September Reporting Roundup: Free-Falling Sales Edition

IPC Boogie 2009, diving after Wayne by Flickr user divemasterking2000
photo by Flickr user divemasterking2000

It’s time once again for the monthly reporting roundup, where you can read my wry commentary about the news instead of subjecting yourself to boring rehashes of the NWMLS press release (or in addition to, if that’s what floats your boat).

First up, let’s have a look at the source material from the NWMLS itself. Here’s their press release: "Wise Buyers" Taking Advantage of Chance to Get Stellar Homes

Home sales remained subpar around most of Washington during September, but directors from Northwest Multiple Listing Service say they are encouraged by some positive signs.

“It’s a slow recovery, but it’s trending in the right direction,” said Joe Spencer, president and COO of John L. Scott Real Estate and a member of the NWMLS board of directors.

You may recall Joe Spencer from a recent Friday Flashback, in which we dug up his claim that November 2007 was “the perfect buyer’s market.” Decide for yourself whether it makes sense to trust his “insights” today.

“There are many very wise buyers taking advantage of what may be a once-in-a-lifetime opportunity,” said Mike Skahen, whose real estate career spans nearly 30 years. “We haven’t seen a summer like this in home sales since 1982 when interest rates were hovering around 16 percent,” he observed.

Could Mike Skahen possibly be any more cliché? “Once-in-a-lifetime”? Really? And what is that comment about summer supposed to even mean? “A summer like this” is about the vaguest description of the market I’ve ever heard.

“Crazy requirements” are impeding the pace of sales, according to NWMLS director Dick Beeson, broker/owner of Windermere Commencement Associates in Tacoma. “Agents are finding it’s much more difficult to navigate the closing process than ever before. If it’s not the conditions of an inspection report, it’s the appraisal coming in off sale price or lenders reviewing and re-reviewing the buyer’s qualifications or buyers rethinking whether or not to buy,” he explained.

Looking ahead, Beeson expects the balance of the year to be “somewhat fickle,” in part because of upcoming elections and lingering uncertainty around the slow pace of the recovery.

I know, right? It’s so crazy that banks and buyers would be so careful when dealing with the purchase of assets costing a quarter million dollars. Also, it’s perfectly reasonable to assume that buyers will be delaying their home purchases pending the outcome of a midterm election.

Lots of great material in this month’s NWMLS comedy flier. Did the papers pick it up and run with it, or did they dig in a little bit to find the actual news on their own? Read on to find out!

Eric Pryne, Seattle Times: Miserable month for area home sales

Buyers closed on 1,158 houses last month, a 28 percent drop from the same month last year, according to statistics released Tuesday by the Northwest Multiple Listing Service.

It was the worst September in at least five years, and the biggest monthly year-over-year decline since April 2009.

That’s no surprise, said Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University.

“The tax-credit program accelerated sales activity in the first half of the year, and it borrowed from sales that otherwise would have happened in the second half,” he said.

Mike Gain, CEO and managing broker of Prudential Northwest Realty Associates, agreed. “We all knew we were robbing from the future,” he said. “We’re just all hoping we’ve hit bottom.”

Both Gain and Crellin said they don’t foresee any big surge in sales for the rest of year.

Lots of people are showing up at his firm’s open houses, Gain said, “but they’re just very hesitant because there’s no sense of urgency.”

I love how now that the tax credit is over, real estate professionals are admitting that they knew all along that the credit wasn’t really adding any new sales, it was just shifting them earlier than they would have occurred anyway.

By the way, this depressed level of sales is exactly what I predicted on these pages back in October 2009 before the credit was extended, and its effects made even worse.

Gerry Spratt, Seattle P-I: Seattle housing market grinding to a halt

The median price for a single-family home in Seattle fell 1.3 percent in September compared with August, and activity in the market continued to grind to a halt, suggesting further drops in the near future.

