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June Reporting Roundup

Before we get into what the usual suspects in the local press had to say about the housing market’s performance in June, let’s take a look at the NWMLS press release that accompanied the release of last month’s statistics:

Housing Prices Around Washington State Rising at More Modest Rates

Kirkland, Wash. (July 5, 2007) – With inventory at an all-time high in the Northwest Multiple Listing Service system, buyers are becoming more selective and sellers are receiving fewer multiple offers, according to MLS officials. Condominiums remain a bright spot, they noted.

Even though the inventory is fairly robust, the selection is slim in some close-in neighborhoods and in some price ranges.

“Inventory levels overall were somewhat higher in June, but still well below the national average and we continue to see multiple offers in certain markets,” remarked J. Lennox Scott, chairman and CEO of John L. Scott Real Estate. Not surprisingly, he noted, markets that are closer to job centers tend to have lower inventory levels and higher price appreciation.

The volume of condominium sales and prices are both outperforming last year. Through six months this year, condo sales are up 6.1 percent compared to 2006, with prices jumping 15.6 percent. In King County, which accounts for nearly two-thirds of the transactions, the year-to-date median selling price of a condominium is $285,000, a 17.8 percent increase from the year-ago YTD figure of $242,000.

Economists suggest the market is underperforming and believe fallout from subprime lending practices may be taking a toll on home sales.

NAR senior economist Lawrence Yun said consumer behavior is outweighing economic indicators. “Psychological factors are currently the biggest drag on the housing market, in addition to a disruption from tighter credit for subprime borrowers,” he said. Household formation has slowed dramatically since late 2006, Yun noted, implying that “many people are doubling-up – they’re adding roommates or moving in with parents.”

“The market is underperforming when you consider positive fundamentals such as the strength in job creation, economic growth, favorable mortgage interest rates and flat home prices,” Yun said, adding, “It appears some buyers are simply waiting for more signs of stability.”

Okay, so to review, here are the primary talking points from the home salesmen at the NWMLS:

  • Condos are great.
  • Inventory isn’t skyrocketing, it’s “robust.”
  • Prices are still rising (just a little more slowly)—rah, rah!
  • Condos… did we mention just how great they are?
  • Oh yeah, and let’s not forget those strong fundamentals.

So how well did the press fall in line with this month’s message?

(Click continue reading below.)

Elizabeth Rhodes, Seattle Times:
Condos hot while overall area housing market cools
Scales tip in favor of home buyers

Economists’ predictions have come true. Like most of the rest of the nation, the greater Seattle-area housing market has slowed to the point where buyers have an edge.

June pending sales of detached houses and condominiums in King County were down 9.4 percent compared with a year earlier, the Northwest Multiple Listing Service reported Thursday.

More striking was the number of homes for sale: 12,282 last month in King County, a 53 percent increase year over year. Snohomish County posted a 61 percent increase last month compared with the previous June.

[NAR Spokesman Lawrence] Yun said the Seattle area is tied with Salt Lake City as the strongest housing market in the nation.

“I’d still characterize the Seattle market as being healthy — one of the few in the country. And in terms of price appreciation, no one else is doing better.”

Marketing consultant Denise Lones said buyers and sellers often make decisions based on what they read in the media.

Negative news stories about local events, national disasters or real-estate downturns elsewhere can all spook buyers, she said.

And that can make sales decline.

But the fundamentals behind Seattle’s market — particularly its strong job growth and dearth of new housing — mean “our area is going to thrive and grow,” Lones predicted.

“If it’s going to be any kind of a slowdown, I think it’s going to be false slow,” she said. “We’re in a very desirable place to live.”

I wonder how long the “false slow” will last? A few months? A year? Five years? When does it turn from a “false slow” to a “serious slowdown”?

Aubrey Cohen, Seattle P-I:
Condos buoy housing market

Condominium sales buoyed Seattle’s housing statistics in June while showing perhaps the clearest sign of a slowing market.

Condo sales were up more than 20 percent from June 2006, contributing to a 2.1 percent, year-to-year increase in total home sales, despite a drop in house sales, according to Northwest Multiple Listing Service data released Thursday. Pending sales, which can be a better indicator of the most recent activity, declined 0.9 percent for all Seattle homes and by larger amounts elsewhere.

