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:
Sales volume, home prices around Washington state rising amid inventory shortages in many areas
The dinosaur represents rising interest rates, raining down the terror of double financial impact on the hapless homebuyer… or something.June may have been cooler and wetter than normal, but weather did not seem to deter home buyers and sellers around western Washington. “Close-in Seattle neighborhoods have been experiencing the most intense buyer activity since 2006,” one broker remarked.
Northwest MLS directors credited several factors for contributing to brisk activity, with many of them mentioning inventory shortages. “Consumers bothered by the lack of inventory are ready to make sure they do not miss out on the shift in the market,” stated MLS board member Darin Stenvers, office managing broker at John L. Scott in Bellingham.
Frank Wilson, another MLS director, believes a unique aspect of this market is “artificially low interest rates” and said waiting to buy a home “could result in a double financial impact.”
Wow, some amazing logic on display there. Lack of selection is causing people to buy a home so “they do not miss out”? And you’d better buy quick before rates go up! It’s not like real estate agents have been using that line for the last decade or so.
Read on for my take on this month’s local news reports.
Eric Pryne, Seattle Times: King County median home price up 10 percent over year ago
King County house prices saw a double-digit increase in June — the first time that’s happened in nearly five years, according to statistics released Thursday by the Northwest Multiple Listing Service.
…
“The numbers are even more positive than I had anticipated they would be,” said Glenn Crellin, associate director for research at the University of Washington’s Runstad Center for Real Estate Studies.
…
What’s behind the turnaround? Analysts pointed to several factors.For one, the mix of homes that are selling has shifted. In February bank-owned houses — usually lower priced — accounted for nearly 23 percent of all single-family sales in King County, according to online brokerage Redfin.
Last month? Less than 10 percent.
…
Crellin said he expected the “shadow inventory” of foreclosed houses would have had a bigger impact on home prices by now.“It just isn’t becoming as big a problem as I expected it would be,” he said.
Kudos as usual to Eric, taking the time to talk to multiple sources and try to understand what’s really going on in the market instead of just parroting the NWMLS press release, as some other reporters have been prone to do.
Aubrey Cohen, Seattle P-I: King County house prices rise by double digits
A dearth of houses for sale in June and fewer bank-owned listings helped push King County house prices up by double digits for the first time since the housing bust, according to a new report.
…
There’s a “critical shortage of listings,” particularly under $500,000, said Mike Skahen, the owner/designated broker at Lake & Co. Real Estate in Seattle. “It is not unusual for more than 50 buyers to come through open houses, and it’s become common now to hold listings open on both Saturday and Sunday.”The heating market hasn’t renewed the buy-at-all-costs frenzy of a few years ago, agents said.
“What we find interesting today is the move away from a home being just an investment, but rather a long-term look at a specific neighborhood and how it complements a lifestyle,” Moorhead said. “Everyone we have interviewed still feels real estate is one of the best investments one can make, but they also realize it too has a downside. Therefore, you just cannot throw caution to the wind anymore.”
Really? After the biggest housing bust of all time “everyone still feels real estate is one of the best investments”?!? Unbelievable. Nothing will get through to some people, it seems.
Kurt Batdorf, Everett Herald Business Journal: Inventory shortages push up home prices
A shrinking inventory of available homes has started to drive up median sales prices and volumes of single-family residences in Snohomish County.
…
Snohomish County’s available home inventory sank from 4,548 units in June 2011 to 2,359 units this June, or 48.13 percent, according to data released July 3 by the listing service. MLS data indicates there is less than a two-month supply of homes for sale in Snohomish and King counties. Most analysts believe a supply of five to six months indicates a balanced housing market.That tight inventory is driving sales activity upward.
Wait, what? Low supply is causing increased demand? Um, no. Low supply coupled with increasing demand is driving up prices.
Rolf Boone, Tacoma News Tribune: Home sales in county can’t keep May’s pace
After the Pierce County housing market posted an 8 percent increase in home sales in May, the market reversed course in June and fell more than 3 percent, according to data released Thursday by the Northwest Multiple Listing Service.
