It’s been nearly two years since I looked at the soft landing question with respect to affordability in a post titled Seattle Soft Landing: Do The Math. Since then, the affordability picture has changed, and we at Seattle Bubble have done a lot more research into historical data, so now seems like a good time for an update to this subject.
For a detailed explanation and graph of the affordability index over the past 55 years, please refer to this post.
First, let’s take the 15-year average of the affordability index from 1985 (just as insane interest rates were beginning to taper off) through 1999 (just before the current real estate bubble got rolling). We’ll call that Seattle’s baseline affordability, which comes in at 109.6.
The most recent complete quarter is Q4 2007, in which the affordability index stood at 70.3. This is slightly improved from the third quarter, when it was at an all-time low of 63.3 (yes, that’s even lower than when interest rates were over 15% in 1981).
For affordability to have dropped 35-40% in less than a decade, one of these two statements must be true:
- The Seattle area has become considerably more desirable, as compared to other cities.
- Real estate in the Seattle area has become considerably overvalued.
A clear example of the first scenario is in the late ’70s to early ’80s, when affordability dropped from 175-200 down to the new baseline around 100. I believe that it was around that time that Seattle made the transition from big town to small city. Has Seattle undergone another such change since 2000? It’s possible, but given the fact that so many other cities around the country have experienced a similar plunge in affordability over the same time period (despite record-low interest rates), the evidence seems to point to the second statement being a better explanation.
Working off of that assumption, it is reasonable to conclude that for the bubble to completely correct, affordability should return to somewhere near its previous baseline. For the sake of argument, let’s say that Seattle is going to return to an affordability index of 100 (which allows for some increase in the desirability factor). The soft landing scenario says that prices will just “level off” or increase less than 5% a year until incomes catch up to support current prices. When we last looked at the plausibility of this concept, we calculated that it would take 15 years or more of level prices for a soft landing to fully play out.
Let’s take another look at what a true soft landing would look like here in King County. Here are a few possible scenarios:
Scenario A
Yearly Home Appreciation: 0.0%
Yearly Income Growth: 3.0%
Interest Rate Growth: 0.25 pts/year
Interest Rate Max: 6.50%
Affordability Index = 100 in: 13 years
Scenario B
Yearly Home Appreciation: 2.0%
Yearly Income Growth: 4.0%
Interest Rate Growth: 0.25 pts/year
Interest Rate Max: 6.50%
Affordability Index = 100 in: 18 years
Scenario C
Yearly Home Appreciation: 1.0%
Yearly Income Growth: 3.0%
Interest Rate Growth: 0.25 pts/year
Interest Rate Max: 7.25%
Affordability Index = 100 in: 22 years
Scenario D
Yearly Home Appreciation: 2.0%
Yearly Income Growth: 3.0%
Interest Rate Growth: 0.50 pts/year
Interest Rate Max: 8.00%
Affordability Index = 100 in: 50 years
Wow, none of those look all that inviting. But what if the “soft landing” is load of malarkey? What if prices really are going to drop significantly? How long would it take to get back to an affordability index of 100?
Scenario A
Yearly Home Appreciation: -5.0%
Yearly Income Growth: 3.0%
Interest Rate Growth: 0.25 pts/year
Interest Rate Max: 6.50%
Affordability Index = 100 in: 5 years
Scenario B
Yearly Home Appreciation: -10.0%
Yearly Income Growth: 3.0%
Interest Rate Growth: 0.50 pts/year
Interest Rate Max: 7.50%
Affordability Index = 100 in: 4 years
Scenario C
Yearly Home Appreciation: -15.0%
Yearly Income Growth: 3.0%
Interest Rate Growth: 1.00 pts/year
Interest Rate Max: 8.00%
Affordability Index = 100 in: 3.5 years
Looks like a much quicker way for the system to correct itself, don’t you think? After running the numbers again, I still believe that the “soft landing” theory is garbage. It’s not happening anywhere else, and I have seen no evidence to suggest that it will happen here.