According to the latest numbers from the Northwest Multiple Listing service, the median price for a single-family home withing city limits was $414,550 in September. That’s 0.85 percent higher than a year ago, but other indicators were not so rosy.

Pending sales, the best indicator of the most recent activity in the market, were down 26.71 percent from a year ago. Closed sales were down 35.69 percent with 346 completed transactions.

I learned recently that Mr. Spratt’s primary job at the SeattlePI.com is writing sports stories. Knowing that, I think he’s earned himself a “most improved” award. Except for a later copy-paste of Joe Spencer’s quote in the NWMLS press release, Mr. Spratt’s report is considerably improved over recent months.

Mike Benbow, Everett Herald: September home sales, pending sales drop in Snohomish County

Snohomish County’s housing market saw another dreary month in September when the number of closed home sales and pending sales dropped.

Pending home sales declined to 895 from 906 in August, according to a Northwest Multiple Listing Service report released Tuesday. Pending home sales were down 26.8 percent from the previous September.

Buyers closed on 615 homes in the county in September, down from 755 closings a year ago and 642 closings in August.

Not a lot of meat in this one. Just a few basic stats and copy-paste quotes from Beeson and Spencer.

Kathleen Cooper, Tacoma News Tribune: Pierce County’s pending home sales down 24 percent from a year ago

September pending home sales in Pierce County were down 24 percent from the same time last year, and median sale prices barely changed – both trends that have been consistent through the summer.

Data released Tuesday from the Northwest Multiple Listing Service, which collects information from 21 counties in Western and Central Washington, shows no radical changes in the month-to-month residential real estate market.

Same story. Mostly copy-paste quotes straight from the NWMLS press release. Sad.

No sign yet of The Olympian’s story. I’ll update this post if they end up publishing something.

[Update]
Here’s the story from The Olympian.

Rolf Boone, The Olympian: South Sound home sales remain slow

One bright spot in the September data was that the year-over-year decline in sales wasn’t as steep as in August, a month in which sales tumbled 26 percent. In August, 246 homes sold in the county, one fewer than in September.

Greene Realty Group real estate agent Blake Knoblauch attributed the slower sales pace to factors including tighter lending standards, the slower economy and a wait-and-see attitude among buyers.

“Buyers are looking for a great deal, and there’s no sense of urgency,” he said, adding that buyers know home prices likely will continue to fall and that mortgage interest rates will remain low.

Those darn buyers. Why don’t they just jump in and throw caution to the wind? That worked out pretty well for everyone who bought over the last four or five years, right?

[End of Update]

Pretty much the only two reporters that did any actual reporting this month are Eric Pryne and Gerry Spratt. Good on them.

(Eric Pryne, Seattle Times, 10.05.2010)
(Gerry Spratt, Seattle P-I, 10.05.2010)
(Mike Benbow, Everett Herald, 10.05.2010)
(Kathleen Cooper, Tacoma News Tribune, 10.06.2010)
(Rolf Boone, The Olympian, 10.07.2010)

  

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.

22 comments:

  1. 1
    D. in Ballard says:

    It may not be plausible for people to hesitate buying a house before midterm elections, but I tell you if it’s 2012 and I still haven’t bought a house and the polls are leaning toward a Sarah Palin presidency, I would absolutely hesitate to buy a house. Maybe take advantage of my husband’s dual citizenship to get the hell out of dodge.

    As for the market, anecdotaly I’ve seen a couple of houses on my watch list go pending when I think they are grossly overpriced. I’m looking in Seattle at nice neighborhoods, but it’s not an encouraging sign.

    Rate this comment: Thumb up 0

  2. 2
    ray pepper says:

    hesitate home buying because of an election?? I say BS…..People BUY when there is a perceived VALUE. I have never heard ANYONE not BUY because of a political outcome……

    “Both Gain and Crellin said they don’t foresee any big surge in sales for the rest of year.”

