Time for our monthly check on the local papers (or digital former papers, as the case may be) to see how creatively this month’s NWMLS press release is rehashed.
First up, here’s the source material: the NWMLS press release that accompanied yesterday’s numbers: Pending sales in Western Washington rise with improved affordability, buyer incentives
Northwest Multiple Listing Service members reported pending sales for April surged 11.4 percent compared to twelve months ago – and rose 21.3 percent from March.
Brokers reported 6,918 pending sales during April across the 19 counties that make up the Northwest MLS market area. That’s up from the year-ago total of 6,208, and the March figure of 5,701 pending sales (offers made and accepted, but not yet closed).
For the four-county Puget Sound area (King, Kitsap, Pierce and Snohomish), brokers notched 5,372 pending sales, the highest total since August 2007 and a jump of 26 percent from March.
…
Lower prices, record low mortgage interest rates, improving consumer confidence, the $8,000 first-time buyer tax credit and other incentives for buyers are credited with spurring activity.
…
Another MLS director reported a “terrific increase” in first-time buyer activity in Seattle’s close-in neighborhoods, calling it the best it’s been in almost two years.
It’s all about the “pendings” this month. Forget the fact that recent trends show over a third of “pendings” never seem to actually become a closed sale. If we just repeat the phrase “pendings were up” enough times, the housing bubble will return, and we’ll all be rich!
So, will the local press ignore the growing story of pendings that never materialize in the closed sales statistics, or will they actually branch out and do more than repeat the positive spin fed to them in the NWMLS press release? Read on to find out…
Eric Pryne, Seattle Times: Pending sales of single-family homes in King County surged in April
If the Seattle residential real-estate market is coming back to life — and that’s still a big if, despite a relatively upbeat monthly report Tuesday — it’s because of people like Lori Gifford.
…
Pending sales usually close a month or so after offers are accepted. But the number of closed single-family home sales in King County in April — 1,004 — represented just 60 percent of the pending sales reported in March, an unusually low share.Skahen and Matt Deasy, general manager of Windermere’s Eastside operations, said that’s probably because of the large number of “short sales” — sales for less than the amount the owner owes to lenders — now in the works. They can take three to four months to close, the brokers said.
I am becoming more impressed with Eric Pryne’s reporting lately. Last month he came around and referred to falling prices as “attractive” rather than “bleak,” and now this month he actually picks up on the big story in the numbers that was intentionally ignored by the NWMLS press release—the huge disparity between pending and closed sales.
Aubrey Cohen, Seattle P-I: Area home sales sprang up in April
Pending sales of houses and condos, combined, in the city and county rose 28.6 percent from March. This is not a seasonal trend, as sales often have dropped in recent years from March to April.
…
Dr. Winnifred Wong just finished her internship in Florida and is moving to Seattle in June to start her residency at the University of Washington. She just struck a deal to buy a condo in Queen Anne.“I’m tired of kind of the black hole of rent,” Wong said. “It was a good time to finally buy, where (prices) are a little more realistic.”
Say goodbye to the black hole of rent, and say hello to the black hole of mortgage interest.
Recent increases in pending sales have not yet brought corresponding bumps in closed sales in following months, noted Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University.
“While the pending numbers are up, I’m not sure how many of those are making it to the closing table,” he said. “Either that or they’re taking a devil of a long time to close.”
Kudos to Aubrey for also not ignoring the gap between pending and closed sales.
Michelle Dunlop, Everett Herald: Hopeful sign for housing market
Snohomish County’s housing market showed signs of a spring thaw as pending single-family home sales rose 28.3 percent in April compared with the previous year.
“Buyers are starting to relax and realize this is a good time to buy,” said Meribeth Hutchings, broker and owner of Windermere Real Estate in Lake Stevens and a director of the Northwest Multiple Listing Service.
…
…the number of pending sales, deals begun but not completed, for both single-family homes and condos increased 23.2 percent compared with April 2008.“One of the most positive signs is that we finally have an increase in pending sales,” Hutchings said.
Ms. Dunlop makes only one cursory mention of closed sales, and otherwise simply repeats the positive spin from the NWMLS press release.
