It’s time for NWMLS June statistics.
Here’s the NWMLS press release: Housing Market Becoming More Balanced as Sales Climb to Highest Level in 10 Months.
Here is your summary along with the usual graphs and other updates.
Here’s your King County SFH summary:
June 2008
Active Listings: up 25% YOY
Pending Sales: down 27% YOY
Median Closed Price*: $449,700 – down 4.3% YOY
Here is the updated Seattle Bubble Spreadsheet, and here’s a copy in Excel 2003 format. Click below for the graphs and the rest of the post.
Here’s the graph of inventory with each year overlaid on the same chart.
The only other year we have detailed data for in which inventory dropped from May to June was 2003, when May was the peak. Has inventory finally peaked? Time will tell, but I think it probably still has a little ways yet to climb.
Pending sales also moved in the opposite direction from their usual pattern in June, jumping up noticably. However, this still was not enough of a boost to keep last month from having the fewest sales of any June on record.
Here’s the supply/demand YOY graph.
Some moderation on the inventory front, but sales are still in the gutter.
Here’s the chart of supply and demand raw numbers:
Months of supply dropped slighly, but stayed above 6.0, making June the tenth straight month of a “buyer’s market” in King County SFH.
Here’s the SFH Median YOY change graph.
We’ve already had a number of little upward spikes in appreciation during this rapid ride to price drops, and until we see what happens through the rest of the summer, we can’t say whether that little upward tick at the end is just more noise on the way down.
Was May the bottom for the local housing market? I doubt it, but I fully expect that these slightly positive numbers will bring all kinds of bottom-calling spin out of the woodwork.
Here are an excerpt from the blurb in the Seattle Times: Puget Sound home prices fall 6% in June
Getting move-up buyers to actually commit is a challenge, says Windermere agent Tim Lenihan.
“They’re the hardest to convince to move because they’ve lost so much equity,” Lenihan says. “I tell them it’s all relative. The house they want to buy is also down. But they’re waiting a few more months to see what happens.”
Meanwhile some buyers are waiting to see if prices fall more. John L. Scott agent Michael Orbino says he tells them that even a small uptick in mortgage rates could wipe out any sticker-price savings.
Nothing like a little bit of fear-mongering to move your product.
The Seattle P-I blurb just quotes the numbers: Value of houses in county down from 2007
“15% would be devastating! I hope that doesn’t happen.”
If inflation hits 15% or some other silly high number, then we’d probably be in a wage-price inflationary spiral. So wages would be going up which would somewhat offset the lack of affordability brought in by the higher interest rates.
During the period 1970 to 1980, retail prices went up 97%. However, wages also went up 98%. This was a period of fairly high inflation in US history and wages and prices were both heading up at an average of 7.5% each year. The 18% mortgage rates were the absolute and temporary peak and hit at about 1982. So while mortgage rates went from 8% in 1970 to 15% in 1980, wages also doubled. The same factors driving wages and prices higher were also driving rates higher. When inflation and expectations moderated, so did rates.
Expecting interest rates to go up to those levels again pretty much implies you expect the economy to go back to that state, which is highly unlikely IMO.
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I doubt it too, lets hope thinks don’t get that bad again! The stag-flation and spiral inflation during the ’70s was no fun. I was just pointing out the worst case scenario and I admit my example was exaggerated but it is not impossible. We are already seeing faily high inflation so Interest rates will have to go up to get it under control (hopefully they will have the guts to raise interest rate before inflation hits 7+%).
My assertion is that we will see highter interest rates soon. Given the market is already weak and people are already stretching to afford houses at current interest rates any increases will have an impact on housing prices.
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The only reason wage inflation in the 1970s was able to keep up with commodity inflation was because labor for a short time had negotiating power due to the amount of time it took for manufacturers to shift production to countries with lower wage costs. That shift sped up during the 80s, leading to the expression “rust belt”. If wages in Washington were to increase, this time Boeing and Microsoft would be ready to shift their growth elsewhere.
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“We are already seeing faily high inflation so Interest rates will have to go up to get it under control (hopefully they will have the guts to raise interest rate before inflation hits 7+%).”
This is where you and I probably differ in opinion. What we have today is reasonably high price inflation, but not wage inflation and certainly not asset price inflation. The current price “inflation” is due to higher prices of commodities due to a supply/demand situation. In this case, raising the cost of borrowing for US consumers/corporations isn’t likely to do much as the price rises are global and demand for gasoline and food are relatively inelastic in the short term. We’re not going to stop eating because corn got more expensive, and you can only decrease your gasoline usage so much in a short period of time.
What needs to happen for this current inflation to moderate is either:
1) Worldwide softening of demand (looks like it’s happening in EU now and therefore will affect Asian demand – which is significant)
2) Worldwide interest rate increases
I don’t think we’re going to have *both* of these things. I put my money on (1) happening in the next 0-12 months. The fed isn’t too worried about the current inflation, although they have to *say* they are. They’re likely hoping that the worldwide slowdown will bring commodities back in line, so that they don’t have to symbolically raise rates to “bring down inflation” when in fact all that will do is bring down inflation expectations at the expense of perhaps making the current recession worse.
Just my 3 cents… (previous 2 cents have been adjusted for inflation)
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Unfortunately, I think we are far more likely to experience deflation, and low interest rates, over the next few years rather than any replay of ’70s stag-flation. There is tremendous demand for T-bills, and we are seeing swift increases in delinquencies of all forms of debt. If we were truly going to be entering an inflationary period then borrowers would be finding it easy to pay off their obligations (i.e. because their incomes would be rising), and treasury yields would be rising to the moon.
Instead of high interest rates we are liable to see lending criteria continue to become increasingly more onerous (e.g. higher collateral and credit score requirements). Those who can actually qualify for loans will get wonderful rates: everyone else (corporate or consumer) will just be shut out of the debt markets altogether.
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Notabull for the win!
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[...] sites seemed to indicate that June’s inventory would be a few hundred higher than May, the NWMLS statistics for the month showed a drop of nearly [...]
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