For those of you that would like to play around with different scenarios for yourselves, I have updated the Seattle Bubble spreadsheet with the latest data to allow just that. Download the Excel 2007 version here, or the Excel 2003 version here. Look for the sheet titled “Soft Landing.”
Re Mag44: “One thing i have learned while watching real estate over here is someone always has more money than you or I. ”
True, but the wealthy normally don’t get that way by making poor financial decisions. IE just b/c someone has a mil or two that they COULD drop on a house doesn’t mean they WILL do so if they anticipate a market decline. I guess this concept pertains somewhat to the “smart money” discussion above.
In any case, you are correct. I have very recently had to get used to the idea that there is someone out there that has more money than me. It was a hard pill to swallow, but I am dealing. You didn’t have to rub it in, though.
Sincerely,
Bill (Gates)
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amazing amount of activity on this post today, boys ~~~ did you know it was a nice day outside?
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Jess, the only reason it was so nice out is that I had to work. I’m off tomorrow so get out the rain gear.
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Toad37- sorry, but you will be rudely surprised if you bet on hyperinflation. Our economy is controlled by the government and the banks. Both hate any kind of inflation. The gov hates it because it leads to higher interest rates, a cost of “doing business” for them, a limiting factor on what they can do, and what they have to spend. Banks hate inflation, because despite their best attempts to factor inflation into interest rates, it means they will always be paid back with dollars that are worth less than the ones they originally loaned out.
There is currently no inflation. There are price increases, due solely to speculation and supply issues in a very few commodities. Don’t confuse specific individual prices with systemic inflation. Again, show me a recession/depression that featured sustained inflation. Ain’t gonna happen.
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Ira,
Inventory and sales numbers point to what should happen to prices, but inventory has been high a while and prices have not moved down the same amount they did in other places. For there to be a price bubble, prices need to be down over 10% in a year and 20% overall. Down 10% total would forever be referred to as a downturn.
My interest specifically lies in Seattle zip codes. The primary cause of the current downturn in every market other than Detroit and Cleveland has been new construction creating pockets where distressed homeowners are concentrated.
I purchased my house a little over a year ago after looking for over a year, and I applied the Warren Buffet system to narrowing down my potential locations. I did and still do not clearly understand the impact on condo prices of the incoming inventory. I don’t totally understand the impact of large new developments in more outlying areas, and I don’t totally understand the impact of a slowdown on an “upcoming” neighborhood or a “stylish remodel”. So, I didn’t buy any of these places / things.
I am in for at least 10 years, got a fixed rate loan, and bought only when I felt the price was under the current market to give me some cushion, and the seller would agree to an inspection. Buying has been cash neutral for me and was necessary for a number of financial reasons, but I read seattlebubble then too and made sure I did as much as I could to make a solid buy, not one based on the fads and frenzy occurring at the time.
In August I figured my paper 20% cushion would be gone by now but according to the recent numbers, zillow and sales in my neighborhood I have my cushion and about 5-10 grand (on paper only naturally).
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I suggest you look again at what happened in other markets that have had substantial downturns. The inventory was rising and sales declining for a year or more prior to the prices actually declining. San Diego, again, is a perfect case study of this. They almost went for two years with declining sales and rising inventory before depreciation started kicking in.
By this measure, Seattle is right on track. It’s just that our inventory didn’t start increasing substantially until much later than other markets. We are just behind the curve, that’s all.
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Deflation; again another reason to read this blog. It didn’t occur to me. For that matter if we take the credit crisis a lot of you guys keep going on and on and on about, and if everything again goes to being cash based, deflation, stabalization, and a true worth of currency should be the only thing that matters in the next few years.
OK, Real Estate blog, Housing is a commodity. There are grades to housing that there aren’t in oil by the barrel or gold which has a set standard. Some one mentioned San Diego. Have any of you seen a community called Liberty City? It’s a Mexican worker housing community that looks like card board boxes stacked together. Are you really going to compare that with down town San Diego.
A second thing is which I do know for a fact that a large section of the Mexican work force who came here for construction jobs are home now building a better economy in Mexico. A lot, a lot of those units in Leberty city are going back to the bank. You’re right it makes little sense to hold on to them.