    What a daring call this is…………………

    I love the sky divers. Just so true ! Trendline down down down….Short sales and foreclosures will continue at an unyielding rate. See you at the Auctions and just keep looking for GEMS!

    Rate this comment: Thumb up 0

  3. 3
    Scotsman says:

    One of the bigger 2007 spec homes on my street finally sold. What was expected to be a $1.0M home ended up going for not much over $540K. Reportedly less than the construction loan. Buyer is a CA transplant who is sure the market will turn starting next year. At less than $140 square foot for high end construction she’s probably safe?

    Rate this comment: Thumb up 0

  4. 4
    D. in Ballard says:

    Oh, speaking of elections and big money decisions. I feel like I’ve heard my financial adviser tell me that the stock market always does well during an election year. It may not be true, but it might be one of these things that people believe.

    Rate this comment: Thumb up 0

  5. 5

    RE: Scotsman @ 3 – Is that one of those places that is totally different than the rest of the neighborhood?

    I know of a place like that in Skyway where most everything around it is small one story houses built in the 40s or 50s.

    Rate this comment: Thumb up 0

  6. 6
    Packet says:

    Crazy requirements? Unless something has dramatically changed in the last couple months, there’s nothing crazy about the requirements. I bought a house earlier this year and it was fairly painless. You get preapproved, you make an offer, the appraisal comes back and everything goes according to plan.

    The only thing I’ve noticed is that the appraisals are actually coming back with reasonable valuations to them. So, if you offered more than the house is worth, you’re not going to get a loan on it.

    Rate this comment: Thumb up 0

  7. 7
    Scotsman says:

    RE: Kary L. Krismer @ 5

    It’s a mixed neighborhood- everything from a few double-wides to multi-million horse properties. There are several comparable properties on the street. $650K might be the midpoint, so I’m a bit surprised there wasn’t more interest in this house. There’s nothing really wrong or odd about it, just little market for that price range?

    Rate this comment: Thumb up 0

  8. 8
    CCG says:

    By D. in Ballard @ 1:

    It may not be plausible for people to hesitate buying a house before midterm elections, but I tell you if it’s 2012 and I still haven’t bought a house and the polls are leaning toward a Sarah Palin presidency, I would absolutely hesitate to buy a house. Maybe take advantage of my husband’s dual citizenship to get the hell out of dodge.

    As for the market, anecdotaly I’ve seen a couple of houses on my watch list go pending when I think they are grossly overpriced. I’m looking in Seattle at nice neighborhoods, but it’s not an encouraging sign.

    I can’t see how Sarah Palin could make it much worse at this point. We’re hosed. Getting the hell out of Dodge is the correct answer.

    Rate this comment: Thumb up 0

  9. 9
    CCG says:

    By D. in Ballard @ 4:

    Oh, speaking of elections and big money decisions. I feel like I’ve heard my financial adviser tell me that the stock market always does well during an election year. It may not be true, but it might be one of these things that people believe.

    Typically the Fed fires up the printing presses during election cycles to help inflate equity/bond prices (earning the FOMC the nickname “committee to re-elect the president”). Bernanke, for example, was nominated for a second term by Obama and has reason to play ball. Of course, people know the party will end at some point and then the question becomes who is closest to the exits. Sometimes the puking starts in January as you’d expect, sometimes they wait till February, sometimes they jump the gun in December.

    Rate this comment: Thumb up 0

  10. 10
    GH says:

    Many people on this website feel home prices will fall. Could somebody explain why that would happen?

    The fundamental factors that brought housing down in 2007-2008 have reversed:
    (1) Unemployment has stabilized and is starting to fall.
    (2) Bad mortgages are being slowly worked out of the system.
    (3) Banks have tightened their lending standards.

    Why can’t this be the bottom?

    The only plausible reason prices would significantly fall from here is a sudden rise in interest rates, or another general meltdown of the economy. The Fed’s recent actions suggest neither are likely.

    Rate this comment: Thumb up 0

  11. 11

    By GH @ 10:

    Many people on this website feel home prices will fall. Could somebody explain why that would happen?