Although sales fell, a Pierce County real estate broker said it’s not enough of a decline to cause concern because the housing market overall continues to improve.
“The market has stabilized, and the market will pick up,” said Mike Larson, president and designated broker for Allen Realtors in Lakewood. “Buyers should look at it the same way.”
Here’s a crazy thought: Maybe buyers are getting sick of having nothing to choose from, and aren’t just going to buy whatever crap happens to be sitting around on the market?
Rolf Boone, The Olympian: Thurston home sales top 300 units for first time this year
Thurston County home sales rose nearly 6 percent in June, cracking 300 units sold for the first time this year, according to Northwest Multiple Listing Service data released Thursday.
Home sales rose 5.86 percent to 307 units last month from 290 in June 2011, while prices were flat in the same period, down 1.08 percent to $226,000 from $228,475, the combined single-family residence and condo data show.
…
“It is improving, and we know it’s improving,” Van Dorm Realty managing broker Steve Pust said about the Thurston County housing market.“It feels like we’re at bottom,” he added, although he chuckled at his own comment because the bottom of the housing market has been a moving target for some time.
“Some time” as in, agents have been calling the bottom for nearly 5 years, basically since the first time prices showed signs of slipping.
(Eric Pryne, Seattle Times, 07.05.2012)
(Aubrey Cohen, Seattle P-I, 07.05.2012)
(Kurt Batdorf, Everett Herald Business Journal, 07.05.2012)
(Rolf Boone, Tacoma News Tribune, 07.06.2012)
(Rolf Boone, The Olympian, 07.05.2012)
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You’ve Covered All the Salient Points Tim
Its like hearing a circus barker from the past repeat the same lame promises at the home buying circus tent, that are over exagerated and repeditive nonsense to get you to buy the over-priced ticket.
I’d add too that the home seller and/or agencies attached to buyer closing fees call this circus barker speal optimistic, albeit its definitely pessimistic nonsense to the buyers/rentors.
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What do you think is causing buyer demand even in the face of so much shadow inventory? You would think buyers would just continue to wait it out for the next bottom?
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By Carl @ 2:
Suzanne.
http://www.youtube.com/watch?v=odQ7s85bk9s
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By Carl @ 2:
Please link to some sort of source that documents “so much shadow inventory.” All of the data I have access to points to shadow inventory being at its lowest level in years, and still declining.
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Every year it is the same, and has been the same as long as I can remember.
The school year comes to a close, and Mom, Dad, and the kids buy a house for the next school year.
In Seattle especially you need to live in the school area to attend that particular school.
People pay a huge premium to have a place for the kids to go to school.
Those that bought or sold now have all summer to get settled in before school starts next year.
Mom, Dad, and the kids are the biggest buyer pool, and the buyer pool that will pay the premiums for housing.
As far as the supply goes, a lot of people were encouraged last year by the Spring Bounce, and this year, I think doubly so. Next year will depend on the elections, but I think people are holding on, or holding out before they sell.
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RE: The Tim @ 4 –
Thanks, because I agree that the shadow inventory idea has past it’s prime.
I’d love to explore what has happened to the millions of properties, I think it was 14 million, that were supposed to be vacant, and ready for a buyer, renter, or bull dozer, but I haven’t seen any mention of those for over two years.
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“What do you think is causing buyer demand even in the face of so much shadow inventory? You would think buyers would just continue to wait it out for the next bottom?”
In the wake of this weeks’ Red, White & Blue blatant, unceasing moronic national hypocrisy, try and Pause, reflect (hands off keyboard) and consider the following (no, it’s not from the NAR or Realtors):
“All propaganda must be so popular and on such an intellectual level, that even the most stupid of those toward whom it is directed will understand it… Through clever and constant application of propaganda, people can be made to see paradise as hell, and also the other way around, to consider the most wretched sort of life as paradise.“
–Adolf Hitler
Learn more (best $11 you will ever invest or free at library) at:
http://www.amazon.com/Propaganda-Edward-Bernays/dp/0970312598/ref=sr_1_1?ie=UTF8&qid=1341614703&sr=8-1&keywords=bernays+propoganda
You guys crack me up. It’s great entertainment. Take your medicine and don’t forget to eat a lunch.
