Reporting Roundup: Pending Tax Credit Expiration Edition

Time for the monthly reporting roundup, where I read all the local paper rehashes of the NWMLS press release so you don’t have to.

Here’s a link to this month’s NWMLS press release (although it still isn’t live yet, it should appear here): Northwest MLS brokers report 51% jump in pending sales

Home sales around Washington state surged last month, with brokers reporting activity at levels “like we haven’t seen in a while,” according to the owner of a Seattle brokerage. Northwest Multiple Listing Service members reported 8,605 pending sales during March for a 51 percent increase over the same month a year ago.

Prices for last month’s closed sales of single family homes and condominiums (combined) were down about 2 percent system wide. Since January, however, prices have inched up almost 1.8 percent.

Within King County, price changes from a year ago ranged from double-digit increases for homes on Mercer Island (up 26.9 percent), Central Seattle (up 14.9 percent), and Vashon (up 10 percent), to double- digit declines in some parts of South King County.

Heh, never mind the fact that for Mercer Island we’re comparing a month with just 13 closed sales to a month with a mere 3 closed sales a year ago. Let’s just throw that 26.9% increase in there and act like it means something. That’ll get people all whipped into a frenzy, right?

Here’s a little chart I made yesterday of the SFH median closed price in King County over the last few years.

King County SFH Median Price: Annotated

Just looking at the year-over-year number would give you the impression that home prices are “stable,” when in fact over the last nine months, the median has fallen fairly steadily, losing seven percent from last year’s spring mini-peak.

Moving on, let’s have a look at how the local press handled another nonsense-filled press release from the NWMLS.

Eric Pryne, Seattle Times: King County house prices post year-over-year rise for first time in 2 years

The bar couldn’t have been lower. Still, an increase is an increase.

House prices in King County rose in March for the first time in more than two years, according to one closely watched measure.

The median price of single-family homes that sold last month was $367,250, up 0.9 percent from March 2009, the Northwest Multiple Listing Service said Monday.

While tiny, the year-over-year countywide increase was the first since January 2008.

The median price in March 2009 — $363,850 — was the lowest in years. And last month’s number, while slightly higher, was the lowest since then.

The March statistics are “very encouraging,” said Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University.

But the market’s future beyond the next few months hinges on several factors, he said, including job growth and the Federal Reserve’s success in keeping interest rates low, as it has vowed, in the face of increasing pressure from buyers of government debt.

Crellin said the year-over-year increase in the median King County house price in March probably was due in part to a federal tax credit for repeat buyers that Congress approved late last year. It has brought some buyers into the market, he said, and they are “taking advantage of bargains they’re finding in higher-priced properties.”

Tim Ellis, who edits the real-estate blog Seattlebubble.com, said in an e-mail that he expects Seattle-area sales to continue to rise through May, then plateau and maybe drop in the summer and autumn after the tax credits expire.

Another well-balanced article from Mr. Pryne. I don’t really have anything to add.

Aubrey Cohen, Seattle P-I: Home prices post first year-to-year rise in more than two years

King County’s median house sales price in March posted its first year-over-year increase in more than two years, according to a new report.

“I thought the numbers were surprisingly strong,” said Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University. “The stabilization of prices in King County was noteworthy.”

Noteworthy assuming we ignore the above chart, that is. It’s good to see Aubrey back, but I was a bit disappointed that later in the article he implied that pending sales were somehow a better measure of sales activity than closed sales, when in reality the exact opposite is true.

Mike Benbow, Everett Herald: Federal tax incentive gives Snohomish County home sales a nice bump

Home sales soared in Snohomish County last month as buyers tried to beat the upcoming deadline for a federal tax break or to invest thanks to prices they haven’t seen in five to six years.

There were 865 homes sold in the county in March, a 68 percent increase from a year ago. Pending sales in the county, meaning the deals were signed in March but not closed, rose 77 percent from last year, the highest in the Puget Sound area.

“The Seattle surge has returned thanks to the opportunities that have been afforded to homeowners through the federal tax credit, historically low interest rates, and increased affordability,” J. Lennox Scott of John L. Scott Real Estate said in a news release.

Home prices in the county continued to fall last month. The combined median price of a single-family home and condominium in the county in March was $268,000, a 12 percent drop from a year ago, when the median was $304,950.