    The fundamental factors that brought housing down in 2007-2008 have reversed:
    (1) Unemployment has stabilized and is starting to fall.
    (2) Bad mortgages are being slowly worked out of the system.
    (3) Banks have tightened their lending standards.

    Why can’t this be the bottom?

    The only plausible reason prices would significantly fall from here is a sudden rise in interest rates, or another general meltdown of the economy. Neither seems likely.

    1. The inventory of homes for sale is higher than it’s been for a while.
    2. Sales are lower than they’ve been for a while.
    3. The fact that banks have tightened their lending standards shouldn’t result in higher prices, it should result in less folks able to buy houses.
    4. Rent to home price and income to home price ratios are still high compared to their historical norms.
    To answer the question: It could be the bottom. But it probably isn’t.

    Rate this comment: Thumb up 0

  12. 12
  13. 13
    Jonness says:

    By Ira Sacharoff @ 11:

    1. The inventory of homes for sale is higher than it’s been for a while.
    2. Sales are lower than they’ve been for a while.
    3. The fact that banks have tightened their lending standards shouldn’t result in higher prices, it should result in less folks able to buy houses.
    4. Rent to home price and income to home price ratios are still high compared to their historical norms.
    To answer the question: It could be the bottom. But it probably isn’t.

    And there is massive shadow inventory out there. I have neighbors on both sides of me who haven’t made a house payment in years. This is getting ridiculous. The one guy is going on 3 years of free rent. How many people like this are sitting out there collecting free rent and using the money saved to go to dinner and the movies; thus, temporarily artificially propping up consumer spending? And to top it off, he previously took $300K equity out of his home and went on a 3-year spending spree. That’s GDP that will never come back to the U.S. by way of his wallet no matter how many years pass. And this does not bode well for the future.

    At this point, economically speaking, everything is phony. The housing market is a house of cards and represents an extreme risk to buyers. If the banks start putting these turkeys on the market, how many people have stellar credit, recession-proof jobs, and big down payments necessary to clean up the mess? In that scenario, Seattle would look worse than Las Vegas.

    Rate this comment: Thumb up 0

  14. 14
    Lurker says:

    RE: GH @ 10
    1) Unemployment is very high and it appears that it will stay high for many years.
    2) Foreclosures and short sales are spreading into the system, causing values to drop and will continue do so for several years until the distressed sales have been stabilized.
    3) Stricter lending standards mean that it is harder to get a loan for a house (this reduces demand)

    Rate this comment: Thumb up 0

  15. 15
    David Losh says:

    RE: GH @ 10

    It’s the straight line of appreciation that’s the issue. If you look at the graph of historic home prices you see the curve up at the end, and then the crash. If you take a ruler and adjust it on the graph then it shows we should decline to 2002 prices. However the graph really starts going up in 1998.

    Now the real question is about inflation. Did we have true inflation or was the appearance of inflation do to loose lending practices? Do we have a true economy of goods, and services, or do we have paper generated profits? Then we have the whole derivatives market thing going on which ballooned into I think $26 Trillion, Corporate cash reserves of $2 Trillion, and if all of that is real money, or just some phantom equity.

    So, it’s basically some weird debate that goes on, but general consensus is that 2002 pricing will prevail. I think we are somewhere in 2004 territory now.

    Rate this comment: Thumb up 0

  16. 16
    GH says:

    RE: Ira Sacharoff @ 11

    Thank you for your response.

    ********

    If you believe that this is NOT the market bottom, then you believe something will get worse. So what will it be?

    Will unemployment climb to 20%?
    Will the volume of foreclosures continue to grow?
    Will banks require 800+ credit scores?

    If nothing gets worse, then by definition we are at a market bottom.

    Housing will not recover soon. But I argue that this is a buying opportunity.

    ********

    You did mention one factor: “Rent to home price and income to home price ratios are still high compared to their historical norms.” That made me think.

