The State of the Housing Market: 2013 Q3

I’d like to try something a little different. Since posting on here tends to break up the various topics that make up the whole of the housing market, I thought it would be useful to put together a “state of the market” post once a quarter or so that brings everything together.

We’ll cover the basics of what’s going on in the local housing market right now, with links to relevant recent posts in case you missed them. If this is something you would like to see on a regular basis, let me know in the comments.

Supply: Inventory

Monthly King County Single-Family Home Inventory

Listing inventory is finally heading back up after falling nearly every single month since July 2010 and setting record seasonal lows for 18 months straight. We’re still at almost the lowest point we’ve ever seen, but listings are moving back toward a normal level, which indicates that a more balanced market should be on the horizon.

Demand: Sales

Monthly King County Single-Family Closed Home Sales

Sales have come in very strong this year, due to a combination of ultra-low interest rates and near-the-bottom home prices. If interest rates continue to rise up to five percent or more, expect sales to drop off dramatically (though not as dramatically as they did when the recession hit in late 2008)

Prices

Seattle-Area Home Prices and Rents

The combination of this year’s ultra-low inventory and strong sales have led to a dramatic increase in home prices. This year’s gains have now put home prices above a level that is supported by local fundamentals such as rent levels. Some of the recent spike is due to a changing mix of homes selling in more expensive regions and fewer distressed sales, but some of it is definitely homes just getting more expensive. I expect home prices to settle down over the next few months.

Other Factors

Redfin Real-Time Bidding Wars

Thanks to the increasing inventory, the record-high level of bidding wars has tapered off in recent months. This is good news for buyers, but for homeowners thinking of selling who didn’t pull the trigger this year it means that you may have missed the best window of opportunity.

Redfin Real-Time Fastest Markets

Similarly, the speed at which homes are selling has been tapering off over the last few months as well, indicating that later this year and early next year should see a more calm market.

Summary

In general, we’re currently in a housing market that is still skewed strongly in favor of sellers, but the trend over the last few months has been toward buyers. Home prices are high relative to a year ago, but rising interest rates and increasing inventory should work to slow price gains to more reasonable levels in the coming months.

If you’re thinking of buying, you’ll probably have less competition and slightly lower interest rates if you buy in the next few months instead of waiting until next spring, but inventory gains probably won’t really pick up steam until then. If you’re thinking of selling, you might want to think about listing now. If a lot of homes hit the market and interest rates continue to rise, attempting to sell a home next spring could be a frustrating experience.

  

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
    joe smith says:

    should that headline say 2013 Q3 instead of 2012 Q3?

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  2. 2
    The Tim says:

    RE: joe smith @ 1 – Yes, thanks. Fat-fingered. Fixed now.

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  3. 3
    Erik says:

    “This is good news for buyers, but for homeowners thinking of selling who didn’t pull the trigger this year it means that you may have missed the best window of opportunity.”

    That is me because I didn’t want to pay the capital gains tax. Hopefully this February will also be a good time.

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  4. 4
    Kyle says:

    Tim,

    This is a great summary!

    Rate this comment: Thumb up 0

  5. 5
    Erik says:

    Rates are inching down and so is inventory. I think this trend will continue for another few months atleast.

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  6. 6
    mike says:

    By Erik @ 5:

    Rates are inching down and so is inventory. I think this trend will continue for another few months atleast.

    Yep, may be a good time to cash out that extra $100K in equity gained over the last 12 months and spend it on something… “bubbly” like a boat or maybe just a trip to Vegas.

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  7. 7
    Erik says:

    RE: mike @ 6
    I was thinking the same thing. I will need a trip to vegas to cheer me up after the repeated beatings I have received by angry computer programmers and throwback real estate agents here on seattlebubble. I need a house to store boat. I will not have a home to store it at. I will be a rolling stone for the next couple years or until I find another good deal on a home to remodel. Maybe I will rent in a nice area of Seattle until the time comes I can score another deal? I think every once in a while a really good deal pops up like the one bedroom condo that sold for 82k in queen anne last month. I will be in the shadows ready to pounce like a mother lion pounces on her prey.

    http://www.redfin.com/WA/Seattle/1306-Queen-Anne-Ave-N-98109/unit-10/home/40454799

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  8. 8
    Bob says:

    When people click “thumbs down” for your analysis, are they disliking your approach, or the trend?

    It make zero sense to me that someone could dislike your very well built Case-Shiller charts. Your prediction discussion for future events is also quite limited. It looks like you average about 30 haters that return just to click red.

    You do awesome work, no matter the trend. These are facts. Thanks for 6+ years of solid reading.

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  9. 9

    RE: Bob @ 8
    RE: The Tim @ 2

    Speaking of fat fingers…when I look at the blog on my phone, the “more”, “thumbs up” and “thumbs down” buttons all appear very close together on the screen so that it is very easy to accidentally select “thumbs down” when I just want to hit the jump. I have done it more than once.

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  10. 10
    The Tim says:

    RE: Bob @ 8 – Thanks. I do wish that more of the people clicking thumbs down would come in and leave specific constructive criticism about what they would like to see instead…

    RE: Charlie Rogers @ 9 – Hmm good feedback, I’ll see what I can do about spreading those out a bit more.

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  11. 11
    David B. says:

    RE: Erik @ 7 – “I need a house to store [a] boat.”

    Or you could put most of your stuff into storage and use the boat as a live-aboard until you find another house to remodel and flip.