So lower prices = more buyers. Crazy!

John Gillie, Tacoma News Tribune: Home sales surge 36% in Pierce County

An $8,000 tax credit and bargain home prices convinced Desiree Snowden and her husband, Stanley, to buy their first home in Spanaway earlier this year.

“After 18 years of living in rental and military housing,” said Desiree Snowden, “we were ready to have a home of our own.”

The federal tax credit allowed the couple to pay off their debts. And the three-bedroom, two-bath home’s $209,000 price meant a $300-per-month cut in the their housing costs compared with base housing. Neighbors told Snowden the house was listed at $358,000 at one point.

“And we got 800 square feet more,” Snowden said.

Now that is buying for the right reasons. Not because you’re afraid you’re going to get priced out of the market forever, but because it makes good financial sense.

But some veteran real estate brokers and analysts aren’t ready to declare the home sales slump over.

“A good month does not a year make,” said Al Morken, a Tacoma Realtor with 38 years of experience.

“It’s kind of a mixed report,” said Morken, who has analyzed real estate trends for two decades.

While the pending deals numbers are encouraging, he said, median sales prices in Western and Central Washington were still down by 2.05 percent over March last year. Pierce County median prices were down 5.86 percent to $215,000 compared with March last year. Snohomish prices declined by 12.12 percent, but King County prices crept up 2.67 percent on closed sales, he said.

So wait, the encouraging part is that sales are increasing, but the discouraging part is that prices are still getting more affordable? Seems to me like that should be part of the good news.

No story spotted so far from The Olympian. I’ll update this post if they publish one.

[Update]
Here’s the story from The Olympian, a day late.

Rolf Boone, The Olympian: Thurston County home sales up

The Thurston County housing market posted its strongest month of the year, with March home sales rising 34 percent in the year-over-year period, according to Northwest Multiple Listing Service data released this week.

Home sales jumped 34 percent to 286 units last month from 214 units in March 2009, combined single-family residence and condo data show. Pending sales also surged 30 percent in the year-over-year period ending in March, and the total number of homes for sale rose nearly 13 percent to more than 1,800 units. More than 650 homes were listed for sale in March, the data show.

Although a federal tax incentive program for first-time buyers and existing homeowners is set to expire April 30, South Sound home sales have been stimulated by lower prices, not tax credits, Ken Anderson said Tuesday. Anderson is the broker and owner of Coldwell Banker Evergreen Olympic Realty in Olympia.

When you can get a $30,000 price reduction on a house from last year, an $8,000 or $6,500 tax credit just doesn’t compare, he said. “Affordability is trumping the tax credit,” said Anderson, although he acknowledged the tax credit as a “nice bonus.”

Wow, so this lower prices = more buyers math works everywhere? Incredible!

(Eric Pryne, Seattle Times, 04.05.2010)
(Aubrey Cohen, Seattle P-I, 04.05.2010)
(Mike Benbow, Everett Herald, 04.06.2010)
(John Gillie, Tacoma News Tribune, 04.06.2010)
(Rolf Boone, The Olympian, 04.07.2010)

  

About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

32 comments:

  1. 1
    Chris says:

    Great graph on median home prices relative to the tax credit window – it looks like an $8,000 tax credit drove a $30,000 increase in median home prices. It would be interesting to look at the Case Schiller Seattle values over that time period. It looks like what really happend was that individual home values were pretty flat or slightly down but the tax credit pumped up the volume of higher end home sales moreso than lower end home sales. That seems counterintuitive if the first round of tax credits was aimed at first time home buyers. There must be an interesting economics problem behind that story.

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  2. 2
    LA Relo says:

    “…he implied that pending sales were somehow a better measure of sales activity than closed sales, when in reality the exact opposite is true.”

    I’ve always thought asking the question of people “would you like to live in a Mansion?” was a better indicator of the health of the housing market.

    There was also a funny article on CNBC today: Most Americans Say Now Is Time to Buy a House: Poll

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  3. 3
    BillE says:

    A 77% increase in pendings for Snohomish county, but how many of those will close? I’ve seen a lot of homes go pending then come back on the market.

    Can anyone in the business here say if there’s been an increase in deals getting stalled by low appraisals? Without knowing what kind of offers are being accepted, it looks like quite a few seemingly overpriced homes have gone pending lately.