Kelly Kearsley, Tacoma News Tribune: Pierce County home prices tumble 14.5 percent
Pierce County’s median home price fell to $225,000 in April, a 14.5 percent decrease when compared to a year ago, according to figures released Tuesday by the Northwest Multiple Listings Service.
That’s one of the largest year-over-year drops the county’s seen since the real estate market started its downward march almost two years ago.
…
Local real estate agents attribute the price decline to a number of factors.Foreclosures and short sales – homes being sold for less than is owed on the loan – are taking their toll on the market.
And many of the homes that are selling are in the lower prices ranges – often $200,000 or less – as first-time home buyers take advantage of low interest rates and tax credits, said Theresa Bastian, operating partner with Keller Williams Realty Tacoma.
Interestingly, Kelly Kearsley focuses in on continuing price declines, and barely mentions either pending or closed sales.
Kelly Kearsley, The Olympian: Thurston median home price down 11.5 percent
Thurston County’s median home price declined to $232,600 in April, an 11.5 percent drop compared with the same month last year, according to figures released Tuesday by the Northwest Multiple Listing Service.
…
The number of closed and pending sales both were down compared with the previous year, as was the area’s inventory. The latter usually is regarded as good news, as a shrinking inventory can help stabilize home prices.
Apparently Rolf Boone is out on vacation or something, because this month’s article for Thurston County was penned by the Tacoma News-Tribune’s Kelly Kearsley, and was little more than a slight rewrite of the above article on the Tacoma market.
(Eric Pryne, Seattle Times, 05.05.2009)
(Eric Pryne, Seattle Times, 05.06.2009)
(Aubrey Cohen, Seattle P-I, 05.05.2009)
(Michelle Dunlop, Everett Herald, 05.06.2009)
(Kelly Kearsley, Tacoma News Tribune, 05.06.2009)
(Kelly Kearsley, Olympian, 05.06.2009)
waitingforseattletocool » May 6, 2009 at 10:51 am
The Tim,
What other statistic do you propose to use to view the market going forward? Closed sales and YOY pricing are not forward looking indicators.
We need three months of data to see where the market is going in any case, but I do find that April activity indicates the market is not dead. For the past 12 years, March absorption rate has always been the highest absorption rate for the entire year, yet this year, April far surpassed March absorption rate.
Kary L. Krismer » May 6, 2009 at 11:15 am
I don’t think you can make the claim that over 1/3 of the pendings never close. There’s a lag factor and for some it might be 3-4 months.
The pendings in March were just over 1600. The sales for April were just over 1,000, or roughly 63%. For any given month I’d only expect a percentage of those to close the next month because very few sales provide for a close of less than 30 days.
Going back to 2007, there were over 2700 pending sales in March. In April there were 2173 closed sales. That’s roughly 80%.
The two periods do show a 17% drop off, but back in 2007 there were very few short sales.
masaba » May 6, 2009 at 11:26 am
RE: waitingforseattletocool @ 1 –
Could someone explain to me this statement ‘March absorption rate has always been the highest absorption rate for the entire year.’ I have seen it several times, and I don’t get it. I guess my main confusion is what exactly is the absorption rate. The term absorption rate implies that it is closed_sales/time, in which case, the above statement is false, as we can easily see from the charts in Tim’s previous post. However, I guess it could mean something else.
jon » May 6, 2009 at 11:43 am
RE: masaba @ 3 – They appear to be using pending sales for the absorption rate. That figure is not going to be useful as long as there are a significant number of short sales pending, at least until short sales are taken out of the statistics while they waiting for the real property owner to approve the sale.
The Tim » May 6, 2009 at 11:56 am
By masaba @ 3:
The way I have seen it used, “absorption rate” is usually just the inverse of “months of supply.”
So MOS is [total end of month inventory] / [pending sales in given month]
And AR is [pending sales in given month] / [total end of month inventory]
Here’s a chart of the monthly “absorption rate” for each year since 2000:
So yes, March is usually the high point for “absorption rates.” But pending sales also usually convert to closed sales at a rate close to 90%, rather than the 60% we’re seeing in recent months.
deejayoh » May 6, 2009 at 12:16 pm
RE: The Tim @ 5 – I think the differience in absorption rates is that inventory is not growing like it usually would be this time of year.