In time however those units will be bought sold and traded by the next wave of people who come here. People come here because we do have the right to practice capitalism. We are one of the few countries in the world that admires winner take all. Anybody can be rich or wealthy here, no matter your family, cast, or color. I see it every day on MTV.
So those housing units may not sell for what they used to a few years ago, but they will sell. I’m waiting for the United States government to adjust the immigration quota for Chinese investment in the United States.
Education? Money has no master and a degree doesn’t mean shut on the street. Ask Bill or Warren.
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#103
“There is currently no inflation.”
Scotsman, have you looked at the cost of a loaf of bread, gallon of gas, ounce of gold?
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Garth,
Sounds like SB is helping people make good decisions, so when the time is right people move forward with a purchase. There is no getting emotion out of buying a home, but it is possible to reduce potential roadblocks both financially and transactionally by being as practical and frugal as possible.
Certainly inventory plays a role in the housing bubble, but people are in the pickle that confronts them because of the type of finanancing over their head. The whole debacle unfolding was finance driven in my opinion.
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“these anti-bubble people are going to fight to the last street. If Seattle as a whole goes down, they will be pointing out Magnolia, Queen Anne are still flat or not going down much. If even Queen Anne goes down, they will be pointing out the street they grew up on that has 4 sales a year is still doing great.”
Even after the Titanic went down there were still bits of it floating on the surface…..
Does this mean the Titanic did not really sink?
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“Jan 00 – Jul 07 = 9.1% yearly appreciation (not 8%)”
I used Tim’s chart from the other day showing median prices at 185% of Jan 00 in Jan 08. That’s 8% almost on the dot. Your base period covers two poor markets, and one good one – not a very good control number. Still even with the increase since 2004, there is not enough to get me to hyperventilate. Difference between you and me is a matter of proportion, not direction.
Scotsman, you are dead wrong on the motivation for the banks and government. Banks live on the spread. We hedge and stay short to move past the transition periods. We don’t care about the rate, except as to whether it kills business. Government doesn’t love inflation, but fears revenue loss more. When was the last time a fist world country chose economic collapse over inflation?
Happy Easter.
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Garth,
As Sniglet pointed out, other places with price drops first saw rising inventories and slowing sales before prices dropped, and Seattle was later in seeing these rising inventories and slowing sales.
But….It sounds like you bought your house wisely, and did everything you could have done to minimize risks.
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Toad 37-
Loaf of bread- up, due to increased worldwide demand for U.S. crops, not inflation.
Gallon of gas- up, due to dollar devaluation and increased purchases to restock reserves
Gold- up, due to speculation only. Tell me an industrial use for gold that gives this commodity real value, other than jewelry and as a fiat currency?
None of these represent inflation, they are only specific price increases. Inflation affects the entire economy. So if we look at things like houses, which are clearly down nationally by 10-15%, construction equipment, most recreational goods, raw material costs (with the exception of energy) and labor, prices as a whole are falling. How many people do you know who got a 10% raise this last year? – 5% raise? Are feeling lucky to still have their job?
Also, re: hyperinflation- the gov can’t just print money and give it out, which is required for hyper-inflation. That is currently illegal in the U.S. For every new dollar created, there is an equal amount of new gov debt. That debt carries interest. How much interest would YOU want to earn on your gov. bond if you knew for certain that the gov was just going to keep printing up fresh dollars and handing them out, decreasing their value everyday, making the dollars you were repaid with worth much less than the dollars you loaned out? Would you even buy them, giving your money to the gov? Nobody else wants to loan money under those circumstances either. If the gov tries to hyperinflate, the demand for their debt immediately dries up, and the game comes to a halt. The market, both domestic and international, will put an almost instant stop to any attempt to inflate our way out of this. Unless, that is, you’re willing to just throw out all of our gov’s credibility, and our system of law.
Like a game of chess, think this through to the next several steps or moves, and their consequences.