Thank you.
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RE: The Tim @ 4 – Thank you!!! Folks, your fearless leader and host has just officially, dropped the bomb…… There is NOOO stockpile of shadow inventory!!! OH NO!! what will you talk about now?
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Actually, I already know what you’re gonna talk about. You’ll talk about how prices aren’t really skyrocketing because of “the mix”.
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RE: corndogs @ 8 –
Got a link for that shadow inventory?
In terms of normal business cycles and bubble recovery we really are past the bottom and slowly but surely headed toward recovery. The longer term issue is still total national debt load. That will eventually come back to bite both the U.S. and other countries. But as far as the Seattle real estate market goes this is now as close to normal as we’re likely to see for some time.
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RE: The Tim @ 4 –
But if there is no shadow inventory, and inventory is low, what will be keeping prices low moving forward? We seem to to have a “normal” number of buyers given sales data. Or do we think that buyers are going to start disappearing?
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One unknown is how many folks are current on their mortgage, or how many folks are underwater.
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RE: Scotsman @ 10 – Yeah, seems like I asked that question already, huh?
Well, massive inflation is the only way to reduce that debt. I’m banking on it, all my decisions are based on that… It’s a must. How else do you make 10 trillion only 3 trillion… Fuels the building block of all goods and services, you can’t go from 2 dollar gas to 4 dollar gas and not have upward pressure on pricing… inflation will come and it will come big…. Don’t let them still your savings with inflation buy real estate..
.
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RE: David Losh @ 6 – What happened to them all? They were bought up for pennies on the dollar by the ‘cognitive elite’ of society while you were on here talking about median housing prices and the economy of Greece. Now they are going to rent them to you so you can have a box to put your crap in and make them wealthy…
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I wonder how you measure the number of owners that are delaying putting their home on the market until prices improve. I know several home owners who are waiting for prices to go up until they put their home on the market. Is there a statistics available?
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RE: corndogs @ 13 –
No, most of the buying has been by small time landlords, not any “elite”, trying to make a return on their money. It is funny how nobody on this blog has commented about this recent herd mentality (bubble) and how it may end badly for many first time landlords. Remember if all the lemmings are running one direction, it is time to ask questions and seek alternatives.
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One month does not a trend make. Markets do not move in a straight line up nor down. That said, the current equilibrium price to ration a home trade between buyer and seller currently demands a higher price:
1. Local REO inventory is dramatically down. Source http://www.becu.org/properties-for-sale.aspx What is now 5 properties (2 pending, 1 high priced suburban and 2 not local) only a few months ago was dozens.
2. Local rents have increased.
3. Money rent has decreased (record low mortgages improve affordability).
4. Local employment is stronger (Amazon, Microsoft, Boeing) than national bringing in net transfers.
5. The five year dearth in local home building has lagged population growth.
6. Stronger underwater sellers, not already shaken out by the market, are holding out for a better deal or are currently locked in as reluctant landlords.
7. Short term market psychology is changing from one of abundance, with time on the buyers side, to scarcity and urgent need to buy.
In the event of better national job market over local, lower rents, higher mortgage rates or new national recession, this trend may quickly reverse.
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By HappyRenter @ 14:
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RE: corndogs @ 12:
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RE: Topdog @ 17 – ‘One month does not a trend make’.. What month are you talking about? We’re looking at years of data here friend. Also, don’t use the phrase “That said” or “That being said”…. When people say that, you know right away they don’t know what they are talking about. Also, waiting until prices are clearly increasing to give us a 7 point summary of WHY they are increasing is far less impressive than calling the bottom when it actually happened like I did. You’re a little late.
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RE: corndogs @ 20 –
The Seattle housing market has been going up for years?
Who said I am calling a secular bear market housing bottom?
