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Supply Soars, Demand Drops Like a Rock

August stats have finally been run by the NWMLS. Thanks to my inside source, you can find the info here first.

When they publish the usual monthly press release with links to the recap pdfs, I’ll post it here. Update: Here’s a link to the press release: Key Indicators for August Home Sales Around Washington Show Continuing Trend of Fewer Sales, Higher Prices. From there you can link to the recap pdf and the county breakouts.

Here’s your King County SFH summary:

August 2007
Active Listings: up 43% YOY
Pending Sales: down 26% YOY
Median Closed Price*: $477,345, up 9.7% YOY

Wow. The big story this month is sales down 26% YOY. That’s the largest YOY drop since statistics have been available (2000). The raw amount of sales (2,094) is the lowest for any August since (at least) before 2000 as well. It will be amusing to see what kind of excuses the real estate sales community comes up with this time. I’m pretty sure “bad weather” is out. Maybe they’ll go with “the weather was so good that everyone was out enjoying it instead of buying houses.”

Inventory continued its usual YOY climb, clocking in almost the exact same YOY jump as last month.

The combination of record-high inventory and record-low sales have bumped the Months of Supply measure to 4.9—nearly double what it was in August of last year.

Median prices dropped back down a bit, not unusual for August. Don’t forget to keep in mind the huge caveats that come with looking at the median, especially as sales begin to drop so significantly.

You know the routine. Download a copy of the updated Seattle Bubble Spreadsheet with highly-concentrated data goodness.

Here’s the supply/demand YOY graph:

Here’s the chart of supply and demand raw numbers:

Just to give you an idea of how unusual this drop in sales is, here’s a graph of the month-to-month change in sales for every year since 2000:

Update: Some of the phrasing of the NWMLS press release really cracked me up. Here’s a little translation guide for the marketing-speak that you’re likely to see regurgitated in the press today and tomorrow:

“plentiful selection in most areas” = Listings at an all-time high, up 46% YOY system-wide, over 60% in some areas.

“the market is adjusting to a slower but steady pace” = As long as you mean “steadily declining,” then yes, it’s “steady.”

“motivated sellers are more flexible than they’ve been in a long time” = Everybody’s trying to get out before the **** really hits the fan around here.

“home prices are still increasing, but at a slower pace” = Prices probably aren’t really increasing at all, but the lousy metric we use to measure prices is increasing, so we’ll say that they are.

“Prices surged 30 percent for single family homes that sold in San Juan County last month compared to a year ago.” = The whopping 20 homes that sold last month—in the smallest county we cover—tended to be more expensive than the 34 that sold a year prior.

It’s a riot!

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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.

79 comments:

  1. 1
    SunTzu says:

    [off-topic article quotes snipped, link left – The Tim]

    Why California housing matters

  2. 2
    deejayoh says:

    bye bye Jumbos?

  3. 3
    Grvetti says:

    Well considering the myopic local press ONLY focus on medain closed sale price… they’ll probably trot out the “strong fudnementals”,”smart buyers”, “Seattle’s so special, we might as well be on the MOON!” arguements and completley ignore the end of the cliff that’s inventory and sales volume.

    What you can read from this is that only the more affluent are buying homes.. if sales were stable YOY and median went up, than you could say that home values are continuing to appreciate.. .but once all the big fish eat all the small fish in the pond, there’s only big fish eating big fish…

  4. 4
    Marc says:

    Everybody and their brother saw decreased sales coming. The bigger story is that prices are prices still heading up by nearly double digits?

    Who’ll be the first to say that locked in loans from July carried August and that September will prove to be Seattle’s Little Big Horn?

  5. 5
    CKT says:

    The press release from NWMLS is up on their website, but at this moment they still have links to the July breakouts and recaps. D’Oh.

    But in the press release they note that downtown Seattle condos experienced a YOY decline in median price. YOY for KingCo condos was up, about 5.75%, however. I think the condo market region wide is where things are going to get ugly first. I can’t wait to see what happened to Pierce Co condos…

  6. 6
    EconE says:

    I can’t wait to see the downtown condo numbers.

  7. 7
    CKT says:

    BTW, why do I feel like a teenie-bopper waiting in line overnight for Justin Timberlake tickets? I’m such a nerd…

  8. 8
    Grvetti says:

    [i]But in the press release they note that downtown Seattle condos experienced a YOY decline in median price. [/i]

    So much for the REIC’s arguement about “empty nesters” buying the high end in downtown… nothing like a fake-demographic to boost sales.

    People who can afford homes aren’t buying 500K+ condos… ’nuff said.

  9. 9
  10. 10
    CKT says:

    NWMLS recaps and breakouts are up now. Pierce Co condos were up 7% YOY. I expected this, though, because Aug06 was especially weak for condos.

    Next month is a very different story; Sept06 was a very good month for Pierce Co condos. I doubt they’ll be turning the trend around. After all, 4 of the last 6 months have MOM declines in Pierce Co condo median price.

    Frankly, I’m surprised how bad things have gotten for King Co condos. Median price declined -3.71% in one month alone. This on top of YOY declines in downtown condos. Ouch.

    SnoCo condos still going strong, but showing serious signs of weakness. YOY price increased 12.9%, but only 6 months ago SnoCo was showing YOY increases of +25%. Also, SnoCo condo median price decreased -4.84% MOM. Not good.