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Whats my name-
Sorry, I used to be a banker, and you’d better believe they care about rates. Rates are an indication of demand. Rates too low, like now, means there isn’t any demand. Rates to high means there isn’t enough money to lend out. Right now demand is in the tank, bank’s costs are largely fixed, and they’re loosing a ton of money. You can’t hedge an operating loss, or a collapse in collateral values, or high default rates. In fact, this whole credit crisis is the result of bankers not paying adequate attention to rates, risk, and spreads. Ask BS about “hedging”, ask WAMU. Next month you can watch Lehman, MS……
Hey, B of A is getting ready to announce an additional $6.5 Billion of loss reserves. Why is that? Will it be enough? Think they care about rates?…
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One more- Goldman Sachs, one of the premier investment banks in the world just had its credit rating cut to “negative.” I thought they’d hedged that….
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what’s my name
I won’t go more into where the smart money is. I think I know some but I won’t pretend that I’m so smart and I’m the smart money.
Anyway, if you’ll like to buy, I think you should really check out Redmond, the land of Microsoft. I’ve just moved into a condo here, rent of course. The unit next door has been on the market for quite a while and it’s now on short sale, get this, at only less than 10% decrease from the original listing price. Still not selling though. Oh, and the unit upstairs had just kicked the tenant out and they’re now preparing the unit for sale. Did I mention that this condo has less than 15 units overall?
If that’s not enough selection for you, there’re 3 blocks of new condo for sale within a 1 min walking distance from my place. I’m not sure, maybe they’re all sold out to investors. Only thing I know is there are plenty of for-sale signs and very few lights on at night at those condos.
It’s really great time to buy now, really. Plenty of selection and I haven’t even told you what’s out there beyond the 1 min walking distance from home.
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Interesting site. I believe you are correct in Seattle RE being overpriced–as is Bellingham–but I wonder how some variables that have changed over time, and continue changing, might skew the results. For example, simple demography: we’re all getting older. The fastes growing demographic in the US is 86+. Has pretty serious housing implications I should think–and other implications, too (‘Honey!! Let’s invest in Geritol!!). Older folks have generally greater resources, so can afford to buy larger houses–or bid each other up on smaller ones. Of course, at some point, most older folks like to be closer in to services, rather than futher out, again driving urban housing prices higher. On the other hand, at soe point a whole lot of ‘em are going to decide the house needs to be sold to move into that nice assisted livig facility. THat will precipitate a crash, barring a new surge in 40-somethings. Then you will really see a crash.
I also wonder at what point women became more or less fully integrated into the workplace. In the 70s and 80s, prices rose because one income households were being supplanted by two-income households, which resulted in greater household incomes, even as per capita incomes fell.
Just a few ramblings…
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Hamster -
Unless you believe all of those factors combined immediately to double appreciation rates in 2004, the logic doesn’t factor out. Those are long term trends, whereas the bubble has been a very short (since 04 only) period of extreme increases. I can see those things driving up appreciation rates very slowly over time, however.
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b-
Don’t misunderstand me; I was not suggesting that the factors mentioned caused the bubble in and of themselves. However, even irational exhuberance has some rationality at its core, imo. In this case, the very factors you cite – e.g., long term trends affecting the market – could perhaps be at the root of the bubble. Long term trends drive a consistent [rice appreciation. Ater a while, people believe that price will always go up, and look to five or even ten year trends as proof. Throw in historic drops in interest rates, imprudent relaxation of lending standards, a broad array on lending instruments designed to make every person in the USA theoretically eligible for a home loan, and the pump is primed for irrational exhuberance.
fwiw, I’m not saying that these factors caused the bubble. I’m just saying that thinking about them is interesting, and may lead to some beeter understanding of how we got here, and where we may be going. Personally, I believe that for a variety of reasons, we may see a relatively soft landing in the NW, but also believe that prudence dictates one act with considerable restraint in managing personal–and governmental–affairs until we have a better handle on what fiscal reality is going to look like over the next few years.
Ham
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#113
Scotsman,
We have inflation in things that are precious and consumer staples.
We have deflation in financial assets and real estate.
I don’t think we’ll see hyperinflation.
Dollar devaluation creates inflation, the Fed is trying to inflate their way out of this debt related Mega-Problem.
Gold will shake out speculators on this correction then head much higher. Gold is money, always has been always will be.