There are reasons other than the disappearance of the shadow inventory for this cyclical bear market rally in the housing market. Some major reasons for Seattle I have listed.
Just like the gold bubble, tech stock bubble, it is highly unlikely to have another major housing bubble in the same generation. The idea of a home, other than a nice place to live, is over. As a life savings investment, home ownership is dead. Though not yet in the minds of few kicking themselves for missing the last bubble and see dollars left on the table. The end of this bear market trap uptick in 2 to 3 years will remove all doubt for the next twenty years.
Structurally for the working family paying a quarter to half million for a home at today’s wage rates makes no sense. The 3% to 4% interest is a temporary anomaly. When credit market looses confidence in obscene debt expansion, interest rates go to double digits as in 1981, that $400,000 home will be boat anchor.
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By Carl @ 11:
Here’s my guess. Banks will finally, after over 5 years, actually figure out that making a timely decision on a short sale saves them a lot of money. Once that occurs more people will be able to put their property on the market, increasing the inventory.
I know that’s going way out there on a limb: Banks acting rationally and intelligently. But that’s my guess.
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I can’t speak for the market and I’ve been both spectacularly right and spectacularly wrong before. But the lack of selection is pretty severe, and, as a potential buyer, it just makes me less likely to even look. I can wait, I can move. And with the weather and employment trends, the latter is becoming more and more likely.
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By HappyRenter @ 15:
I’m sure Deutsche Bank is working on that right now. It’s part of their: “Let’s see how gullible Americans are!” series of data releases.
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In the past I’ve said the non-distressed median has been bumping around between 380k and 420k for quite some time. I’ve gone back and looked further at that, and here are the low points for each year. Note that for 2008 and 2009 there may be some distressed properties in the data because the NWMLS didn’t always track that status.
2008 the low point was November, with a median of $392k ($218 per square ave)
2009 the low point was March, with a median of $365k ($197 per square ave)
2010 the low point was April, with a median of $390k ($215 per square ave)
2011 the low point was December, with a median of $378k ($193 per square ave)
2012 the low point was February, with a median of $382k ($195 per square ave)
From 2010 on, the median has only been above $420k three or four times, including this last month with a median of $430k ($217 per square ave).
So when you take the mix for distressed properties out of the equation, the market has been relatively flat for quite some time. Now that the numbers are rising though, pointing out that effect on the mix is much more acceptable here.
Again, the overall median is really more about the health of the market, as is Case-Shiller. When you try to read more into it, like whether someone who bought in 2005 is underwater, you’re attempting to do something with the median that it cannot do.
Numbers from NWMLS sources, but not compiled by or guaranteed by the NWMLS.
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By corndogs @ 20:
Funny, I say the same thing about people who end every sentence in ‘…’ That ‘…’ means I can’t finish the thought or back it up with anything of concrete value. Please, share with us the ‘years of data’.
All I can really deduce from your posts is that you don’t understand what caused the run-up in the first place.
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By corndogs @ 20:
Actually, what it means is that there’s an exception or limitation on the first thing stated. So it doesn’t mean what you think at all.
For example: Conservatives don’t like government spending. That being said, they will generally support military spending.
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I love how post 25 gets two thumbs down by people who apparently can’t counter what was stated. Facts are facts.
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ROTFL – thank you for post 27, Kary, the choice of specific counterexample is absolutely priceless :) :) :)
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RE: Kary L. Krismer @ 28 – What you said was spot on… no intelligent reply and a thumbs down means you are stating facts people don’t want to hear.
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RE: Topdog @ 21 – You make too big of a deal about the bubble, prices got out of hand between 2005 and 2007 and they corrected. It’s nothing that is going to have a psychological affect on a generation. Maybe it will for people who don’t understand real estate investing and who obsess about charts and graphs that have no bearing on the situation. but in the long run, housing makes a steady climb with inflation and always will and inflation will continue.
The problem with a lot of people like yourself, is you think housing has to be in a bubble state to be an investment, maybe you’re too young and that’s all you know. But real estate going up with typical inflation is a great investment, if you don’t’ understand that as a fact, and don’t understand the mechanism of how it works, than you need to educate yourself.
