Demand Down, Supply Up, Prices Dip

It’s that time of the month again. Time for fun with numbers. September figures from the NWMLS have been posted. King County Residential inventory jumped even more than I was expecting, up 28.79% from last year. Sales tanked nearly 20% from August, and are down 20.59% from last year. Median sales price for single-family homes in King County actually decreased from August, down to $425,000 (up 11.48% from September 2005).

It is worth noting that the while inventory commonly increases from August to September, last month’s 10% jump is the largest increase over that time period in at least the last seven years. Likewise, sales tend to decline in September, but last month’s nearly 20% drop from August is the largest September drop since 2001. Furthermore, the last time that the median sales price from August to September dropped by more than last month’s 2.30% was 1998.

Also interesting is the fact that the “months of supply” number (inventory / pending sales) shot up almost a full month—the largest jump since December 2000—from 2.54 to 3.49, a value not seen since Winter 03-04. If that rate of change stays steady (I doubt it will), we will reach six months of supply (generally seen as a “balanced market”) before the new year.

As is traditional, I have uploaded an updated version of the Seattle Bubble spreadsheet for your number-crunching pleasure. Don’t forget that you can always find the link to the spreadsheet on the sidebar.

Here are the supply & demand graphs.

Check out those curves.

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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. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.


  1. 1
    The Tim says:

    Let’s play “Predict the Spin”

    I predict that the local papers will focus most of their articles on the fact that there is “still double-digit appreciation,” and that they will claim that any signs of a slowdown are merely standard seasonal slowing.

    I hope to be proven wrong.

  2. 2
    Grivetti says:

    I predict that the local papers will focus most of their articles on the fact that there is “still double-digit appreciation,”

    I concur there Tim. You can spin stats any which way but loose, and the “still strong” housing market mantras followed up by “robust job-growth, blah, blah, blah” will be the stock quotes of the day. I’m sure we’ll hear the typical “While the rest of the country…” and “we’ve managed to escape the worst of it…” nonesense. The thing is, I’ve noticed Seattle press is about 1/2 yr. to a full yr. behind the curve. We’re currently hearing the “soft landing” arguement, something the national press has long since abandoned.

    But again, if you look at numbers, you can get the YOY camel hump affect. YOY, while a decent timelime for real estate in long term doesn’t capture mid-year surges. Prices can be crashing, but a YOY +% increase won’t capture the plummeting affect. Who knows, prices may’ve been up 30% YOY just last month, but you wouldn’t know it…

  3. 3
    Kaleetan says:

    The bulls are running on Wall Street.

    The DOW Jones has hit a record high because investors are betting on a soft landing.

    Why no doom and gloom for investors?

  4. 4
    Amit D. Chaudhary says:

    Wow, did not expect a price drop for months. It is the highest Sept inventory for King SFH since Sept 2003. The biggest indicator after the price is the pending sales drop YoY of -20.59%

    Tim, Thanks for the actual pdf data and analysis.


  5. 5
    AmazedRenter says:

    Regardless, 20% YoY drop in sales is significant. Let’s hope the trend continues.

  6. 6
    john_law_the_II says:

    this is it, Seattle is not different. it’s doing what the rest of the US was doing in 05

  7. 7
    Lake Hills Renter says:

    I’m not suprised to see the inventory numbers. My anecdotal observations on the eastside have reflected this. On the way home from work yesterday I counted “for sale” signs for houses actually on the road I drive, not side streets. For the 3 mile residential route, the grand total was eight houses for sale, one with a “sold” placcard. That does not count the new subdivision being built apparently on spec near work, with room for probably 8-10 McMansions “from the $1M!”.

  8. 8
    EconExchange says:

    Ummm. Lets play spot the trend!! I know I can! YOY increase.

    September-05 16.78%
    October-05 20.34%
    November-05 14.75%
    December-05 17.01%
    January-06 17.33%
    February-06 11.29%
    March-06 12.32%
    April-06 17.08%
    May-06 16.88%
    June-06 15.34%
    July-06 14.71%
    August-06 12.02%
    September-06 8.60%

    And gee from Sept to Aug the PRICE dropped 392K to 380K in King County a drop of 3% IN ONE MONTH and effectivly getting rid of the appreciation since April. Lets see them spin this positive….I know they probably will resort to YOY numbers instead of pointing out the undeniable trends but SHAME ON THEM IF THEY DO!