No Fiat currency has ever lasted in history.
Toad
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I think gold is about done. It has a speculative history, and is now not much more than a shawdow fiat currency since it has no real value as a commodity except in jewelry. And people don’t buy a lot of jewelry in bad times. It can’t readily be used as money in the work-a-day world, as it doesn’t come in handy denominations, and it’s hard to “make change.” Historically, gold was a good medium of exchange. But as deflation gets started, the dollar firms up, interest rates go back up to the long term trend of 8% or so, people will want greenbacks. Gold will die a final death as any real store of value. Give me oil, dollars, or food.
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I don’t think the FED is really trying to inflate. They may be trying to slow the onset of deflation, but when you look at the size of the problem verses the available resources of the Fed and gov combined, they don’t have enough bullets to win the war. The dollar size of the problem is overwhelming, trillions of dollars in pending financial disaster verses a Fed with less than a trillion to play with, and a gov that is already on the edge of insolvency.
When the Comptroller of the U.S. gov quits his job so he can go around the country full time, speaking, trying to get people to understand the U.S. is functionally bankrupt, you know there’s not some easy way out.
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I found Ardell’s Sunday night stats over on RCG interesting. The median price ‘for sale’ YTD is $525,000 but the median price sold YTD is only $437,500.
We are already seeing a difference of $87,500 or 17% between what people are asking and what people are buying.
Here are her stats:
Active/For Sale – 9,779- UP 148 – median price $525,000- no change
In Escrow – 2,712- UP 11 – median price $444,000 – DOWN $4,000
Closed YTD – 2,883 – UP 332 – median price $437,500 – UP $1,500
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Ray Pepper is spamming 500Realty.net on the Yahoo boards now. Found a spam of his on the Zip Realty message board LOL!!!
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At # 51, Softwarengineer said:
“I imagine Marc is hoping his Bellevue condo is immune from the recent Seattle price crashes too, so apparently argues flippantly too, with our pragmatic Bubble Brain leader, The Tim.”
I’m in Magnolia, not Bellevue, and yes, if a price crash happens, I do hope my home is immune. Who wouldn’t?
Flippant argument? I offered constructive criticism of a proposition proffered by your leader that narrowed all feasible explanations to two. As an attorney I am trained to read and interpret a person’s “stated” argument and to determine its relative strength or weakness. To that end, if you review Tim’s original posting you’ll see that his entire premise “works off the assumption” that the “Seattle area has [not] become considerably more desirable, as compared to other cities.” His “evidence” for this assumption is “the fact that so many other cities around the country have experienced a similar plunge in affordability over the same time period.” Thus, he concludes that “for affordability to have dropped 35-40% in less than a decade” real estate in the Seattle area [must have] become considerably overvalued.”
I critiqued Tim’s proposition as unpersuasive on the basis that it flatly dismisses alternative explanations. Such one sided arguments rarely persuade judges or juries and I couldn’t help myself from pointing out this shortcoming. The irony of this is that I don’t disagree with Tim’s general premise. Seattle probably has become too unaffordable. I simply disagree that this is entirely the fault of an easy-credit induced real estate bubble. It’s my belief that Seattle has become a much more desirable city, albeit not the “world-class city” that one national pundit has suggested. Accordingly, the cost of living in Seattle should significantly increase relative to other cities. Thus, it may be the case that massive real estate price drops in other areas of the country represent appropriate corrections of significantly unsustainable affordability losses. And it may also be the case that Seattle’s real estate run up was, while similarly fueled by lax lending standards, speculative bidding, etc., to some degree, a naturally occurring run up that coincided with the overall U.S. real estate run up. Ergo, Seattle might not experience the same degree of correction that many other areas will experience.
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Indeed, comments like Marc’s and takenroad’s are adding to the conversation, and much appreciated. It’s comments like magnolia44′s “grasping at straws” (#23, #29) that are flippant and pointless (although certainly amusing).
