August Reporting Roundup: Gutter Momentum Edition

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).

To kick things off, here’s an excerpt from the NWMLS press release:

Northwest MLS brokers notch this year’s best monthly tally of sales during August

“For the first time in a long time, I can say with confidence that things feel better,” said Northwest MLS director OB Jacobi, president of Windermere Real Estate. “We shouldn’t get too distracted by the large increase in pending sales,” he cautioned, noting, “It’s a positive sign, but these figures are being compared to last summer’s post-tax incentive doldrums. With that being said, we’re excited about the positive momentum in the market.”

“With a low level of home inventory for sale and historically low interest rates, we are seeing a healthy volume of sales activity causing multiple offers,” observed J. Lennox Scott, chairman and CEO of John L. Scott Real Estate.

Commenting on the latest numbers, NWMLS director Frank Wilson emphasized, “A real estate market is about activity and momentum.” He also noted historic affordability, with the cost of a home better matching income levels and extremely low interest rates contributing to favorable conditions. “We continue to live in a real estate market of extreme affordability, affordability levels that have not been seen in decades,” he stated.

They forgot to mention the “high open house traffic.” I like how they’re focusing on “momentum” from a period when sales were at record lows. Sure, we’ve moved out of the gutter, but we’ve got a long way to go before we get back to anything resembling a “normal” market. Here’s a quick look at August single-family closed sales in King County for every year since 2000:

King County Closed Sales: August

Sure, 2011 looks great compared to 2010—the lowest year on record—but even during the worst year of the dot-com recession in 2002 we had 25% more sales in August than we did this year. But never mind the data. Let’s throw out nebulous concepts like “activity and momentum” and tell ourselves that everything is coming up roses.

Read on for my take on this month’s local news reports.

Eric Pryne, Seattle Times: Local home sales on pace to top last year’s total

More houses are likely to sell in King County this year than in 2010, when federal tax incentives fueled the market, observers agree.

But sales volumes are far off the frenzied, pre-bust pace of 2006 and 2007. And prices remain flat: The median price of a single-family home sold in King County has barely changed in six months, the Northwest Multiple Listing Service says.

Buyers closed on 35 percent more houses in August than in the same month last year, according to statistics released Tuesday by the listing service.

The big year-over-year increase wasn’t a surprise: After federal tax credits that were part of the Obama administration’s economic-stimulus package expired around mid-2010, home sales fell into a lull that persisted well into fall.

It’s nice to have Eric back again. The intern produced pieces that were certainly better than the shameless cheerleading that used to be pumped out on these pages by our old friend Elizabeth Rhodes, but Eric is still the best at telling the complete story, in my opinion.

Aubrey Cohen, Seattle P-I: Home sales surged in August, while prices fell

Local home sales shot up in August by the largest percentage in years, while home prices continued to sag, according to a new report.

Last month’s sales rose 36.4 percent in King County and 28.3 percent in Seattle from August 2010, when the market was still hung over from the expiration of a home-buyer tax credit, the Northwest Multiple Listing Service reported Tuesday.

Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University said we won’t have an “apples-to-apples” comparison until next month, when September numbers come out, because the tax-credit hangover had worn off by September 2010.

The text of Aubrey’s article is much more even-toned than the headline. I suspect Aubrey didn’t choose the “home sales surged” title. I don’t agree with Glenn on this one. I think that the sales hangover didn’t really wear off until October last year. I think we’ll still see pretty unnaturally high year-over-year numbers next month. October 2011 will probably see more sales than October 2010, but it most likely won’t be 30% more.

Mike Benbow, Everett Herald: County housing market shows signs of an upswing

August was the best month for home sales in Snohomish County since April 2010, the month the nation’s homebuyer incentives expired.

There were 916 homes sold in the county last month, a 42.7 percent increase from August 2010, the Northwest Multiple Listing Service reported Tuesday.

The huge jump in sales isn’t a big surprise.

Because of the low prices, many people who didn’t have to sell their homes now kept them off the market. Listings in the county totaled 4,425 homes in August, a 26 percent drop from a year ago.

Short article, but Mike does hit on a good point there about inventory. I suspect we’ll be seeing pretty low inventory for quite some time, given the large number of bubble buyers who are essentially stuck in their homes.

John Gillie, Tacoma News Tribune: Central Puget Sound area housing sales up from 2010

Encouraging news for the Puget Sound housing market emerged Tuesday with the release of new sales figures for August.

Pending sales for the four-county central Puget Sound area, King, Pierce, Snonohomish and Kitsap, were the highest they’ve been in August since 2006, said the Northwest Multiple Listing Service. And closed sales were up significantly in all four counties.