I wonder if all this great news will bring a lot of sellers out of the woodwork?
Kary L. Krismer » May 6, 2009 at 12:22 pm
RE: deejayoh @ 6 – Excellent point, and I think the answer depends on whether they’re not selling due to price or volume (perception things are not selling). This news didn’t emphasize price very much.
The Tim » May 6, 2009 at 12:55 pm
By deejayoh @ 6:
This is from a Zillow press release today:
That represents nationwide stats, but I still think there is definitely a large amount of pent-up supply out there, even here in Seattle…
D. » May 6, 2009 at 1:15 pm
It may bring a lot of sellers out of the woodwork, but unless they are pricing their properties reasonably I don’t think they’ll see a lot of buyers. My inbox suggests people are still way off on pricing.
Greg Perry » May 6, 2009 at 1:25 pm
RE: The Tim @ 8 –
I agree (pent up sellers)
Kary L. Krismer » May 6, 2009 at 2:28 pm
There are almost always reasons why inventory numbers are significantly off. During good times there are a lot of FSBOs and even people putting their house on the market because they think they might get a great price for it, but who don’t really care if it sells. During bad times we have people who would like to sell, but not at the price they think they could get, or simply holding off because they see so many others on the market.
home free » May 6, 2009 at 2:44 pm
There is an article in the Kitsap Sun where Mike Eliason, director of the Kitsap County Association of Realtors, actually seems to think the pending sales are an idication of reaching rock bottom.
The jump in pending sales has come as a relief to real estate agents, their ranks now thinned by the recession.
“When you reach rock bottom and you start to trend upward, we’re very happy,” Eliason said
http://www.kitsapsun.com/news/2009/may/05/rising-pending-sales-a-bright-spot-in-housing/
Ray Pepper » May 6, 2009 at 2:58 pm
Anyone jumping into SRS yet?
(ultra short real estate pro shares)
From 295.00 to 20.82
Good God! This rally may take it to 0.
(I think I begin nibbling tomorrow)
Scotsman » May 6, 2009 at 3:19 pm
Lots of inventory is being held back in my neighborhood with only 2 of the 9 homes I’ve been watching currently listed. One of the remaining 7 is rented for a year to a CA couple, 2 are available for rent, and 4 are sitting empty and have had their signs taken down. All are in the $650K to $750K price range. There is no market for homes in this price range east of Issaquah.
patient » May 6, 2009 at 3:31 pm
RE: Scotsman @ 13 –
It’s the same west of issaquah. The difference compared to earlier years spring time is really huge around my hood in Kirkland/Redmond. From running through most of the area west of 148th to the water front on a regular basis it feels like there is a about 1 home for sale where there were 10 the last couple of springs. It feels like we have reached the “stand-off” phase were few are buying and even fewer are listing. There’s only one side that can win that game. Buyers. It will be interresting to see how this evolves during the next 12 months, if it will all turn to a foreclosure market like CA.
David Losh » May 6, 2009 at 4:05 pm
RE: waitingforseattletocool @ 1 –
The school districts changed the dates for picking next year’s school for kids from February 15th to March 31st. Mom, Dad, and the kids are the biggest buyer pool in any market.
Groundhogday » May 6, 2009 at 4:25 pm
Left out of all these “momentum” interpretations is one simple factor that will negate any potential momentum bounce: affordability. The end of crazy lending means buyers have to be able to afford homes. And there simply aren’t enough buyers who can afford homes at current prices and current incomes. Granted, buyers at the 75%-tile for income could be buying homes at the 25%-tile for price, but then a bunch of sellers don’t get a chair at the end of this game.
–Groundhogday
b » May 6, 2009 at 4:39 pm
I think lower-tier momentum is great, since most stats have shown (even Ardell’s) that the higher tiers are not selling at all. So while volume may begin to recover from the 2008 lows in lower tiers, we should also anticipate a huge amount of price declines coming in the pipeline. If only lower tiers are selling, higher tiers will have to come down to meet them eventually, especially if there is a lot of “pent up sellers” (which is probably true, I know several of them!).