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  4. 4

    RE: BillE @ 3 – I haven’t seen any real issue with appraisals, but perhaps I’ve been lucky. Most the ones that don’t close are short sales, and those probably never even get to an appraisal stage.

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  5. 5
    Urban Artist says:

    I have seen at least three houses in Ballard have sold signs within a few weeks of being on the market. Then the sold sign is gone and the house remains on the market. Ballard has come down in price a bit but sellers are still asking awfully high prices for not much house.

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  6. 6
    anonymous says:

    RE: Chris @ 1 – I’m sure some of the 3 month price gain was just the summer selling season. There are similar bumps on the graph in 2007 and 2008 after all. It doesn’t look like the price declines after the surge were as bad as the ones in ’07 and ’08.

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  7. 7
    Greg Perry says:

    Median prices have a seasonal bump every year. This year will have one, too.

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  8. 8
    ray pepper says:

    RE: Kary L. Krismer @ 4

    Not sure why you always say this Kary. Short sales are closing everyday. I have two this month alone. One of our other agents closed one last week and another in about 10 days. Every short sale we have gotten involved with has closed albeit with delays.

    The key is educating your client prior, a competent listing Agent, and patience. Also ensuring that the listing is immediately marked STI when signed around to protect your Buyers offer. If the LA is unable/restricted from doing this you walk from that listing.

    Short sales remain the best deals on the block everywhere and I strongly encourage ALL BUYERS to seek them out first. Let all the overpriced bagholders attempt to sell theirs up against the short sales and foreclosures in the coming years. In the end theirs too will become a short sale.

    But, I assure everyone they are speeding up and already they are so much more efficient then in 2009. The banks will stream line these short sales due to the sheer number that will continue to plague the markets.

    Watch and Learn.

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  9. 9

    By ray pepper @ 8:

    RE: Kary L. Krismer @ 4 – Not sure why you always say this Kary. Short sales are closing everyday. I have two this month alone.

    I prefer to base my beliefs on actual statistics rather than the experience of a single agent or two.

    There are currently over 1,200 active short sale SFR listings in King County, and an additional over 1,200 short sale listings in some sort of pending. March was the first month I’ve noticed were over 150 of them sold (barely). Usually it’s more like 120. Using 120, there are over 10 months of actives and over 10 months of pending transactions. To me that means short sales have a low chance of actually closing.

    I don’t usually run Pierce County, but it has about 10 months of pending and over a year of active, based on March’s sales.

    Numbers from NWMLS sources, but not compiled or guaranteed by the NWMLS.

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  10. 10
    ray pepper says:

    “To me that means short sales have a low chance of actually closing”

    Ahh..Yes…Once again…Its the Agents the Buyers choose to represent them that once again proves to be critical. So for myself having a 100% success rate in every short sale I attempted means I’m way ahead of the average agent. I will tell you this though Kary. The listing Agent is crucial and when preparing a hometour the Buyers Agent must dig and find out exactly what their client is going to step into long before showing the home.

    Some of these Listing Agents conducting short sales do NOT even have their sellers qualified for a short sale with their bank. They just plopped it on the MLS. Some of the Listing Agents haven’t even pulled title to see if there are existing liens and judgements that the bank must take into account.

    Can you imagine that Kary? You take a short sale listing without pulling Title? Taking ANY listing without pulling Title? The incompetence that surrounds me in this field continues to astound me. Yet, Agents complain about short sales NOT CLOSING.

    Well…. hello!! Your asking an institution to take a SERIOUS LOSS. The Agent can do some due diligence prior don’t you think?

    Its the Agents causing these delays Kary not just the Banks!

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  11. 11

    RE: ray pepper @ 10 – I would agree with you that a buyer’s agent should check out the situation prior to showing. Last year I had two clients interested in the same short sale property. The agent was a liar, so I never showed it to either client. I don’t remember who one of the clients was, but the other ended up buying a bank owned property.

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  12. 12
    ray pepper says:

    RE: Kary L. Krismer @ 11

    Do you blog at RCG? I think I’m officially retiring from that site after they deleted my entries.. Any where else we can yell at each other other then here?

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  13. 13

    RE: ray pepper @ 12 – I don’t post there for similar reasons. I do sometimes read Rhonda’s, Jillayne’s and Craig’s posts, because they can be informative, but that’s it.

