Seattle Bubble

There has been some great stuff coming out of our Seattle-area “alternative” real estate businesses Redfin and Zillow this week that deserve to be mentioned.

First up, Redfin came out with a great paper called Seven Tactics for Real Estate Bargaining. Check out their blog post announcing the study here. They analyzed recent sales data from 9,053 single-family-home sales across three markets, including 2,446 in King County, looking for homes that sold for a large discount from the last asking price.

Many of the characteristics they identified in homes that sold for a large discount were exactly what you would expect, but it’s great to see some hard data to support your gut instinct when it comes to negotiating a good price on the largest purchase of your life.

Here’s their seven tips on where to look for a seller that’s seriously ready to negotiate, and who to avoid:

• Focus on Listings Unsold After 90+ Days
• Focus on Fixer-Uppers
• Back Off on Remodels
• Don’t Be Put Off by a Price Reduction
• Look for Homes Owned a Long Time
• But Don’t be Put off by Flips Either
• Don’t Expect Banks to Negotiate Much

Sound, data-driven advice for anyone looking to drive a hard bargain in today’s so-called “buyer’s market.” Check out the full report here (pdf).

Next up is a survey from Zillow that (like Zillow itself) is more entertaining than particularly useful, but is still worth a look. The results of their Q2 Homeowner Confidence Survey of 1,367 U.S. Homeowners showed that:

Nearly two out of three homeowners (62%) believe their home’s value has increased or stayed the same over the past year; however, the reality is that 77% of U.S. homes have declined in value.

They also blogged the announcement of their survey results here. Another amusing tidbit from the survey results:

Three out of four (75%) homeowners expect their home’s value will increase or stabilize in the coming 6 months. However, when asked about their local market, 42% think home values in their locality will decrease (compared to the 25% who think this about their own home).

Click to enlarge

So at least 39% of the people are delusional about the value of their own home over the past year, but only 17% are delusional when it comes to the value of their home in the coming year. Hey, at least it seems to show a slight trend toward recognizing reality.

(Glenn Kelman, Redfin Blog, 08.07.2008)
(Amy Bohutinsky, Zillow Blog, 08.06.2008)

Aubrey Cohen is on a roll lately, doing a great job of reporting what’s really going on with the Seattle-area real estate market, instead of just painting the rosy picture that agents and builders would like to see printed. Here is Cohen’s latest, on the drastic price-cutting measures that builders just outside Seattle are taking to clear their stagnant inventory.

Karen Waters thought she got a good deal last March when she paid $425,000 for a new house in the SouthRidge at Silver Creek development near Puyallup.

After all, the price was about $100,000 less than buyers had paid builder Centex Homes for similar houses on the block the previous fall. By February, however, neighboring homes were selling for about $350,000.

“I totally wished I would have waited,” Waters said last month.

The Seattle-area housing market has held up better than many, largely because it did not have as much overbuilding as places such as Las Vegas and Phoenix. Still, the local market has slowed and builders are taking dramatic steps to clear out housing inventory in suburban areas.

“The reality is, our real estate market is in the tank,” said Don Dutton, managing broker of Windermere Real Estate’s Puyallup Office.

Overbuilding deserves the biggest share of the blame, he said.

Read the whole thing. This is exactly the kind of thing that was happening in Florida and California 1-2 years ago. This is great news for those of us that don’t care to live in Seattle or Bellevue proper. No, it hasn’t hit downtown Seattle yet, and I don’t expect things to get as drastic in Seattle proper as they are and will further out.

This article demonstrates that the “running out of land” and “we didn’t overbuild” arguments really only make sense if you are talking about Seattle proper. Even then, it’s debatable whether we’ve overbuilt the condo market or not. I suppose in a year or two we’ll find out.

(Aubrey Cohen, Seattle P-I, 04.16.2008)

Update: A reader pointed out a similar article in the Everett Herald this weekend: Why Snohomish County builders aren’t building.

Drive through newer residential areas in Marysville and witness what happens when buyers stop buying houses and developers keep developing.

Empty lots line roads and the edges of cul-de-sacs. Many have sidewalks, utilities and roads, but no houses.
…
The supply of buildable lots and new homes ready to be sold in Snohomish County has ballooned to nearly a three-year supply, according to New Home Trends, a real estate research and consulting firm.

That means headaches for developers who bought land at sky-high prices a few years ago and now can’t sell it. It means builders are applying the brakes on new-home construction and off-loading what they’ve already built.

Of course the Herald article goes on to quote various “experts” (such as real estate agents), who say that it’s just a “breather,” a “normal market,” and that “the market is coming back.”

Sure it is. Any day now.

(Debra Smith, Everett Herald, 04.16.2008)

Over at the Bubble Markets Inventory Tracking blog, they’ve got an ongoing series titled “If Only I Waited,” where they highlight purchases in which a home is sold (or for sale) at a significant discount to recent sales in the same neighborhood.

For the first time, the Seattle area has been featured, with a pair of Everett houses taking the spotlight in Friday’s post. Go check it out!

Thanks to the person that pointed this out in the comments.

Update: The Seattle are is on a roll, with Sunday’s edition of “If Only I Waited…” coming from the other end of town down in Kent. Go us!