S-Crow » May 6, 2009 at 6:06 pm
B@18:
Good observation. The smart agents are doing a bit of financial analysis and showing sellers what it takes to actually buy their property under today’s lending guidelines (or at least they should have a loan officer provide this information), particularly those homeowners in the upper price ranges. Quite a few of the higher tiers HAVE to come down to meet the buyers where they are active.
I still find it difficult to swallow all the marketing I see touting 100% nothing down loans (outside of VA where it has been in place for years). While some may be able to swing it, it seems like quite the roll of the dice.
Geordie Romer | Leavenworth WA » May 6, 2009 at 6:18 pm
We are certainly seeing a bounce in number of pendings in May here in Leavenworth that we haven’t seen earlier. We aren’t seeing a lag between pendings and closings like Seattle, probably because of the minimal impact that short sales and foreclosures have had on our market.
An interesting anecdote (which is hard to quantify) is the huge number of offers, especially rejected offers, that don’t make it to mutual acceptance (aka pending) we are seeing in our market.
http://iciclecreekrealestate.com/2009/05/01/leavenworth-no-swine-flu-in-our-market/
Are other agents seeing this in their market?
My impression is that buyers are ready to buy, but are looking for price drops that haven’t necessarily occurred.
jasonwarren » May 6, 2009 at 7:09 pm
The lending situation has indeed changed a bit. The day my offer was accepted (last Monday) I got a notice from BECU (the lender I had planned to use) that they upped their minimum down payment, and explained the reason as a requirement imposed on them by their mortgage insurer. Quite a few lenders had a similar story. And when I landed on using First Tech CU, I discovered that they disallow cash back rebates from discount brokers to buyers (which I am using).
Curiously however, every lender we dealt with pre-approved us for probably 8% more of our net income than I would be comfortable spending. Apparently some habits are harder to change than others.
All has come through fine as of now, but for about 24 hours I was a bit distressed (and will be able to apply the rebate to an escrow fund for repairs and improvements).
Jonness » May 6, 2009 at 8:18 pm
By Groundhogday @ 17:
Good point. Check out the Las Vegas affordability and then check out Seattle.
http://www.zoyzoy.com/realestate/ofheo.php?msa=29820
jon » May 6, 2009 at 8:54 pm
“one-third (31 percent) of homeowners said they would be at least somewhat likely to put their homes on the market in the next 12 months if they saw signs of a recovering real estate market.”
That is very odd. Why would someone say they are going wait until their property reaches its rock bottom price before they try to sell it? There are a few rational scenarios, the primary one would be they want to upgrade, and so they want the price scale to be at its minimum so that the differential in price to their newer house will also be at its minimum. One could try to sell now and rent until the bottom is reached, but the sales volume is very low. Apparently most people conclude they will have to drop their price so much to sell now that it is not worth it to rent in the interim.
But the people who are going to downsize or move to the Sun Belt should be dumping their houses now, and they aren’t. Even if they don’t want to move to an interim rental, and they think that the Sun Belt is still falling, their current house is falling even faster and so they would be losing less equity each money.
Arwen » May 6, 2009 at 9:03 pm
I’m in Vancouver, BC, and our spring bounce is all the news here – we only peaked in June last year, are at astronomical prices/incomes ratios even still with some of the worst affordability on the planet — and realtors are calling recovery. It’s making me blink.
I often come to you guys to see a possible trend a year out or so, plus your analysis is great. Vancouver has loosely tracked Seattle… I mean, all the markets loosely look the same (down) but we’re later to the game. The Pacific Northwest share rain and realtors and we sure held on; Vancouver was still gripped with delusional Real Estate Fever even a year ago.
But this interests me, that you’ve got a numerical bounce (whatever that may end up being like in sales) at the same time we have.
Maybe the lack of Vitamin D is making us particularly irrational…
Racket » May 6, 2009 at 9:27 pm
“There are a few rational scenarios, the primary one would be they want to upgrade, and so they want the price scale to be at its minimum so that the differential in price to their newer house will also be at its minimum”
Thats the boat I am currently in. My current mortgage is less than what I can rent my current house for. We make about $75k more a year than when we bought our house, so it seems like a perfect time to upgrade. We are looking at the 450k-500k range, and can easily float both mortgages if my old house stays vacant for a while.
