Seattle Bubble

Here comes this month’s market reporting roundup. After seven months of declining/flat prices, declining year-over-year sales in 27 of the last 28 months, and 23 straight months of an ever-increasing number of homes on the market, I think we can officially declare that the Seattle-area housing market is in a slump. Of course, while the newspapers seem to have finally caught on to that fact, don’t expect most local real estate agents to admit it. Despite all the measurable data pointing to the market getting worse before it gets better, I think we can expect plenty of upbeat predictions and bottom-calling throughout this drop.

Click below to find out for yourself.

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It’s time for another reporting roundup. Let’s see what the local newspapers have to say about January’s not-so-positive numbers from the NWMLS. Will they claim that the market “bottoming out” and about to jump into full recovery mode? Or maybe they have finally come to accept the fact that Seattle will not avoid the downturn, which is really just getting started.

Read on to find out…
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Here’s a few quickies to start off your Monday morning.

First up, Seattle’s market got a mention in the LA Times on New Year’s Eve while I was cavorting about the country. Note that this was a week or two before the NWMLS statistics for December came out, showing a year-on-year price decline.

It’s the kind of house that a year or two ago would have been snapped up in days: a refurbished rambler in a woodsy residential neighborhood minutes from downtown.

The asking price: $559,000.

But after seven weeks, Kristen and Al Dittmaier have not received a single offer on their Wedgwood home.

“I really believed there would be no problem selling,” Kristen Dittmaier said. “But the whole feel of the market has changed. We might have to drop the price.”
…
Of 20 major U.S. metropolitan areas, all but three — Seattle, Portland, Ore., and Charlotte, N.C. — experienced a decline in real estate values this October compared with last October, according to the Standard & Poor’s/Case-Shiller composite price index, released last week.

Home prices have fallen most in the Midwest, Southwest, Florida and California. In Los Angeles, prices fell 8.8%; in New York City, 4.1%.

Seattle prices increased 3.3%, but that was the smallest year-to-year rise for the city in more than a decade. The annual appreciation in Seattle has been slowing for more than a year and a half. Some economists say it’s only a matter of time before Seattle joins the national slump.

Next up, Aubrey Cohen points out the “not-so-fine print on the conforming loan limit:”

It appears conforming loans still would be capped at less than $500,000, under the economic stimulus package deal announced last week.

The deal would raise the cap from $417,000 to 125 percent of a metro area’s median home price, with a ceiling of $730,000, according to Congressional leaders.

The Seattle area had a median home price of $394,700 in the third quarter of 2007, according to the National Association of Realtors. That would put the new cap at $493,375, an increase of $76,375 (18.3 percent) from the current level.

And lastly, get ready for a shock: slowing sales means lean times for real estate sales offices. Shocking, I know. But it’s really happening in Olympia.

A slower Thurston County housing market has been felt by not only buyers and sellers but also South Sound real estate professionals.

Exit Northwest Realty decided last month to vacate its 5,000-square-foot office on Martin Way in Olympia because it had become too expensive to rent in a slower market, co-owner and broker Steve Cahill said.

The real estate company had occupied the space for about 18 months, but now will retreat to a Shelton office while it looks for smaller, cheaper office space in Olympia, Cahill said.

“We have to change the way we do things and get leaner,” Cahill said.

Golly, if I didn’t know any better, I’d say the bubble around here has finally burst.

(Tomas Alex Tizon, Los Angeles Times, 12.31.2007)
(Aubrey Cohen, Seattle Real Estate News, 01.27.2008)
( Rolf Boone, The Olympian, 01.18.2008)

If you thought last month’s reporting was fun, just wait till you get a load of the goomy tone of the latest wave of articles.

I find it interesting that the NWMLS chose to release the statistics so late in the day yesterday, on the fourth business day of the month (rather than the fifth, which has been the recent standard). It’s probably just a coincidence, but I can’t help wonder whether it might have something to do with the fact that the election results are sure to grab all the headlines today, pushing the nasty real estate news out of the spotlight…
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Okay, the biggest real story this month: plummeting sales, resulting in a record-high “months of supply.” The fake story: dropping median prices—which is most likely at least partly an illusion (so far), which can be largely attributed to… you guessed it: the plummeting sales. Let’s see what the news outlets chose to focus on…

There are just too many good quotes in this month’s articles to keep this post short, so click below to read the whole post.

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Here’s the usual roundup of the NWMLS press release echo chamber for this month. As expected, most of the focus is on price, price, price. As long as the median price keeps going up, expect more of the same.

Bibeka Shrestha, Seattle Times:
Median price for house in Seattle tops $500,000

The median price for a single-family home in Seattle topped the half-million-dollar mark for the first time last month, the latest sales figures show.

