Real Estate Heat Index plummets in 2018—now at lowest level in over six years

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We haven’t taken a look at my “Residential Real Estate Heat Index” for King County single-family homes and condos since the fourth quarter 2017 data, so let’s see how it has moved through 2018 so far.

King County Residential Real Estate Heat Index

Wow, that’s quite the reversal this year from the recent trend. After hitting a massive all-time high in the fourth quarter of 2017, just three quarters later the index has fallen to its lowest point since the first quarter of 2012. Coincidentally, the first quarter of 2012 was when home prices in the Seattle area hit their lowest post-bubble point.

This measure is typically highly seasonal, peaking in the fourth quarter most years due to the low number of listings. However, after dropping down to earth in the first quarter, the heat index usually stays fairly stable through the first three quarters of the year. Not so this year. The first quarter was down slightly year-over-year, then the second quarter hit a three-year low, and the third quarter was the lowest level in over six years.

I still don’t think this decline portends another big bursting bubble anything like what we saw 2008 through 2012, since the foundation of the market is much stronger than it was ten years ago. That said, it is definitely becoming very difficult to ignore the dramatic signs of the slowing market here in the Seattle area.

Next year is going to be very interesting.

Methodology: The “Residential Real Estate Heat Index” is an index that rolls changes in the median price, new listings, total inventory, pending sales and closed sales all into a single number to measure the relative “heat” of the market. The formula is [100 × (median price ÷ median price last year) × (number of closed sales ÷ end-of-month inventory) × (number of pending sales ÷ number of new listings)]. Individual monthly index values are averaged to arrive at a value for each quarter. Note that this index only looks at the real estate sales market as reported by publicly-available data shared by the NWMLS. It does not factor in any other economic conditions such as wages, interest rates, rents, etc. You can download the full data set by becoming a member of Seattle Bubble.
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Around the Sound: Inventory growth, sales declines spread outside of King County

With September’s stats in hand, let’s look at broader Puget Sound area. Here’s the latest update to our “Around the Sound” statistics for King, Snohomish, Pierce, Kitsap, Thurston, Island, Skagit, and Whatcom counties.

The biggest gains in new listings and active inventory are still in King County. Snohomish, Pierce, Kitsap and Thurston all also saw some decent gains in inventory, but in Island, Skagit, and Whatcom inventory was flat or still down. Meanwhile, closed sales are falling everywhere but Whatcom.

Home Price Changes: May to September - Median Sale Price of King County Single-Family Homes

Home prices fell more between May and September this year than any previous year

Between May and September this year, the median sale price of single-family homes in King County has fallen 8.0 percent. Most years home prices rise between May and September. The biggest decline between those months in previous years was 5.7 percent in 2008…

NWMLS: Inventory continues to climb as sales slow

September market stats were published by the NWMLS today. Home prices have leveled off as sales continue to slip and inventory piles up. Year-over-year listing growth hit its highest level ever as the number of homes on the market reached its highest level since January 2012…

September Stats Preview: Sales drop over 25 percent from 2017 as listings continue to pile up

Home sales volume was at its lowest September level in six years for both King and Snohomish County last month, dipping over 22 percent from a year ago. As a result, the number of homes on the market hit its highest point since early 2012. Foreclosures are still at all-time lows…

Consumer Confidence blows past 2007 highs, approaches 2000 levels

Before the month is over, let’s check in in on the latest data from the Consumer Confidence Index.

The overall Consumer Confidence Index currently sits at 138.4, up three percent in a month and up fifteen percent from a year ago…