My net worth is in the millions and my income on my tax return was over 400K last year, this wealth came primarily from real estate…. The bubble had nlittle to do with that, and has had no affect on my income. On paper there was a peak in my net worth in 2007 and a trough in 2011, but rent kept going up and my income keeps going up, To me the value of my property will continue to be based on rents. I didn’t buy property during the height of the bubble because it didn’t make sense based on the income. This is how all real estate investors think, because that’s how it works. There are dozens of people out there working everyday giving me a substantial part of their paycheck like clockwork and believe me, that is the sweet spot you want to get yourself into.
Another problem for you is you think the 500K home in Seattle is a house for the working class family.. The house for the working class family is only $250K and is pobably located in Pierce County. Everyone thinks they’re an upper middle class guy… (if they can’t afford it, nobody can)… My experience is that many overestimate their financial standing in life… People in Seattle are often educated professionals, if you are not, you probably can not compete in that housing market… In Tacoma, many houses are below build cost….. that may be the place for you.
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By corndogs @ 31:
I wouldn’t agree with that. A large number of people bought into condos and “starter houses” at inflated prices, and most now are either stuck in them or looking at a short sale, unless foreclosure has or will change that. While some of those might want to buy again as soon as they can, many of those people will be greatly affected moving forward and be very reluctant to buy again.
THAT BEING SAID, it’s true that this group of people is relatively small, at least locally. Even if you took the larger group of every person who bought a property between 2005 and 2008, that would be a relatively small group.
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RE: Kary L. Krismer @ 27 – I know what it means, I’m in the engineering field, and I’m hearing it several times a day, usually from people regurgitating obvious crap. But, I will admit, it has nothing to do with whether his points are good or not.
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RE: corndogs @ 31 – Please, since you feel so obliged to share all your financial details including net worth and income, can you share with us how you pulled in 400K last year. What percent from RE? How many rentals? Average income per rental? Or did this come from cap gains? Are you a flipper? Why don’t you educamate all of the unwashed mouth breathers on this blog? We can certainly find all this from public records, but it would be far more fun coming from the King himself.
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By me @ 23:
One small step for “me”, one giant leap for SWE.
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RE: Topdog @ 19 –
I’d take a single number on the roulette wheel over high inflation in the next decade. I see a larger chance that we will see a rise of politicians who favor a strong dollar to stabilize confidence and the investment climate in the US to bring some real productivity increase. It might take another presidential cycle of loose money but I think we’ll get there and it will keep longterm inflation in check.
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RE: corndogs @ 31 –
So, you are a small time Real Estate Investor.
Let me help you out here a little bit. Investors buy cash flow, cap rates are widely distorted. Being worth millions, and having millions of dollars are two different thing, vastly different.
True inflation would require an increase in wages that we haven’t seen, and I doubt we will see. Without a rise in wages the consumer can only borrow more to maintain the lifestyle they have.
If we do get inflation we have historically low interest rates that can rise to combat that.
The bubble is significant because it is inflating once again due to those historically low interest rates coupled with a comparison to the previous bubble prices of property.
That being said, big time Real Estate Investors are building thousands of rental units right now. Those rental units will be added to the vast number of housing units that were built, and mortgaged. The big time Real Estate Investors are buying up dirt, the same as they have done for decades, at fire sale prices. They can afford to lower rents far below yours and take your clients, I mean renters.
So let’s recap your income for the folks at home because I always find it amusing. You make $400K, pay $70K in income tax, and you are worth millions. OK, great.
Now I own a cleaning business that just added another employee this week. I can add employees for no money out of pocket, and they cash flow out of the gate. If an employee doesn’t cash flow I terminate them. This is a right to work State.
The fact is I want to add another 10 employees this year. My tax consequence for hiring people is actually pretty low because I can hold my income at what ever level I choose. If I pay more I get better, and more, employees that want to work.
The conclusion I came to in 2008 is that Real Estate is a dead horse in the race to cash flow. Small business is by far a much better investment.