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  12. 12
    Macro Investor says:

    “If you’re thinking of buying, you’ll probably have less competition and slightly lower interest rates if you buy in the next few months instead of waiting until next spring…”

    “If you’re thinking of selling, you might want to think about listing now.”

    Tim, you might want to clarify your conclusion. You are advising both buyers and sellers that now is the best time. The first sentence quoted is bullish on housing. The second one looks like a top call, with an ominous urgency (“now”).

    I think what you really mean is nothing much will change the next 6 months, except maybe a little less buying frenzy.

    Note… I didn’t up/down vote the article. Never used that feature.

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  13. 13
    Lilypad says:

    I like this kind of summary a lot. I don’t have time to wade through each and every chart, I just want the highlights (and/or lowlights).

    I’ve been watching the market in several towns on the Eastside I-90 corridor carefully for almost a year. We’ve been ready to pull the trigger since last January, but instead of buying, we’ve ended up watching the prices surge upward and interest rates do the same. I’m very glad we didn’t buy earlier in the year. It seemed entirely too bubbly for my nerves. The last 6 weeks or so, I have enjoyed watching properties sit longer on the market and have laughed at the pathetic price reductions ($4000 off? You really think that’s going to get my attention??) sellers have begun to make. Currently, we’re waiting to see how the political situation plays out before deciding if we REALLY ready to sink money into something now.

    As always, thanks for your blog. It’s made me a much more informed consumer. And it’s made me way more annoying to my friends who own houses and thought prices were going to be back at late 2006 levels any day now…

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  14. 14
    mike says:

    RE: Lilypad @ 13 – You see prices dropping back to late 2006 levels?

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  15. 15
    nwbackpacker says:

    After several years of searching, we just gave up our search for a ‘hidden gem’ in the hip Ballard, Green Lake & Maple Leaf neighborhoods. In the end, we settled on a fine house in Crown Hill which we plan to hunker down in for years to come. I know we didn’t buy at the ‘top’…………..OR the ‘bottom’. In the end, I think sometimes you need to stop pretending like you have a crystal ball or have any control over macro trends. It IS just a giant piggy bank, right?

    Final note, if the economy tanks, our house would be fairly easy to turn into a duplex so in a pinch, I like the built in insurance plan it affords, though I don’t want housemates ;-)

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  16. 16
    whatsmyname says:

    “Listing inventory is finally heading back up after falling nearly every single month since July 2010 and setting record seasonal lows for 18 months straight. ”

    Ouch! I’d hate to be quoted saying that on the same day my own blog sidebar was showing a 200 inventory decrease since the August reference point – and with an unbroken chain of 13 years Q4 declines. I’d say inventory has peaked, and will be trending down for the next half year. But, that’s me.

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  17. 17
    Erik says:

    RE: whatsmyname @ 16
    No, that’s not just you. I don’t see inventory thrashing upward like “The Tim” and Matthew do. Tim speaks as if it is game over and inventory is going up without question as if it is a for sure thing that has been done. It is a little strange to me since he generally doesn’t make conclusions as is it is a sure deal. I respect Tim’s opinion, but I don’t see things happening that way.

    Previously “The Tim” said “A little over a month ago I pointed out that inventory is on track to beat 2012 by August. So far that still looks like a strong possiblity.”

    That did not happen. Tim is a strong inventory bull. I think supply(inventory) will approximately meet demand(sales). I’m not sure why Tim makes that conclusion unless he thinks the buyers that gave up are gone for good. They rented for a while until they can find a home they want. Therefore supply will meet demand and supply(inventory) will stay about where it is at or decrease slightly as it has consistently done in the past.

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  18. 18
    Ron says:

    Excellent summary…

    Now, if politicians from red states a.k.a. welfare states would stop trying to trash this country, these trends would continue.

    Viva narcissism….

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  19. 19
    Jonness says:

    By The Tim @ 10:

    RE: Bob @ 8 – Thanks. I do wish that more of the people clicking thumbs down would come in and leave specific constructive criticism about what they would like to see instead…

    Tim:

    IMO, you’re asking way too much from the people who are purposely clicking thumbs down, given that most of them are products of inbreeding who never learned how to read or write. :)

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  20. 20
    Peter Witting says:

    RE: Erik @ 7 – At least I know what you’ll be doing with your extra $500 a month, Erik. The HOA dues on that sucker are $425 a month.

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  21. 21
    Erik says:

    RE: Peter Witting @ 20
    Currently, I pay $400/month HOA dues. I only pay $453/month for my mortgage though and about $182/month for taxes and insurance. Yes Peter, HOA dues are expensive. I am willing to pay them because there is no way I could own a house in a nice location with view of Lake Washington for the price of $1035/mo. Most people on here don’t like the idea of a HOA because they don’t feel they have full control.

    If I bought the place I posted and sold my current place, I could pay all cash for it and just pay HOA dues. Plus I would get to live in Queen Anne! I would Fix up the place with my income from work since I’d have no mortgage. When I fix it and sell it, all the the money will go to me. Just an idea…

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  22. 22
    Scotsman says:

    A slow- very slow- return to normal markets with very slow growth in prices. Appreciation rates equal to inflation with maybe a small bump for population growth and employment in the Seattle area. Unless some externality- war, collapse in Europe or Japan, etc. knocks us off course I would expect to see something close to what this article predicts:

    http://www.zerohedge.com/news/2013-10-02/bill-gross-monthly-thoughts-expect-beautiful-deleveraging-conclude-some-time-2035

    Will it work? Heh- think 20 years of Japanese history. But housing prices in Seattle will stay where they are and rates will indeed be lower soon enough.

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