    You can yell at me over at SREP. ;-)

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  14. 14
    ray pepper says:

    RE: Kary L. Krismer @ 13

    I’ve been a bad boy at RCG! Dustin emailed “I’m done with you!” Until I cool off!

    Reminds me of when I was younger. You cannot FIRE me …I QUIT!

    Kary, tell me the truth. Like only you can…Am I an ass?

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  15. 15

    RE: ray pepper @ 14 – Well, first, I thought Dustin was gone over there. Didn’t he sell out (and yes, I realize that he sold out when he first created the site, but I’m talking about selling out in a different context.)

    Second, I wouldn’t worry too much about what Dustin thinks. He doesn’t know squat about what’s going on over there, or at least he didn’t back when I frequented the place. I think it was Losh that called him an absentee owner about a year ago. He’s not anyone I respect, and so I don’t see why you or anyone else would care what he thinks.

    Finally, as to whether you’re an ass–let’s just say you’re a little different. But not an ass.

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  16. 16
    buystocks says:

    RE: ray pepper @ 14

    sounds like a good weekly poll subject:

    Is Ray an ass?
    A) Yes, Ray is a total ass all the time
    B) Yes, Ray is a total ass some of the time
    C) Yes, Ray is sort of an ass all the time
    D) Yes, Ray is sort of an ass some of the time
    E) No, Ray is not an ass
    F) I do not know Ray well enough to make a decision
    G) Other

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  17. 17
    Scotsman says:

    RE: ray pepper @ 14

    “Am I an ass?”

    No, but let’s face facts- anyone that continues to eat at Claim Jumper when it makes them sick is at least a few pickles short of a full peck.

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  18. 18
    Scotsman says:

    OK, stop it Tim, Please! I’ve been whipped into such a frothy frenzy of real estate delusion I can hardly breathe. Was it BillE that said we need more charts without those confusing numbers on the side?

    Give it to me straight, a full-on shot of J Lennox Scott truthiness and MSN manipulation, a barrel full of Bloomberg BS. If I buy now, just how fast is my house going to increase in value? 15%, 20% a year? If I buy three, how wealthy will I be?

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  19. 19
    Scotsman says:

    Whoa! Just went over to RCG for my daily dose of sweetness and light, and to check in on the big “Is Ray An Ass” controversy. I threw up just a bit, overwhelmed by the super excited, super motivated community building full service superness of it all. The old saying, “ya don’t know what ya don’t know” came immediately to mind. Talk about being stuck in 2006 with a double dose of PMA. Even Mack is more in tune with reality. Whew.

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  20. 20
    ray pepper says:

    RE: Scotsman @ 19

    Yes, it appears she bit when you asked her if real estate will ever go up in Seattle again. She truly doesn’t know who she is responding to.

    Buystocks…That is a classic Post. My wife answers C.

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  21. 21
    Packet says:

    RE: Kary L. Krismer @ 11 – Wow. Ray and Kary agreeing on something. I never thought I’d see the day…

    Rate this comment: Thumb up 0

  22. 22

    RE: LA Relo @ 2

    Pending Sales are a Joke

    Tim has already documented that area in depth, so I won’t blog repeats of it.

    The April Tax Credit is most likely a joke now too….the escrow likely won’t close fast enough to get it signed in time…..let’s hope honest realitors take their tax credit advertisement signs down this week.

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  23. 23
    Scott Weitz says:

    Heard a great song that reminded me of the economy/ housing market right now:

    “Sometimes falling feels like flying….for a little while”

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  24. 24
    anonymous says:

    RE: Scotsman @ 18 – So I was talking to a young woman this weekend about why I absolutely have to buy a house.
    me: “So what do you think is going to happen to house prices in the next few years?”
    her: “They will go up about 10% in value per year.”
    me: “For how long?”
    her: “Forever.”
    me: “But how is that possible, unless wages go up that fast? In 10 years a median home would be around a million bucks, like 1% of the population would be able to buy, and that isn’t enough to fill all the houses.”
    her: “So? It’s happened before.”
    me: “Yes, but that was a huge bubble and it made a price crash inevitable.”
    her: “Prices didn’t drop in Seattle.”
    me: mouth gaping, not knowing how to respond.

    So why do JL Scott and the NAR keep paying the papers for advertising then releasing obviously misleading press releases? Because it works.