That price, $501,000, was up 10.1 percent from last year’s $455,000, the Northwest Multiple Listing Service reported Monday. (Median means half the houses sold for more, half sold for less.)

The report is unwelcome news to those already priced out of the local housing market.

A worker would have to earn $57 an hour — about $119,000 a year — to afford that Seattle home, according to the Seattle chapter of the Urban Land Institute.

The significant drop in the number of sales is not mentioned at all in the Times article, and she only makes a passing comment that “number of homes on the market continued to climb.” Bravo, Bibeka, bravo.

Aubrey Cohen, Seattle P-I:
We’re still buying in Seattle — with caution

As buyers hear about a deflating national home market, they’re being more cautious in Seattle, where prices haven’t declined but the market sure has slowed.

“There are a lot of first-time buyers who are holding onto the belief that the market’s going to change, so they shouldn’t buy,” Windermere Real Estate agent Jim Patterson said at an open house in West Seattle.

Buyers’ reticence and difficulties getting a loan — or at least one with a desirable rate — are obvious in August statistics the Northwest Multiple Listing Service released Monday.

Seattle’s closed sales were down nearly 11 percent from August 2006 — the first yearly drop since February and the largest since October. That was better than the 19 percent drop in King County as a whole and the 17 percent decline across the 19 counties the listing service covers statewide.

Pending sales, which can be a better indicator of recent activity, were down 17 percent in Seattle and 23 percent in King County and the 19 counties as a whole. The number of homes for sale, meanwhile, shot up about 50 percent in Seattle and King County, and 46 percent in Western Washington.

Mr. Cohen wins this month’s coveted “most balanced reporting” prize, by actually bothering to mention the skyrocketing inventory and suddenly-plummeting sales—right at the beginning of the article, even. I love the quote from the Windermere agent, who appears to be implying that “the believe that the market’s going to change” is somehow naïve and foolish, rather than a reasonable conclusion supported by the available data.

Devona Wells, Tacoma News Tribune:
Pierce County home prices up

Otherwise, sales activity in Pierce County – and around the Puget Sound area – looked much like it has for months: More homes for sale with fewer pending and closed sales compared with the same month last year.

Real estate agent Bob Niehl, with Spanaway-based Crescent Realty, said the apparent contradiction between rising prices and sluggish sales can be attributed to the best houses selling at the best prices.

And some sellers who see the state of today’s market are sitting it out, he said.

“A lot of sellers are looking at this and think, why take a beating? If you don’t have to sell, why sell now?” Niehl said.

Ms. Wells’ article was fairly tame, and even highlighted median price declines in neighboring Thurston County. The bottom line down in Tacoma seems to be a market with very unsure footing. Reminds me a little bit of a sputtering biplane, hovering through the air on momentum.

Michelle Dunlop, Everett Herald:
Home sales sag, but prices remain up

The number of homes listed for sale in Snohomish County mushroomed in August amid slow sales, though real estate prices remained slightly above this time last year.

In case there was any doubt the hot market for homes has cooled, consider this: There were almost 63 percent more single-family houses and condominiums on the market last month than a year ago, according to the Northwest Multiple Listing Service figures released Monday. Sales dropped 25 percent compared with the previous year.

And the days of double-digit percentage rises in home prices every year may be gone, too. In August, the combined median price for houses and condos was $352,475, about 4 percent above August 2006.

Awesome. Yearly double-digit price increases may be gone. The article ends with the usual quote from a local agent: “I think it’s a great buyers’ market.” Great, indeed.

Rolf Boone, Olympian:
Home sales see upturn

Thurston County home sales improved in August but the sales totals still didn’t match the record number of homes sold in August 2006, the Northwest Multiple Listing Service reported Monday.

Increases in home and condo sales values also flattened out last month while inventories of unsold homes continued to grow.

Last month, 439 houses and condominiums sold in Thurston County, down from 522 sold for the same period last year, the data show.

Although home and condo sales in August reached a new high for the year, it resulted in a 16-percent sales drop when compared with last August’s sales totals.

The combined house and condo median price remained essentially unchanged in the year-to-year period at $269,000, according to the data.

For those of you keeping score at home, what Mr. Boone is so artfully avoiding stating outright is that the SFH + Condo median in Thurston county actually decreased from last year, to $269,000 from $269,900 last year (and the high of $275,174 in July). Pretty hard to spin that one.

Overall, it’s really getting interesting out there around the Puget Sound.

(Bibeka Shrestha, Seattle Times, 09.11.2007)
(Aubrey Cohen, Seattle P-I, 09.11.2007)
(Devona Wells, Tacoma News Tribune, 09.11.2007)
(Michelle Dunlop, Everett Herald, 09.11.2007)
(Rolf Boone, Olympian, 09.10.2007)