“For the first time in a long time, I can say with confidence that things feel better,” said John Jacobi, president of Windermere Real Estate. But Jacobi cautioned that the 26.42 percent increase in pending sales in the 21 Washington counties that Northwest MLS covers was so large in part because August 2010’s pending sales were relatively weak.

“We shouldn’t get too distracted by the large increase in pending sales,” he said. “It’s a positive sign, but those figures are being compared to last summer’s post-incentive doldrums.”

Al Morken, broker with Better Properties Real Estate’s North Proctor branch, likewise was cautious about pending sales because so many fail to close because of strict credit requirements, more diligent home inspections and inconsistent appraisals.

Despite the warning about pending sales given right in the NWMLS press release, let’s dedicate half of our article to talking about pending sales. That sounds like a good plan.

John Gillie, The Olympian: Thurston’s August pending sales up year-over-year

Encouraging news for the Puget Sound-area housing market emerged Tuesday with the release of sales figures for August.

Thurston County saw pending sales increase from 344 in August last year to 370 last month, said the Northwest Multiple Listing Service.

Pending sales for the four-county central Puget Sound area – King, Pierce, Snonohomish and Kitsap – were the highest they’ve been in August since 2006, said the Northwest MLS. And closed sales were up significantly in all four counties.

Closed sales in August reflected that same positive news in those four counties, while closed sales in Thurston County last month were down slightly.

Pierce County saw a 44.24 percent increase in closed sales last month. King had a 36.4 increase. Kitsap figures reflected a 36.36 percent bump, and Snohomish had a 42.68 percent increase.

Thurston County’s closed sales were down 2.44 percent, the new figures showed.

Argh, I hate it when they publish basically the same exact article in the News Tribune and the Olympian. However, it is interesting that Thurston County isn’t seeing the same big year-over-year increase in closed sales. Not sure why Thurston would be left out of this party. I’ll have to dig into that a little more to see what’s going on down there.

(Eric Pryne, Seattle Times, 09.06.2011)
(Aubrey Cohen, Seattle P-I, 09.06.2011)
(Mike Benbow, Everett Herald, 09.06.2011)
(John Gillie, Tacoma News Tribune, 09.07.2011)
(John Gillie, The Olympian, 09.06.2011)

  

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.

17 comments:

  1. 1

    Besides the volume of pendings not matching the volume of the following months’ solds, the prices don’t match up either. These numbers are the published median sold since December, followed by the median pending since December:

    Sold Pending

    370,000 333,500 Dec, 2010

    356,000 324,000 Jan, 2011
    334,000 334,975
    345,000 325,000
    349,950 325,000
    345,000 339,950
    345,000 329,500
    350,000 324,900
    350,000 319,000 Aug, 2011

    If the pendings were relevant, you would see the sold median dropping more.

    Numbers not guaranteed by the NWMLS, and also there’s the possibility of an entry error by me.

    Rate this comment: Thumb up 0

  2. 2

    Just for comparison, this is what the sold-pendings looked like in 2007:

    429,495 435,250 Jan, 2007
    429,925 450,000
    454,950 468,750
    465,000 459,900
    469,000 474,950
    470,000 474,000
    481,000 469,950
    477,345 449,950
    450,000 439,950
    443,950 432,773
    435,000 442,000
    435,000 428,500 Dec, 2007

    Same disclaimer.

    Rate this comment: Thumb up 0

  3. 3
    Scotsman says:

    If J L Scott was skippering the Titanic I’m pretty sure he’d be assuring the passengers that ice flows would hold the ship up while momentum carried it to a safe shore.

    Would there be a bidding war for the life boats?

    Rate this comment: Thumb up 0

  4. 4
    NewNormal says:

    Why do we expect, or even want, sales to return to bubble levels, as indicated in the comparison of August sales since 2000? Maybe this is the new normal. Or more precisely, the bubble period wasn’t normal to begin with.

    Rate this comment: Thumb up 0

  5. 5

    RE: NewNormal @ 4 – The bubble period wasn’t normal, but I don’t think we’re to a normal period on the other side either. There are all those people underwater who want to sell but have a snowball’s chance going the short sale route. Other than that, we might be at the new normal.

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  6. 6
    Lurker says:

    RE: Kary L. Krismer @ 5

    I have no idea what a “normal” market is like but I’ve only been somewhat interested for the past ten years!