  9. 9
    SeattleMoose says:

    But, but Kendra Todd said…….blah blah blah.

    Kendra is just the local version of CA’s Leslie Appleton-Young. And like LAY Kendra will have to eat crow soon also.

    But of course the newspapers will figure some way to put a happy face on it…..until they are forced to face up. Then they will instantaneously jump sides and they will be all smug in the “we told you all along camp”.

    You can count on the above…its “in the bag”.

  10. 10
    Alan says:

    I would love to see some sort of pricing graph superimposed over the supply/demand curve.

  11. 11
    The Tim says:

    Alan, you are in luck. The spreadsheet contains just what you’re looking for. It’s the second graph (the percent change from year to year), with the percent change in the median plotted on a second y-axis on the right-side. The page in the spreadsheet is titled “S&D % w Median” and in fact it’s the page the spreadsheet should open to by default. If for some reason you can’t or don’t want to use Excel, here’s a snapshot.

  12. 12
    Crashcadia says:

    The recent run in the DOW and NAS will be short lived.
    The pump is on for the November elections. Smart investors will dump early.
    There have been a lot of major corrections in the markets in October. Both the 1929 and 1987 crashes were in October.

    The lemmings are watching the fundamentals collapse and are figuring the FED will lower rates.
    Perhaps if the fundamentals point to a devastating depression, the markets will sky rocket. That seems to be the logic behind the recent market action. I expect a major market correction in the very near future.

    If the FED does lower rates I still see a collapse for housing nation wide. The coming recession and the recently issued guidance on exotic mortgages along with low affordability will put a pinch on the first time homebuyer. The ripple effect will dampen all housing activity even more than its current anemic state.

    The recent run to commercial construction will also be short lived. All the new warehouses being built to accommodate cheap imports will be sitting empty once the economy unravels.

    It appears that the market investors are drunk at the hurricane party.
    The FED may bring some more punch to the party, but the hurricane is on the doorstep and the wind begins to howl.

  13. 13
    flopfolder says:

    The Tim,

    Great blog. Have been lurking for a while.

    It may be a bit premature to make much of the price dip. According to ZipRealty, while the median price declined, the $/sq. ft. increased in August. This would indicate that the median price decline is simply a result of smaller homes being sold.

    I hope that the overall trend is down, as I want to buy a house in the next couple years, but as of now, it is too early to say whether or not a peak has been reached.

  14. 14
    The Tim says:


    I agree. That’s why I made sure to point out that these kinds of trends in September are not an uncommon occurrence. This drop is larger than most others have been, but I don’t intend to make a big deal about price stagnation or drops until/unless it happens in the spring.

    What’s most interesting to me now is the surging inventory and plummeting sales.

  15. 15
    EconExchange says:

    funny that everyone loves to say prices are going UP when the median goes up. But Oh No, can’t say prices are going DOWN when the median goes down. interesting.

  16. 16
    flopfolder says:

    “funny that everyone loves to say prices are going UP when the median goes up. But Oh No, can’t say prices are going DOWN when the median goes down. interesting.”

    The funny thing is that most MSM artictles talk about everything in nominal terms. If prices were expressed in a per unit adjusted manner, this wouldn’t be a problem.

    Have the building of large square footage McMansions added to an increase in median home prices? Certainly!

    If you want a realistic look at the increase in home prices over the last few years, then you would need an inflation adjusted comparison of $/sq. ft to median household income, which is not something you see very frequently in the MSM. Shiller’s indices (which take into account such things) have done a good job in showing that home prices have indeed reached bubbilicious proportions.

    How long a return to fundamentals will take is anyone’s guess though. Very likely it will be months before a real trend is observed in Seattle. Until then, we will be forced to listen to how much this area of the country is different.

  17. 17
    Where's the Bubble? says:

    Interesting data. Curious as to why you have not posted anything over the past year while the median housing price has skyrocketed? King County medium housing price as of August 2007 is now $477,345. How about an update?

  18. 18
    deejayoh says:

    King County medium housing price as of August 2007 is now $477,345

    Forum lesson number one: don’t expect a challenge to someone’s data to be taken seriously based on a post where you reference the “medium” house price. LOL

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