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I want to provide another viewpoint about the current condo situation in Magnolia. I was laid-off in Oct by a local Biotech firm which is headquartered in CA. I have had my condo (Baywatch condominiums) on the market since May ’07 (purchased it for 339,000 back in Sept of ’06). I did not see any foot traffic until I lowered my price to 299,950. I’m waiting to close on a short sale for 250,000.
Across the street from me are a cluster of townhouses that were completed last year. Two “For Sale” signs have been up for > 4mths. There are also numerous “For Sale” signs from Thorndyke Ave to Discovery Park. Don’t tell me that condos are appreciating in Magnolia!!
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LUC,
Sorry to hear that. In case it wasn’t clear in my post, I live in a house in Magnolia and I can’t speak to what condo prices are doing there. If your unit is two bedrooms let me know if your short sale buyer falls through for some reason. I have a personal friend looking in Magnolia in that price range.
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I have been watching very closely the single family home and townhome market in Magnolia and Queen Anne since last year. Granted, my range is <$600,000 but the places I have been watching have been sitting, then removed from MLS, then they appear again as 1 day on the market with 15-20K price reductions. In particular a few of the new townhomes we were interested in are now showing up on Craigslist for rent.
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Peter,
I’m a big fan of low balling on houses that have been on market for awhile. So, you might consider friring a shot across their bow to see what kind of a response you get. But, be careful because you might end up owning it!!
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Thanks Marc. The MLS listing is 27172048.
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I’ve been watching a bunch of houses in Magnolia. From what I see, appreciation there in the last year has been flat at best, and in many cases homes purchased in the last 18 months are selling for less than they were purchased for (if they are selling at all)
Some facts: 21 of the ~125 listings in Magnolia are quick flips like this. At current asking prices, 8 of these owners will end up losing money after they pay fees and taxes.
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The latter posts are far more realistic descriptions of the state of Magnolia’s current RE market than the misleading impressions previously posted. Anyone who is really paying attention to that market can’t help but notice that very little is moving – whether condo or SFH.
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Help me out here. In post 104 banks and government control the economy, and rates will be high because the banks and the government don’t want inflation.
By post 114, rates are low because there is a lack of demand for borrowing. (And apparently not because because of the Fed’s lowering actions. Frankly, I’m just glad the problem isn’t that banks won’t lend as some people here think) So, are BS and BofA taking big losses because rates are too high or because they are too low?
Or are these losses really due to a disconnect specific to the securitization markets where opaque bonds can’t adequately be valued and warehoused loans intended for that market can’t be securitized? As a former banker you will be happy to know that traditional commercial banking is pretty healthy for this part of the cycle, and commercial banking operations are generally doing fine. You might even remember that after the panic in the 80′s, even the junk bond market recovered nicely.
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Daph,
I don’t like condo’s, especially suburban condo’s. But tell me truly, if you think the dollar is tanking and securities are tanking worse – where do you put your money?,
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Magnolia 44 said not to worry everything is great and everyone here seems to be posting these ridicules counter points — what gives
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deejayoh,
It seems to me that Magnolia is the tale of two cities, one is the city on the bluff where recently updated older homes with no warts and new construction sell at a significant premium and the other a city where people put over-priced crap on the market and then act surprised when it doesn’t sell in 30 days. In other words, Magnolia is experiencing the same thing happening in many other parts of the city, the good stuff sells and the crap sits.
I have a sneaking feeling the March NWMLS median price for area 700 will not continue the upward trend of the last few months. Then again, a few of the big houses could close by Friday and get our numbers back up!
I won’t be holding my breath.
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Marc,your post offers an exceptional piece of wishful thinking. Check out the post I wrote on Saturday re: the number of houses in Magnolia that actually seem to be moving. Not a single house in Magnolia over 750K (approx 40 houses) was listed as STI. Many of them have been on the market for months. Many of them were on the market last year (for substantially more) and were removed when they did not sell, only to be put on the market again in the new year. Many of these houses are absolutely beautiful. The problem is that they are (now) perceived to be way overpriced, This would not have been the case 18 months ago. There has been a dramatic shift in all tiersof the real estate market here in Magnolia. If well-built houses are selling and crap is not, as of Saturday the score was 154 – 7 for crap.