    Rate this comment: Thumb up 0

  7. 7
    NN2 says:

    RE: NewNormal @ 4

    Just for reference (as we are in a tech centric geographic area) the Nasdaq composite peaked in 2000 and it stands at about half that today. Over a decade later the index has recovered half the crash. From here, it’d take another nine or so years of 9% annualized gains to get back to the pre-crash high. Outside of the increase volume due to the volatility in 2007-2010 and the new high frequency traders, the volumes are essentially flat. So, lower prices and flat volumes in the post-bubble world. This is from companies who innovate and actually produce goods and services as opposed to real estate while providing shelter, just sits there.

    Just something to keep in mind in predicting the future (which i cannot)…

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  8. 8

    By Lurker @ 6:

    I have no idea what a “normal” market is like but I’ve only been somewhat interested for the past ten years!

    You probably missed 4 or 5 normal markets in that period of time. Each one lasting exactly a day. ;-)

    Rate this comment: Thumb up 0

  9. 9
    ARDELL says:

    RE: Lurker @ 6

    As to volume:

    Single Family Home sales have to go up 31% in King County to get to “normal”.

    Condo Sales in King County have to go up by 50% to get to “normal”.

    That based on the two year average volume pre-bubble 1/1 to 8/31 compared to 2011 volume for the same period. I expect Single Family will get there before condos.

    Rate this comment: Thumb up 0

  10. 10
    ricklind says:

    By Kary L. Krismer @ 5:

    RE: NewNormal @ 4 – The bubble period wasn’t normal, but I don’t think we’re to a normal period on the other side either. There are all those people underwater who want to sell but have a snowball’s chance going the short sale route. Other than that, we might be at the new normal.

    What he said.

    I think we have at least “several” years back to any kind of “normal” growth trend, starting from a more reasonable, new, lower reference point. We still have all this debt to unwind, and we have 2 possible routes, from what I see. One is a fast unwind with a crash, and the other is a slower unwind with a softer, but still painful, landing.

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  11. 11
    whatsmyname says:

    RE: ricklind @ 10

    Or, we could monetize.

    Rate this comment: Thumb up 0

  12. 12
    David Losh says:

    RE: NN2 @ 7

    You are correct that we here in Seattle, Bellevue, and areas surrounding Redmond, are a bubble compared to the rest of the world. We can throw in San Fransisco, and New York, maybe Washington D.C. or Chapel Hill North Carolina. In other words we can put job centers into a separate basket. Those could be considered housing unit sales.

    You can compare housing unit sales to affordability if you want, some people do, as in the press releases. It doesn’t mean anything, but it makes for good press.

    I can easily predict that housing units, or any Real Property, as an asset class, will not regain value past, say 1998. We may even have to go back further because of internet commerce.

    We have global dirt. We need a bunch for farming, and manufacturing, The problem with both of those over priced, over valued land masses is that the consumer has to have the ability to buy. The consumer will need to catch some serious economic breaks to continue to pay for the over priced food, and clothing that are rapidly becoming luxury items.

    Looking at Real Estate, or Real Property alone as any type of indicator will never give you the story of how it plays in the global economy. Right now housing isn’t playing well at all.

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  13. 13
    Real World Express says:

    Every little uptick in sales, also removes buyers from the potential pool.

    That’s why we usually see a big drop following the upticks.

    With job creation negative in this region, high costs of living, relative remoteness from the rest of the country, prices will only continue to plummet.

    Rate this comment: Thumb up 0

  14. 14

    By Scotsman @ 3:

    If J L Scott was skippering the Titanic I’m pretty sure he’d be assuring the passengers that ice flows would hold the ship up while momentum carried it to a safe shore.

    Would there be a bidding war for the life boats?

    I think the line would be ” There is a new paradigm for ocean liners. They only stay afloat and no longer go down.”

    Rate this comment: Thumb up 0

  15. 15
    Dave says:

    I’m wondering if it’s possible to show a similar graph by year, with August closed sales/available listings? Sales are constrained by buyers and the economy, but could also be constrained by available inventory. It seems like that would be an interesting metric to gauge how quickly things are and were moving at various points in history.

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  16. 16

    RE: Kary L. Krismer @ 5
    Very True Kary

    I was thinking along the same lines as you. The real estate market in Seattle is not some static entity that allows buyers to stay put and not transfer out of the area with their jobs and retirements. Even bad health makes real estate move in Seattle too, as their incomes are slashed. This is normal, bubble or no bubble.

    Tim’s charts could very well tell us more and more folks are turning down job offers, turning down retirement and staying put sick, until they get evicted; because they can’y afford to sell.

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  17. 17

    […] Seattle Bubble calls it a “flat, boring summer” and notes that King County’s median home price of $350,000 has rewound to roughly 2005. “[E]ven during the worst year of the dot-com recession in 2002 we had 25% more sales in August than we did this year,” offers Tim Ellis, for contrast, in his follow-up post on NWMLS stats. […]

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