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  25. 25
    anonymous says:

    RE: softwarengineer @ 22 – I’ve been seeing tax credit advertisements go up, not down.

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  26. 26
    Packet says:

    RE: softwarengineer @ 22 – Not really. They just have to have a signed contract by the end of the month. The close date can be anywhere until the end of June. So, there’s still more than enough time. 2 weeks from now though, there won’t be.

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  27. 27

    By Packet @ 26:

    – Not really. They just have to have a signed contract by the end of the month. The close date can be anywhere until the end of June. So, there’s still more than enough time. 2 weeks from now though, there won’t be.

    How long do you think it takes to close?

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  28. 28
    Packet says:

    RE: Kary L. Krismer @ 27

    For the short sale I’m about to buy? About 2 months. An REO or straight up sale should be less than that.

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  29. 29

    RE: Packet @ 28 – I don’t know where you are on the short sale, but good luck getting it closed in two months.

    If we’re just talking short sales, I would say that any tax credit signs should have come down on them at least a month ago, if not longer. I’m not even sure that I’d be comfortable with such a sign being there at all even if it was six months ago.

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  30. 30
    Packet says:

    RE: Kary L. Krismer @ 29 – Waiting for the mortgage to come through later this week. Close date is later this month.

    I’d agree though, no short sales should be advertising the tax credit. For a regular sale or an REO though? There’s still a couple weeks of time left.

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  31. 31
    What the Heck says:

    OK, now that the credit is about to expire, what’s the next program? Is this one extended or is the government out of the tax credit business for housing?

    Thoughts.

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  32. 32
    Jonness says:

    By What the Heck @ 31:

    OK, now that the credit is about to expire, what’s the next program? Is this one extended or is the government out of the tax credit business for housing?

    Thoughts.

    Other forms of government subsidy will help to prop house prices up above historical levels of affordability (low rate loans to banks, fake accounting standards, etc). But without the direct MBS/Tax credit injection, Seattle-area prices will continue to decline, especially in the outlying areas (normal Spring bounce taken into consideration).

    The government will eventually come forth with more surface-level stimulus, and onward we will go. Their hope is they can prop up the dead turkey long enough for inflation will set in and lead to a wage-price spiral. This will rescue the banks from being underwater. However, the front-edge of inflation is rough, because it increases the interest payment on the U.S. debt at the same time the value of the dollar is being destroyed. And of course mortgage rates go up as well. That along with increased taxes makes it tough to slog out of a bad economy (Volcker is calling for a VAT). Add in the possibility that consumer prices inflate, but wages don’t, and we head downward for another round of pain.

    Despite the smoke and mirrors all around us, everything rests on jobs being created. Most of the stock gains are based on business efficiency gains. The small increase in consumer spending probably has more to do with strategic defaults freeing up money and sheer consumer frustration and throwing in the towel than with good economic fundamentals forming in the system.

    Personally, I believe there is no rush to buy a house until the unemployment rate drops appreciably. There are way too many people out of work, underwater, and/or tapped out on debt for house prices to increase at a sustained rate. The consumer’s pocket must be lined with cash and/or credit before things can change. The way to win the game is to live as frugally as possible and save as much as possible. This way, when we turn the corner, you will be a step ahead of the competition.

    Outside of bubble economies, it typically takes money to make money, and you can’t get rich paying 50% of your income to interest on debt. The key to getting ahead is opposite that of a bubble economy. In a bubble, you want to leverage as far as possible into bubbling assets and sell at the top. But when the bubble collapses, you want as little leverage and as much liquid assets as possible.

    MV=PQ. In a rough way, M can be thought of as jobs, and V can be thought of as bank credit. By the same token, PQ can be thought of as house prices. That’s not exactly holding to the relationships in the original equation, but I believe the general equation (job income * bank loans) = (house prices * quantity sold) has some relationshipal merit and is worth keeping an eye on. According to the equation, decreasing unemployment isn’t nearly as meaningful if the new jobs don’t pay as much as the jobs that were lost. What matters is the total money in the system available to consumers to compete for assets. That’s why the government believes it can jump in and fill the void until things come back to normal. The question is, can it pull it off, or is it making matters worse in the long run?

    There is a lot of risk associated with getting into the Seattle housing market at this time.

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