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July Reporting Roundup

It’s that time of the month again—time to check in with our trusty local real estate mouthpieces “reporters” in the local press. What do Rhodes, Cohen, Benbow, Boone, and newcomer Dan Beekman (with the Tacoma News Tribune) have for us this month? Read on to find out…

Warning: Sarcasm Ahead

Elizabeth Rhodes, Seattle Times:
Housing prices defy logic, keep climbing

Economics 101 teaches that prices should drop when the supply increases dramatically, but the Seattle area’s housing market keeps confounding that conventional wisdom.

Prices of King County houses and condominiums last month increased 9 percent compared to a year earlier — even while the number of available properties grew 51 percent.

This continues a trend that has persisted for several months.

Why rising inventory isn’t having the anticipated effect is hard to pin down, but there are theories.

All revolve around the idea that an increase in the number of for-sale homes isn’t necessarily a negative factor that would cause prices to fall.

Ms. Rhodes’ “theories” are nonsensical and misleading. They’re not even worth quoting and wasting time debunking. However, I’ve got a theory of my own, but I’m saving it for a post all its own later this week. Stay tuned, I think you’ll find it compelling.

Aubrey Cohen, Seattle P-I:
Condos driving the housing market

Condominiums increasingly are driving Seattle’s housing market, according to new information released Monday.

The number of Seattle homes for sale in July shot up 50 percent from a year earlier, while sales increased 6 percent and the median price bumped up 1.8 percent to $427,453, according to Northwest Multiple Listing Service data. Condos accounted for 39 percent of homes on the market and 32 percent of July sales, up from 32 percent and 28.5 percent a year earlier.

With Seattle’s single-family-home neighborhoods basically full, condos and townhouses are about all that’s getting built these days, meaning they’re quickly becoming a bigger and bigger share of the market.

What does this mean for overall market? For one, condos are driving up inventory and sales, which increased 34 percent and 1.2 percent, respectively, among Seattle homes alone, excluding condos, in July, compared with a year earlier.

And, because condos tend to sell for less, they drag down the median price for all sales. The median house price excluding condos in July was up 5.7 percent from a year earlier, while the median for condos alone was up 4.7 percent. Townhouses have a similar effect.

Is it 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. Woop-dee-do.

Dan Beekman, Tacoma News Tribune:
County home prices inch up

Home prices in Pierce County rebounded slightly in July after appreciation sputtered in June.

The median sales price for July was $281,400, according to figures released Monday by the Northwest Multiple Listing Service. The price represents a 1.4 percent increase over June and a 3.31 percent jump from July 2006. In June, median prices grew less than 1 percent from the year before and declined from May.

East Pierce County has a surplus of empty new homes.

“When you give people so many choices they can’t make a decision, they won’t,” [Windermere broker Dick] Beeson said. “When there are fewer homes, people make quick decisions and buy.”

According to Beeson, Lakewood’s housing market has begun to rebound. North Tacoma homes are selling within four months, on average, and the University Place market remains strong.

Others in the industry agreed.

Looks like Mr. Beekman is a “quote the salesmen” kind of real estate reporter. It’s a pity. Personally I prefer Devona Wells’ slightly more frank style.

Mike Benbow, Everett Herald
County housing boom finally fades

If you can trust the numbers, Snohomish County’s red hot real estate market of the past six or seven years is officially over for now.

Consider these digits released Monday by the Northwest Multiple Listing Service for July sales:

57. The percentage rise in the number of homes available on the market during the past year.

17. The percentage that home sales have dropped in Snohomish County between now and a year ago.

4. The percentage increase in home prices since July 2006.

“It’s transitional,” said Vern Holden, a Windermere broker in Mill Creek.

Holden described the old market in the county as a “pure sellers market” where buyers had to act fast, had few choices, found getting a mortgage to be easy and were pretty much stuck with rising prices.

Things are clearly different now, he added.

“It’s moving to a more balanced market, maybe even a buyers market in the near future, he said.

Oh, it’s transitional, all right. I predict it will transition straight on through the “balanced market,” past the “buyer’s market,” and end up somewhere in the general vicinity of the “everyone hates real estate” market.

Rolf Boone, The Olympian
Sales tepid for homes, condos

Thurston County sales of single-family homes and condominiums are struggling to measure up to last year’s hot real estate market as sales dropped about 15 percent in July, the Northwest Multiple Listing Service reported Monday.

In July, 396 houses and condos sold, compared to 464 for the same period last year, the data show.

Meanwhile, combined house and condo median prices continued to rise, up 7 percent from $257,278 to $275,174, according to the data.