My hopes are that I can nab a house that went for $650k+ in 2005-6 on a short, REO, etc. I feel that I have time to be picky, and interest rate increases would be more of a cause to rush me into a house than the market itself rebounding.
what goes up must come down » May 6, 2009 at 10:43 pm
Recession what recession, layoffs what layoffs — man when will people learn.
Kary L. Krismer » May 6, 2009 at 10:59 pm
By b @ 18:
But those are mainly the houses well above median–you could use $1M as a cutoff, but it may start lower than that.
I attribute a lot of that to stock market losses.
Racket » May 6, 2009 at 11:22 pm
RE: Kary L. Krismer @ 27 –
“I attribute a lot of that to stock market losses. ”
You would think that all the money people are saving by switching to Geico would help.
Scotsman » May 6, 2009 at 11:36 pm
RE: Jonness @ 22 –
Nice. Thanks for posting that. Cruising around the country on that chart is very interesting, and explains the housing situation in the simplest way possible- a picture.
Patti » May 7, 2009 at 6:50 am
A first time buyer’s story….
I fit into the first time home buyer under 200K scenario. I put in an offer in March, and withdrew it after the seller started playing games. I guess she got giddy about the market bouncing back and started to try to move up the price and errata. She was a realtor by the way, and it felt as if she thought the sale was sport, whereas I am looking at my first time home and have been anticipating this for years. We were in completely different head spaces. No need to play games with people in this market, so I pulled my offer when something came up on inspection.
I lost out by not moving quickly enough this month on a few foreclosures that got multiple offers, coming in around just under 200K. Then I put in an offer on another house last Saturday (first day on the market) and am under contract. I am very excited about it. It was priced at 199,000.00 and that’s what I offered. It is in very well maintained condition in an attractive single family neighborhood in Bremerton, where the job market is stable due to the Navy. I have excellent credit and a VA loan option that I’m going to finally use. Sellers didn’t want to bother with my VA loan during the bubble. Do I think the value may go down? Yes, it’s likely over the coming months, but I think the price was very reasonable and will probably recover eventually. Houses priced 25K more, that have less to offer in the way of neighborhood or condition – I walked away from. I can live with and love this house and plan to stay there for 10 years at least.
Speaking of things that have changed, let’s talk about realtors. I could not get a realtor to give me the time of day back in the boom. Given my first time buyer status, my mid 70K single income, and my refusal to get involved in risky loans, I guess I wasn’t the optimal buyer. My first realtor, since I decided to buy this year, expected me to search the internet and call him when I found something I wanted to see. Of course I obsessively surfed. But he would never get out to the houses I wanted to see quickly after they came on the market and they already had offers three days later. These were under 200K and in generally excellent condition. I think the first guy is still living in the boom years. I rather quickly traded him in for a guy I love, who actually supplemented my efforts with research on the homes, suggested others that he thought were good etc. My new guy has a couple decades of experience, and that’s one reason I selected him. I actually interviewed him over coffee before committing because I was serious about buying and wanted someone whose outlook and practices would be a good fit. The old guy is actually upset that I went with someone else, and I plan to send him a thank you note and a gift certificate but, that is it.
My experience is that prices have come down, a lot. But not most sellers have not come down enough to be comfortably affordable to people like me. Payments still exceed rent by quite a lot, and throw in major repairs and lots of cosmetic stuff, the new wave of foreclosures coming and well, it isn’t attractive. But with the foreclosures, there are some excellent buys around 185 to 190K and if a seller of a clean well maintained home is willing to compete with that (200K ) they seem to be getting multiple offers in a few days.
What is interesting is when people interpret the entry of people like me into one segment of the market as indication of a recovery to the market as a whole. Buyers like me are so far from the 300K plus market that you can’t even see it from here. Maybe if they start dropping their prices, it will trickle down the ladder to us eventually, but I’ll still be happy with my rambler.
dancingeek » May 7, 2009 at 9:43 am
RE: Jonness @ 22 – Awesome link. They cover every area I wanted to look up. It’s great to have a visual of how home price index and income index have historically tracked each other and how out of whack things have been over the past eight or so years.
Tyler » May 7, 2009 at 1:29 pm
@ 22 — Very cool charts. I would like to see those graphed on top of interest rates, or monthly payments normalized to the median sales price.