The median Seattle condo price in June was $300,000 — up 9.8 percent from a year earlier, compared with an 8.4 percent rise in the median house price. But June’s median for condos decreased from the previous month for the fourth month in a row, adding up to a 5.5 percent drop since February.

“Four months in a row, it’s an interesting thing,” said Matthew Gardner, a Seattle land-use economist. “Is this kind of indicating a slowdown in the marketplace? Yeah.”

But Gardner also noted that most new condos are not in the listing service’s numbers and said month-to-month variations do not mean as much as the yearly price changes, which he does not expect to go negative.

Rather, year-to-year appreciation should settle at 5 percent to 6 percent, he said.

“That is a rational market. We haven’t seen one of those for quite some time and we’re heading back toward it.”

Last Sunday, some potential buyers looking at homes noticed the changes.

“It seems like the market has not gone down, but flattened,” said Jason Shay, of Seattle, who has looked at homes on and off for three years. “Before there were a lot of homes that just were on the market for like two days. Now it seems like they’re sitting a little bit longer.”

But many also didn’t expect prices to go down.

“I think we’re like San Francisco,” said Brianna Beck, who owns a Seattle townhouse, but wants a detached home. “People have money — they’re going to buy.”

“People have money…” do they? I guess as the exotic financing options continue to dry up, we’ll see just how much money people really do have. And as far as the San Francisco comparison, well, I don’t have anything more to say on that subject that I haven’t already said.

Devona Wells, Tacoma News Tribune:
Summer slump for homes?

It’s been years since Pierce County’s housing market has looked this bleak.

The median sales price in June barely inched upward, to $277,500 – an increase of just 0.82 percent compared to June 2006 and a decline from May 2007, according to figures released Thursday by the Northwest Multiple Listing Service.

Countywide, the supply of homes for sale has grown to about 6.8 months, pushing the market to one that favors buyers rather than sellers, according to Dick Beeson, a Windermere broker and a Multiple Listing Service director.

And sales were down from the same time last year, with 24 percent fewer stand-alone houses and condominiums sold.

The slowdown comes at the height of the summer selling season and as counties elsewhere in the Puget Sound region continue to post healthy sales growth.

Previously this year, Beeson had expected the county would end 2007 with median sales growth in the 5 percent to 7 percent range. Now he thinks it will be 3 percent or less.

Wow, that didn’t take long. It was only just last month that Pierce County reached that magical number of 6 months supply, and already appreciation has dropped to the floor. I guess it’s a bit difficult to spin 1% appreciation as positive. Well, Elizabeth Rhodes could probably do it, but thankfully Devona Wells seems to be more interested in actually reporting the news, rather than printing article after article packed with sugar-coated predictions.

Mike Benbow, Everett Herald:
Condo prices shoot up 20 percent from last year

Not long ago, homebuyers didn’t want much to do with condominiums. They wanted a single-family house and a big yard.

Builders didn’t want to build them, either, as a wave of lawsuits alleging shoddy construction pushed contractor insurance through the roof.

But today – a time where the market for single-family homes has cooled significantly from the days of multiple, full-price offers – the condo is king in Snohomish County.

The median price for single-family homes only was $381,719, a 9 percent increase from a year ago. That compares with what had been double-digit rises last year.

Inventories for homes are also way up, by 55 percent. Builders are clearly focusing on condos, though.

Sure, the market is slowing down… but look over here! Condos! Don’t you want to get in on the hot condo action? Oy.

Rolf Boone, The Olympian:
Sliding sales of houses continues
Analysts reach differing conclusions about downturn

Sales of Thurston County houses dropped 17 percent in June, which prompted one real estate agent to say the real estate market has cooled down to compensate from its torrid pace of a few years ago.

In short, single-family house sales are down while condo sales are up in the past year. Inventories and median prices have climbed in both categories, and generally, it has been taking a little longer to sell a house recently compared with the market boom of a few years ago.

South Sound real estate professionals view differently the significance of a year-over-year 17 percent drop in home sales.

Because current house sales are measured against the boom in housing that started in 2004 and ended in 2006, house sales are bound to be lower, real estate agent Eric Hjelm of Greene Realty Group of Olympia said.

Yes, sales are indeed “bound to be lower.” And lower, and lower, and lower…

(Press Release, NWMLS, 07.05.2007)
(Elizabeth Rhodes, Seattle Times, 07.06.2007)
(Aubrey Cohen, Seattle P-I, 07.05.2007)
(Devona Wells, Tacoma News Tribune, 07.06.2007)
(Mike Benbow, Everett Herald, 07.06.2007)
(Rolf Boone, The Olympian, 07.05.2007)

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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.