Besides higher inventory levels, other factors that have slowed down the South Sound housing market include higher mortgage interest rates, more new construction and slower rates of home price appreciation, Abbey Realty real estate agent Ted Leland said.

“A lot of people got spoiled with low mortgage interest rates and the high rates of appreciation,” Leland said.

Now that home prices aren’t appreciating 20 percent a year as they did two summers ago, some buyers aren’t nearly as excited to invest in property, Leland said.

And while first-time home buyers have more homes to choose from, some are back on the sidelines because of tighter lending standards, he said.

Five of Leland’s real estate transactions this year have fallen apart because the buyers couldn’t qualify for home loans, he said.

A year ago, it wouldn’t have been a problem qualifying, Leland said.

You don’t say. Who could have predicted such a thing. And what’s this about buyers “investing” in property? I thought everyone in the Puget Sound bought their houses purely as a place to live, not due to speculation of future gains. What an odd statement to hear from a real estate agent…

(Elizabeth Rhodes, Seattle Times, 08.07.2007)
(Aubrey Cohen, Seattle P-I, 08.07.2007)
(Dan Beekman, Tacoma News Tribune, 08.07.2007)
(Mike Benbow, Everett Herald, 08.07.2007)
(Rolf Boone, The Olympian, 08.06.2007)

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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.

20 comments:

  1. 1

    FIRST TIME HOME BUYERS IN SEATTLE NOW COMPLETE DINOSAURS?

    God forbid we keep our college graduates in Seattle, after all, these youth loaded down with college loans are useless for the realitor. We need only “experienced” professionals who can trade up, that is if there’s any new jobs for them either….

  2. 2
    rose-colored-coolaid says:

    Tim,

    Just because people in Olympia were speculating in unreal estate doesn’t mean that people in Seattle are. Thurston county only have ponies in shades of gray or brown; none of them are pink! Further, Olympia does not have Ballard in it. That alone should be enough to explain their funk.

  3. 3
    Grvetti says:

    So all the SFH’s in Seattle are full? Well, hell, I guess I’ll just do Ballard a favor and rip out all those For Sale signs I see planted in everyone’s yard… If they occupants start yelling at me, I’ll just say “Hey, didn’t you read? There’s no more SFH’s in Seattle anymore, just condos and townhomes.”

    BTW, Lizzie Rhodes’ “theories” arguement is probably the most ridiculous laziest reporting I’ve seen from her in a long-time. She should just stick to parroting mortgage brokers and realtors, because when she actually makes a stab at ‘reporting’, its all you can do not to throw up in your mouth a little.

    I’m thinking by this point, to spite the constant stream of facts and data we’ve been emailing her over the years, she ignores reality and puts out shill-pieces in the guise of reporting. I guess I know what happens when you fail out of economics, you become a journalism major.

  4. 4
    Nude says:

    This isn’t rocket science. Knock out the bottom 20% of home buyers and the median sales price has no where to go but up.

    How’s that for a “theory”?

  5. 5
    TJ_98370 says:

    The opinions / observations of these reporters are almost irrelevant now.

    With the recent tightening of standards in the primary mortgage market and investors being spooked about the secondary mortgage market, real estate sales will be a whole new game from now on. I think we can expect some dramatic changes.

  6. 6
    The Tim says:

    With the recent tightening of standards in the primary mortgage market and investors being spooked about the secondary mortgage market, real estate sales will be a whole new game from now on. I think we can expect some dramatic changes.

    But Terry, you’re forgetting the magic rules of Seattle real estate:

    1. All real estate is local.
    2. Everyone wants to buy a home in Seattle.
    3. Boeing, Microsoft, strong job growth, millions of people moving here, neverending appreciation…

    So as you can clearly see, lending standards mean nothing to the Seattle housing market.

    I should apply for a job at the Seattle Times.

  7. 7
    TJ_98370 says:

    ….you’re forgetting the magic rules of Seattle real estate:

    All real estate is local.

    Everyone wants to buy a home in Seattle.

    Boeing, Microsoft, strong job growth, millions of people moving here, neverending appreciation…

    So as you can clearly see, lending standards mean nothing to the Seattle housing market.

    Tim,

    Sorry – I lost proper perspective for a moment. It won’t happen again.

  8. 8
    rose-colored-coolaid says:

    Playing the devils advocate here, but has anyone else recognized that massive difference between what experts are predicting these days and what typical American sentiment is when polls are taken?

    While the pros are still mostly pushing the Goldilocks scenario, and recession is unlikely, the majority of Americans now believe we are either already in recession, or will be by Christmas. Similarly, polls for congress and the president have been very low. These ratings are often strongly influenced by financial status of the people.