Now in order for me to make this switch it cost me $1.2 Million, but it’s only money, and money is a very stupid thing to want.
There is always more money.
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RE: Kary L. Krismer @ 32 – :) Sounds like you disagreed with me, and then after the ‘that being said’ you agreed with me, hmmm….
If someone is ‘stuck’ in a house, they are still in the housing game right…by waiting for a higher price they are doing their part to put upward pressure on pricing. They actually are helping raise prices more than the guy with equity, because he’s free to sell at anytime. In order to put downward pressure on pricing, they’d have to first sell at the right price, and then drop out of the game, they’d have to sell and then swear off home purchasing for 20 years (a generation). Not only a small group, as you’ve said, but a small chance that they’ll take this specific action.
For the people who get foreclosed on, many are relieved because they walked away owing nothing, got a year or two of free rent in trade for 3 years of messed up credit. How is that a bad deal? All you can say for sure is, at the moment, there is a pool of people with bad credit who can not buy a house now who will be able to buy in the near future, some will, that means more buyers in the future.
For the people who used their house as a credit card, they received 10s or 100s of thousands of dollars of free money over the years. The type of person who went through this will certainly be in line for the next go ’round…. (now they know that there is no real downside)….what percentage of these people do you think planned the foreclosure to maximize the take… I’d say most. They’ll be back for more in 3 years. Only this time, they’ll have the premier low interest rate credit card, an upgrade!… These guys are salivating to get back in.
The people who lost on this deal is the tax payer.
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RE: David Losh @ 37 –
Cap rates are distorted? Wow thanks for the help…
A small business can be better than real estate, for sure, but that’s an active investment. We are talking about real estate, which is typically viewed as a passive investment. You should be diversified in your investments, a business and/or real estate are two good hedges against inflation. It would be foolish to have all your money in real estate, or in stocks or in any one basket… I’m just saying real estate hasn’t become a worse investment than it ever has. But small business and RE are apples and oranges, as you know, a small business takes all your time and then some. and is a lot harder to sell a business for what it’s worth than a piece of property.
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RE: wreckingbull @ 34 – Take it easy stocker, I shared a little bit about myself to illustrate that real estate investment has worked well for me personally. Having a net worth in the millions is not that much to a lot of people… it’s just better than doing nothing and trying to act like the sky is falling. It’s not.
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By Topdog @ 21:
I think it was corndogs who pointed out that working class families don’t belong in half million dollar homes, but luckily there are plenty of quarter million dollar homes. You just have to forget about the half million dollar location.
Note that the recent levels of defaulted credit are higher than at anytime in the living memory of most people who still have living memory. If credit prices were truly a function of confidence loss, we’d already be in double digits, But credit is a supply and demand product, albeit with government influence on supply. Rates won’t reach double digits until demand side factors allow. This analysis will put you in the seat of the fellow who couldn’t see the importance of the mix in the median numbers until the median numbers wouldn’t give him what he wanted.
Here’s a resource so that you can see the boat anchor effect in the years following 1981 (start page 5).
http://www.census.gov/const/uspricemon.pdf
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By Kary L. Krismer @ 24:
That’s why I don’t understand Tim’s comment @4: “The data … points to shadow inventory being at its lowest level in years, and still declining.”
Shadow inventory includes also houses whose owners are reluctant to put them on the market because they are waiting for prices to increase. Is this correct? I think that these are the homes for which it is most difficult to know when they appear on the market, and yet they are an important component of shadow inventory. I don’t know if my reasoning is correct though.
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By corndogs @ 13:
It doesn’t make sense to me. In order to have inflation, you also need higher wages. Wages, in particular of state employees, are stagnant. We might see inflation, but only for imported goods, and mainly because of the devaluation of the dollar. Running to buy real estate just because of impending inflation seems risky to me.
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By HappyRenter @ 42:
When most people use the term “shadow inventory” they are talking about foreclosures at various stages along the process from first missed payment all the way to fully owned by the bank and just not listed.
What you’re talking about is pent-up supply, which is a subject I have discussed here before, and likely will again.