    Does that historical imbalance necessary mean that prices will fall from where they are now?

    Suppose future home values appreciate 1% below inflation. With proper leverage, residential real estate would still be profitable, and this historical imbalance could be corrected.

    Rate this comment: Thumb up 0

  17. 17
    GH says:

    RE: David Losh @ 15

    You make some interesting points.

    I agree that inflation is key. Some argue that the US government under reports true inflation.

    If so, how would that affect our analysis of past home prices?

    Rate this comment: Thumb up 0

  18. 18
    EconE says:

    By GH @ 16:

    RE: Ira Sacharoff @ 11

    Thank you for your response.

    ********

    If you believe that this is NOT the market bottom, then you believe something will get worse. So what will it be?

    Will unemployment climb to 20%?
    Will the volume of foreclosures continue to grow?
    Will banks require 800+ credit scores?

    If nothing gets worse, then by definition we are at a market bottom.

    Housing will not recover soon. But I argue that this is a buying opportunity.

    ********

    You did mention one factor: “Rent to home price and income to home price ratios are still high compared to their historical norms.” That made me think.

    Does that historical imbalance necessary mean that prices will fall from where they are now?

    Suppose future home values appreciate 1% below inflation. With proper leverage, residential real estate would still be profitable, and this historical imbalance could be corrected.

    http://en.wikipedia.org/wiki/Straw_man

    Rate this comment: Thumb up 0

  19. 19
    ray pepper says:

    RE: Jonness @ 13

    “And there is massive shadow inventory out there. I have neighbors on both sides of me who haven’t made a house payment in years. This is getting ridiculous. The one guy is going on 3 years of free rent. How many people like this are sitting out there collecting free rent and using the money saved to go to dinner and the movies; thus, temporarily artificially propping up consumer spending”

    How many are out there doing this? More then you and I could comprehend. Remember…………….people only will remain STUPID for so long…….Now, upside down homeowners have crossed the path of social acceptablity of doing this and there is no coming back…………….

    I have so many stories to tell you all but trust me whan I say this over and over…………..”They are all coming back…” There will be GEMS to be had…See you at The Auctions…(except this weekend..Seattle Home Show)

    Rate this comment: Thumb up 0

  20. 20
    The Other Ben says:

    By D. in Ballard @ 4:

    Oh, speaking of elections and big money decisions. I feel like I’ve heard my financial adviser tell me that the stock market always does well during an election year. It may not be true, but it might be one of these things that people believe.

    Yeah, 2008 was a really good year for the stock market. :)

    I feel like this warrants some excel spreadsheets.

    Rate this comment: Thumb up 0

  21. 21

    Real Estate Price Free Falling Due to Chronic Unemployment

    But…..the pundits say the repression’s over, sales will rebound and the stocks will rise.

    They say 2-3 yrs of chronic unemployment is just a lagging indicator….LOL.

    I say our stocks are rising not because the domestic consumer is buying again, they rise because foreign interests are buying up America’s stock assets and America is buying everything foreign. How long will this go on? I suppose until the debt spiggot is turned off by the foreigners.

    Rate this comment: Thumb up 0

  22. 22
    ARDELL says:

    RE: GH @ 10

    1) Prices are currently higher than they were in early 2009 when the tax credit briefly expired. So a fall back to at least that level is a given by year end 2010.

    2) Volume is down 40% YOY Single Family Homes (not including townhomes) King County. A 40% volume drop has to result in price drops…especially after January 1 and continually thereafter, as inventory rises against that decreased volume.

    Some stats and graphs here: http://www.realtown.com/Ardell/blog/tracking-the-market

    Required disclosure: Information in this comment is not provided by, verified by or published by The Northwest Mulitple Listing Service.

    Rate this comment: Thumb up 0

Leave a Reply

Use your email address to sign up with Gravatar for a custom avatar.
Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

Please read the rules before posting a comment.