My jaw dropped in amazement when I read this headline in my inbox yesterday: House prices likely to decline. Granted, it was a Q & A column in the Everett Herald, not a headline news item in the Seattle Times (which would have probably made me faint), but still, it’s nice to see an admission like that in any of the local rags.
Question: I have been seeing stories in the news about the housing bubble around the country, with some areas seeing a drop in prices now that the big boom is over. Do you think that will happen here in the Seattle area too?D.K., Lynnwood
Answer: …Last year at this time, I went out on a limb and said that I felt that the local housing market was peaking. I thought that home prices would max out during the spring home-buying season and then level off. Home prices actually continued to increase through late summer, but the housing market has definitely cooled off in the last three months, as I had expected.
This week, the Northwest Multiple Listing Service released home sale stats for November and you can see that a trend is emerging. There were 35 percent more homes for sale last month than there were in November 2005. At the same time, there were 11 percent fewer homes sold in November compared with November 2005.
So I suspect that next spring when most sellers put their homes on the market, we will see a big increase in the inventory of homes of sale. And unless there is a large pool of prospective buyers out there, we will probably see the home market swing toward a buyer’s market where there are more homes for sale than buyers. That’s good news for home buyers who have been frustrated by skyrocketing home prices over the past few years, but not such good news for homeowners who need to sell soon.
As I said above, prices will likely flatten out and possibly decline slightly, but traditionally we don’t have the kind of home price “crash” that happens in boom-and-bust housing markets such as San Diego, Las Vegas and Phoenix.
Of course, we also traditionally don’t have the kind of home price “spike” that we have had in the last three years, where the median home price shot up nearly 50%.
He goes on to explain the possibility that speculators fleeing the market will further drive prices down. Much to my amazement, rather than repeating the oft-heard (but never backed up) claim that the Seattle market doesn’t have many investors, he admits that their potential affect on the Seattle market is largely unknown.
I don’t recall seeing (and couldn’t locate) an article published “last year at this time” where he claims to have predicted Seattle’s housing market peak. If anyone knows where to find a link to that, please post it in the comments. [Update: Thanks to Megan the Librarian below for pointing out the November 2005 article Mr. Tytler references above.]
Kudos to Mr. Tytler for pointing out the obvious trend and its likely result.
(Steve Tytler, Everett Herald, 12.10.2006)