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RE: The Tim @ 44 –
Thanks for the clarification. Googling gave me a different definition:
“A term that refers to real estate properties that are either in foreclosure and have not yet been sold or homes that owners are delaying putting on the market until prices improve. Shadow inventory can create uncertainty about the best time to sell (for owners) and when a local market can expect full recovery. Also, shadow inventory typically causes reported data on housing inventory to understate the actual number of inventory in the market. ”
http://www.investopedia.com/terms/s/shadow-inventory.asp#axzz1zuAfkBwL
But now I understand that pent-up supply is not included in the definition of shadow inventory used in this blog. Sorry, I should have asked right away.
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RE: HappyRenter @ 45 –
I would include people who have moved out of their homes and are renting them out even though they have no intention to be long term landlords as “shadow inventory”. That does not include all people who keep their former home as a rental when buying a new property.
Some of my clients want to keep their condo or townhouse 1st primary residence as a rental without regard to what it will sell for. They paid the principal down or off and didn’t need to sell it to buy their new single family home. They always intended to keep it as a rental property from the time they bought it several years ago.
On the other hand there are some people who are considering keeping the home they own for reasons other than wanting to own a rental property. In the case of my clients, we usually sell it. But there are many people who hold on to a property as a rental “for a year or two” and those unintentional landlords are clearly part of “shadow inventory”, IMO.
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RE: HappyRenter @ 45 – RE: HappyRenter @ 45 –
I too was confused by the definitions. If we use the term “pent-up” supply to cover all of the houses that people “want” to sell, but can’t for whatever reason, then the pent-up supply will of course moderate any potential further upside to pricing.
The counter to that is that those who sell pent-up supply still need to live somewhere, and the critical question is whether they will then go buy something else or if they will become part of the renting class.
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RE: Carl @ 47 –
I heard different stories. Some people need to downsize because they are retiring. Others want to upsize because they have a larger family. Others need to move to a different city for professional reasons. Good point though. Pent-up sellers are also pent-up buyers. I have no idea how it will affect prices, but having more homes on the market will definitely improve choice. More supply usually means lower prices, but better choice might draw more potential buyers increasing demand. In the end, it might just balance out.
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By HappyRenter @ 48:
That was the point I made about three months ago, but in a slightly different context. Before sellers would be afraid to buy without selling first, for fear they would have difficulty selling. Now the greater difficulty is the buy side.
Each move like that creates two transactions. The first when they buy and the second when they sell. No matter the equity before, the fear of selling was holding up both transactions.
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By HappyRenter @ 48:
It’s the other way around. Price drives supply, and higher prices bring more supply.
I think you may be thinking of demand relatively to supply. If there’s too much supply relative to demand, prices will tend to fall, and supply will eventually adjust.
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By Kary L. Krismer @ 50:
Does it mean that we need higher prices before we can have a better inventory?
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This post got me to look at some properties today, in areas 705, 710, from the ship canal to 145th, and Puget Sound to Lake Washington.
My take is that properties between $200K to $400K are mostly crap.
When you get between $400K, to $600K it’s like the skies open, and light shines brighter. There are some very nice properties for sale in this price range. In my opinion some of those properties would have sold for more, like between $50K to $100K more even a few years ago.
Above $600K you get into the land of dreamers on pricing, but even those are selling, some are very good values, and are properties many buyers weren’t able to touch in recent history.
Prices are declining, but what is selling are higher priced homes.
If you are a serious buyer, with money in the bank, and can qualify for the loan, I think you would make the best deal you could on a higher priced home. People are for sure buying according to the mortgage payment, so why not.
More plainly put, I think this rise in median prices has to do with people buying higher priced homes, and passing on lower priced crap.
There is also plenty of lower priced crap to buy, but the lower threshold seems to be holding steady at $250K. In order to move some of the crap the price would need to come down more. Most sellers right now I think would rather rent the property than sell it. At today’s rents they probably cash flow a little to boot.
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By HappyRenter @ 51:
That would certainly help, but it’s not the only thing that would help.