    Here’s the thing, while any given expert is probably smarter than any given Average Joe, a large group of average people is more diverse and thus smarter than a small group of ‘pros’.

    I just wanted to mention this for anyone who feels like ‘everybody is optimistic’ when it’s really only a vocal minority who are.

  9. 9
    Alan says:

    New high for KC SFH inventory: 10,240
    Will my prediction hold? Is the monthly closing bonanza over and will inventory climb steadily over the next two weeks?

    I think we will see 10600 on Windermere by the end of August.

  10. 10
    redmondjp says:

    Wow, Tim, there you go alienating our sarcasm-impaired readers again (thanks for the warning though, I call that progress).

    It’s obvious that there is no problem with the real estate situation in the greater Seattle area, because if there was, RE professionals would certainly be the first ones to tell us about it. Instead, we have very useful advise such as what kind of soap not to use when staging your house.

    My across-the-street neighbor from me, in a house identical to mine, just bought a 4br/2.75ba 3300 sf house built in 2001 (one of those monstrosities where the house hides behind the 3-car garage facing the street and you can’t see the front door), for $775K. And he’s keeping his old house as a rental (so probably didn’t extract equity, as it will be cash-flow positive with his existing mortgage). And he works at Microsoft. The Pink Ponies are alive and well in my neighborhood!

  11. 11

    The responses from mortgage loan originators this week have fallen into a couple of different categories:

    1) New LOs that have no idea what’s going on.

    2) Somewhat experienced LOs who have been in the industry less than 10 years who are angry that their loan products are going away.

    3) Seasoned veterans who have learned not to panic and instead are trying to re-learn which lenders offer which products.

    4) Career LOs who survived many financial crisis’ in their lives including the 1980s S&L bailout and know that they will survive this one too. These folks already know disaster is upon us but prefer not to talk about the elephant in the room and instead are focusing on “strategic resiliance.”

    Best quote heard in my classroom today: “100% LTV stated income/no doc loans are gone. This wipes out a huge segment of the population that previously had ONLY relied on these loan products. I have nothing to offer these buyers and refinancing homeowners.”

    The question for the group I’ll be with tomorrow, is, with these stated income/no doc loans, what percentage were in the first time homebuyer range, and what percentage were in the second or third tier?

    I hope somebody gets that awful picture of hand-soap off the front page of RCG. It’s totally creepy. What’s next, soap in the shape of other body parts?

  12. 12
    Garth says:

    Sole proprietors are the one legitimate reason for no doc loans I know of.

    Numerous articles in the WSJ seem to think the new types of mortgages and lower standards created about 5 million new homowners and account for about 10-15% of the potential buyers now. Consensus was most of those would return to renting, nobody seemed to have any idea what path back the majority would take.

  13. 13
    biliruben says:

    Nice breakdown, Jillayne.

  14. 14
    MacAttack says:

    Thanks, Tim. The following should be an easy prediction, given the new higher rates on jumbos: Median prices will FALL (oh, the horror!) as higher-end sales drop off dramatically (sellers are too greedy to reprice, or stuck), while the low end chugs slowly along. Essentially, this is the opposite of what we see now: Low end quiet, higher end still moving = higher median.

    August medians should be VERY interesting, more so in markets where a “jumbo” isn’t very jumbo.
    cheers,
    Mac

  15. 15
    rose-colored-coolaid says:

    Garth, I thought the only legitimate reason to do No-Doc is for criminals. Oh what irony. A sole proprietor should at least be able to use his income tax statement for documentation right? Please correct me if I’m wrong, but that’s what I really thought.

  16. 16
    Buceri says:

    If all levels of credit are being tightening as discussed, the slow down should be across the board. A first time buyer with a $270K mortgage at 6%, it needs about $1900 plus taxes and insurance. You would need about $72K household income to qualify (assuming 30% gross monthly income requirement for housing). And we already discussed on this board the over $50K salary issue.

  17. 17
    CCG says:

    “I should apply for a job at the Seattle Times.”

    Sorry, you need a proven history of housing bullishness and debilitating brain anuerysms.

  18. 18
    Garth says:

    rose-colored-coolaid,

    Partially because of irritation with the B&O tax in Washington, many Sole proprietors or small LLC’s will pay themselves a low salary and keep their business perpetually breaking even through deductions to minimize their tax burden.

    They wind up with a documentation problem when they go to borrow money or sell their company.

  19. 19
    jaspans says:

    Currently, my husband and I earn 82,000 a year, have no credit cards or car loans, just school loans, and 20,000 down….but when we look and fixed loans, and very basic homes N end (we work N end Seattle) we can’t afford a home. What is a median earner family to do? Will prices in the low end really come down?

  20. 20

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