19 comments:

  1. 1
    Joel says:

    Psychological factors are currently the biggest drag on the housing market . . .

    Oh really? I would’ve pegged unaffordability as the biggest drag on the market. But then again, homes aren’t bought with money, they’re bought with leverage.

  2. 2
    Matthew says:

    “Psychological factors are currently the biggest drag on the housing market . . .”

    When the price goes UP, it’s fundamentals. When the price goes DOWN it’s psychology!

  3. 3
    deejayoh says:

    It’s interesting how the NWMLS has gotten all sneaky about access to their reports all of the sudden. They’ve started hiding the links, they removed them from their press reports, etc.

    I think their getting nervous. It’s harder and harder to spin the story with everything getting dissected in the blogosphere.

    Thanks to Tim for helping keep them honest

  4. 4
    Jesse says:

    Indeed deejayoh… i’d love to get access to the June breakouts. If anyone comes across a link please post it.

  5. 5
    The Tim says:

    The “permanent” link to the recaps and breakout pdfs is on this page.

    The more detailed pdfs have been obfuscated.

  6. 6
    EconE says:

    I don’t think that that median condo price is gonna help sell all these new downtown condos.

    JMO

  7. 7
    Finance says:

    EconE – Condos sell themselves…however I do believe that the median does matter to some extent, since those buying say “wow I bought mine cheaper than avg” (which isnt the same thing).

  8. 8
    Brian says:

    Just curious about the latest data – must be an error?
    HousingTracker: Seattle, WA

  9. 9
    The Tim says:

    Brian,

    Yes, it is an error. See this discussion in the forums.

  10. 10
    deejayoh says:

    Condos sell themselves

    that’s why there are twice as many on the market in downtown Seattle as there were last year. cuz they’re selling themselves.

  11. 11
    kpom says:

    “that’s why there are twice as many on the market in downtown Seattle as there were last year. cuz they’re selling themselves.”

    And, according to one Realtor’s blog, the median price of downtown/Belltown condos went up all of 2.04% between May 2006 and May 2007.

  12. 12
    george says:

    Again, the Seattle Times quotes National Association of Realtor cheerleader Lawrence Yun. As if he were an objective source of real estate information.

    Meanwhile, Lawrence Yun is now a laughing stock according to this reporter for the Los Angeles Times:

    http://latimesblogs.latimes.com/laland/2007/06/realtors-blame-.html

  13. 13
    Old Ballard says:

    “Condos sell themselves”

    Let me count the number of unsold Condos east/west between 32nd Ave NW and 15th Ave NW and north/south between say Market St. and 65th St. 17+3+7+10+70+50+5+three site that haven’t broken ground, and not one of these units, including studios are selling for less than 350,000.

    Condo’s are going to have to work overtime to sell themselves.

  14. 14
    mydquin says:

    Not long ago, I suggested that the recent credit crunch would affect the bottom end of the market more than the top end. Most of the bubble believers dismissed that possibility and suggested that the different segments of the market are too intertwined for the market to be bifurcated. Well… we now have some evidence…

    http://www.nytimes.com/2007/07/11/business/11leonhardt.html?hp

  15. 15
    SeattleHotty says:

    The sub-prime problem is far from playing all the way out.

    US mortgage problem fears spark sell-off:
    http://tinyurl.com/2p667c

  16. 16
    uptown says:

    mydquin,

    Don’t worry, the high-end will feel pain. Once the mid-market is stalled and the hedge funds have collapsed from holding bad paper, the rich will have no one to sell their overpriced mansions to. That’s when you can start to talk about calling a bottom.

  17. 17
    TJ_98370 says:

    Hey SeattleHotty,

    Didn’t Mr. Cramer say that all this would be contained within Bear Stearns?

  18. 18
    JustAnotherRenter says:

    Why were blocks of air (condos) ever popular anyway?

    I mean sure I have an irrational desire to own a house just like any American, but not to own a block of air!

  19. 19

    […] just me, or does Aubrey’s article this month seem like little more than a slight rewrite of last month’s piece? Okay. We get it. Condos sales aren’t slowing down as much as single-family homes. […]

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