One of the biggest non-price changes could be banks finally learning that taking over one week to process a short sale costs them many thousands of dollars. If sellers thought that there was a greater chance of success on doing a short sale, more would presumably try it, increasing the inventory for buyers. That would though eventually increase the price you pay for short sale properties.
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Losh wrote:
Then how do you explain the non-distressed median in July, 2010 being basically the same as it was in June, 2012, when the average price of such non-distressed sales was significantly lower in June, 2012?
As I said above, the median has been bouncing around mainly between 380k and 420k for a long time. Much if not most of the increase in the median is due to there being fewer distressed properties as a percentage of total sales. It’s simple math–when you reduce the percentage of a group of properties which has a much lower median, the median for the entire group goes up.
Comparison of July, 2010 to June, 2012 from NWMLS sources, but not compiled by or guaranteed by the NWMLS.
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RE: Kary L. Krismer @ 54 – Dave, I realized you were limiting yourself to two NWMLS areas. In those areas it’s slightly different. The non-distressed median is higher than back in July, 2010, but the mean is barely higher. If you look at the entire SFR market there, the numbers have hardly changed.
Same disclaimers as prior post.
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It’s simple.
Number on the number of “investors” buying property to flip, or rent, is shrinking because that buyer pool is saturated.
Number two banks don’t need to sell because, as we are seeing, the price of property is going up, not down.
Third is the buyer pool, who are buying, are the more affluent who can afford a half of a million dollars worth of debt. That buyer pool is finding bargains in the $400K to $600K range. What they would have paid $700K for two years ago is now $600K.
There are just so many cute houses in the half a million dollar range, how could people resist? On top of that I did a search by school in my area, and the number of houses selling in a trifecta of grade school, middle school, and high school combo is staggeringly high compared to individual schools a young couple may be interested in.
People pay a premium for being close to the right schools for the kids.
The NWMLS is a wonderful thing. It is the reason most Real Estate agents still have a job. You can do so much more with searches using data directly from the NWMLS than any other set of resources a person may think they have.
My opinions however are my own, and are not a representation of the NWMLS or it’s associates.
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RE: David Losh @ 56 – I’m not sure if that was a response to what I asked. What I asked was how do you conclude people are buying more expensive homes? The stats don’t seem to show that.
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However having only approximately 1860 sales below $200K in King County, and 4100 between $200K to $400K, then 2300 sales between $400K to $600K, kind of points out what I was saying. The kicker is 1000 listing sold between $600K to $800K, then the approximately 740 sales between $800K and $6Million.
These are simple search result from the NWMLS that are not verified, and are by my own searches which are wholey, and totally unscientific. This search was done to bolster my own opinions, and in no way represents any assertions made by the NWMLS or it’s associates.
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So yeah the stats do show that even in Pierce County. There’s 2400 below $200K sales, and 1500 between $200K, and $400K, with 200 sales between $400K to $600K, and 50 above $600K into the millions.
So if volume were being used to determine the median, then yeah the below $200K range wins by a nose, but if we use dollar amounts, people are buying more expensive homes.
Again I just took a few minutes to look at some simple search results on the NWMLS, but never verified the numbers, it just seems to confirm what the NWMLS put out in a press release.
The opinions that I expressed concerning the statistics that I found are my own opinions, and in no way represent the assertions made by the NWMLS or it’s associates.
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RE: Kary L. Krismer @ 53 –
According to Tim’s statistics of a few days ago, the inventory is at its lowest level in the past 12 years:
http://seattlebubble.com/blog/wp-content/uploads/2012/07/KingCoSFHInventory2012-06.png
This is definitely not a good news for buyers. Can we expect it to increase in the next couple of years?
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RE: HappyRenter @ 60 – No one really knows, but because it’s low it’s more likely to head up. People though were saying the same thing about interest rates the past two years.
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RE: corndogs @ 40 – wow, so you really can get rich by posting comments on blog entries! Millions, too. Wow. Just, wow. Guess the rest of us look really dumb for posting our comments for free.
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