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Bitterowner,
For what it’s worth, my sources say there are more than ten homes priced at $720,000 or more that are STI or pending in Magnolia. Granted some of them won’t close until next month and won’t affect March’s median.
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Marc,
I just checked the Windermere site, I see no houses >750K listed as STI.
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The house Mag44 was touting (749K) is the only one I could find that is listed as STI above 625K.
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mag 44 is it good to know that you bought at the peak????????
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Luc & Bitterowner,
JL Scott doesn’t show properties that are in Pending status which most of the properties I mentioned are. However, I just saw that there are now two that are STI according to Windermere:
28036419
28028665
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Marc, are you sure about that (JLS not showing pending)? I’ve got a couple of properties I’ve been keeping my eyes on using John L. Scott’s site down in Vancouver for my parents, and I’ve watched one of them go from “Active” to “Pending” (and then back to Active again). Or do you just mean that they don’t show up in search results when they’re pending?
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Tim,
That should have said Windermere, not JLS, since that was who Alan’s post referred to. I see that JLS also shows only two STIs in Magnolia >$700k and no pending despite there being several homes in pending status in Magnolia.
I suspect your last statement is correct: “they don’t show up in search results when they’re pending.”
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Marc,
That doesn’t make sense, why would a site not actively update their active and STI status. People searching for homes would never know what is available.
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The NWMLS does indeed list 9 homes pending at 720+ in Magnolia, and one STI.
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On the Northwest MLS system, Pending is a completely different status than Active and Active STI. Pending means that a purchase and sale agreement has been signed (i.e., the house is “sold”) and the inspection contingency has been resolved but the transaction has not yet “closed” (i.e., the money exchanged for the deed). Peninding status is a likely indicator that title review contingencies and other similar contingencies have been resolved. However, it typically does not mean the financing contingency has been waived by the buyer because, generally speaking, that often doesn’t happen because the Form 22A, by default, requires the seller to affirmatively seek waiver of the financing contingency.
It’s not surprising to me that public MLS websites would not show Pendings because they probably don’t want other buyers meddling in a “done” deal.
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So our point has been correct all along, one STI house in Magnolia
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I think we’re getting bogged down by the specifics and forgetting about the big picture. Big picture = crickets chirping loudly in Magnolia these days. The new 1.5M STI will certainly give hope to those in that higher market tier whose places have been going nowhere fast.
We used to get monthly postcards from varous RE agents listing every address that sold in the previous month in Magnolia, along with selling price of each property and average (not median) selling price, which would be skewed toward the higher end every month by the one or two ultra expensive Magnolia mansions in the mix. These postcards suddenly stopped coming when it seemed obvious that sales activity had slowed dramatically. They were replaced by ‘informative’ brochures on the value of specific renovations, etc. Then sometime recently we did get a monthly list of all properties sold in Magnolia. I think there were 4 properties listed. It seemed ridiculous. I’m sure somebody’s marketing consultant got an earful.
Anyway, it certainly seems reasonable to discuss how much or how little the Magnolia housing market will tank during this obvious slowdown (ie Marc’s discussion), for those who care. However, to represent the market as being very hot, where crazed house purchasers are insanely snapping up overpriced properties willy-nilly (ie Maggie44′s post) when the evidence overwhelmingly indicates otherwise seems either deluded or oddly self-serving.
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Luc,
Almost. There are two STI but to your larger point, yes there are very few STI’s in Magnolia. My point is that I’d rather have more Pendings because they’re more likely to result in a closed sale than an STI especially in this climate of buyer’s increasingly insisting on defect free inspections and seller repairs.
Bitterowner,
You’ve got a good point about the product mix in the NWLS’s median. I don’t see any behemoths in moving this month so I predict the 700 area’s median is going to go down. However, I haven’t been keeping an eye on Queen Anne so it’s possible they’ll have some big dogs sell and prop us up for another month.
If and when it does go down I’ll be the first to admit I’ll be disappointed. It’s been nice living with the hope that my neighborhood continues to appreciate and I have nothing to fear from the national downturn. What’s not been nice is knowing how tenuous this hope has been.
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