    Bottom line: condo market in puget sound is bad and getting worse…

  11. 11
    Marc says:

    “Bottom line: condo market in puget sound is bad and getting worse…”

    Yep, sure is. I mean dang y’all SnoCo is only up 12.9% instead of 25%. And Pierce is only up 7%. As for downtown, it’s only a matter of time before the condo developers start performing harry-karry. Over at the new Belmont Lofts conversion on First Hill they’re suicidal because they only signed contracts on 1/2 of the units the first week and were only able to raise the prices by $20,000 this week.

  12. 12
    TJ_98370 says:

    Inventory up, sales are down, imitating real estate trends of much of the rest of the country. Where oh where can this possibly lead?

  13. 13

    CHECK THIS OUT BLOGGERS

    I found a picture of most of us Seattle Bubble Bloggers; waiting for the current August 2007 inventory surges on top of the likely monthly future inventory surges, the next couple years [the national/Seattle loan problem is a huge iceberg and we’ve just started to see the tip] to very likely mount up non-stop.

    Its us waiting for the deals in like 2009. Its a picture of a vulture.

    Once the properties stay unsold [and vacant] for more than 6 months; that’s when the prices start to horrifyingly collapse. Looters start breaking the windows, while rats and vagrants start living there on free rent.

    I’d say if you still have a job in 2009, and have some spare cash [I’d leave that 401K alone, you’ll need that come retirement]….that may likely be the good buy-in year in Seattle.

  14. 14
    deejayoh says:

    Mark –

    I am missing your meaning. Did you mean hara-kiri, or perhaps it was Harry Caray? No, that would be hard to commit. Maybe it’s the old “Harry Carry” as in bringing along the Potter Series?

  15. 15
    CKT says:

    Hey, that’s a great point Marc! Good thing the Seattle summer rain has finally taken a breather. I hear Belmont Lofts leaks like a sieve. Water damage and mold galore! But I’m sure it’s nothing that a little paint can’t cover up. And vinyl siding?!? Sho’ is fancy…

    Perhaps the rest of them will sell like hotcakes for that extra $20K; somethings gotta puff up the rest of the market.

    Besides, I hear Belmont Lofts also has an newly-built underground pony barn. This ensures that these sparkling enclaves will appreciate at least 20% per year for the next 30 years.

    In fact, from what I understand, all of First Hill used be a pony graveyard when the first settlers arrived here. It’s a very special place, the mostest specialist place in all of Puget Sound. Hallowed ground, if you will. At night, if you listen ever so closely to the winds blowing past Swedish Medical Center, you can hear the ghosts of ponies past whispering, “neigh… neigh… prices only go up… neigh… neigh…”

  16. 16
    The Canary says:

    No one seems to be commenting that pending sales from the link are down 73% YOY and 87.5% from the prior month, not that’s a cliff!

  17. 17
    reality says:

    This is probably old, but I hadn’t heard it before and I liked it. Good response to the ‘Seattle is special’ argument.

    Your city may be special, but it was just as special when it was half as expensive ten years ago, so being special does not account for the run up in prices.

    http://patrick.net/housing/crash3.html (#6)

  18. 18
    Demersus says:

    Where BubbleBuyer today? He sounds very familiar, like someone who bought in Ballard.

  19. 19
    wreckingbull says:

    Ask the Hjarta sales office (in ‘white-hot’ Ballard no less) how Seattle condo sales are going. I’ll bet they don’t quite agree with Marc.

    Its dead out here.

  20. 20
    patient says:

    26% down that’s brutal especially when in August there were still a “spill-over” of loans approved prior to the main mortgage tigthening. August and September sales number should be a very good relative indicator on the degree of impact the new lending standards will have on a market. It would be interresting with a “top 10” markets list of YOY sales decline to see how special we are.

  21. 21
    brettro says:

    Belmont Lofts is garbage.

  22. 22
    CKT says:

    U R A RENT-TARD BRETTRO!!!1!!! BELMONT LOFTS IS TEH AWESOME!!!!!!!!!! TAKE IT BACK!!!! TAKE IT BACK!!!! TAKE IT BACK!!!!TAKE IT BACK!!!!

  23. 23
    The Tim says:

    Hey everybody, just a quick note to draw your attention to the update at the end of the post. NWMLS press-release-speak translated.

  24. 24
    biliruben says:

    The breakout is missing total res kc pendings. I was trying to find the 26% number, but it’s 100 right now.

  25. 25
    John says:

    CKT, if those people can eat BBQ at a construction site, they are dumb enough to overpay for those condos. Do you know they are getting a 42″ tv or a scooter. Wow!

  26. 26
    AmazedRenter says:

    My favorite quote from the NWMLS article?
    “In Snohomish County, sales prices climbed from $368,875 to $375,000, a gain of about 4.5 percent. ”

    Realtor(TM) math. 368k to $375k is less than 2% appreciation. Oh how I can’t stand these morons. Thank goodness the bust time has arrived even for Seattle.

  27. 27
    Angie says:

    Tim, thanks for posting the excel sheet and the graphs. Numberlicious!

    Statistics are tricky business and it’s sometimes hard to figure out what is a meaningful comparison. (There’s a reason why stats get lumped in with “lies [and]damn lies”).

    You’re crowing about a drop in pending sales and a rise in listed sales. Percentages are part of the story, but not all of it. I took your MLS data and charted the ratio of pending to listed from Jan 2000 to Aug 07. There’s some jumpiness in the data, but in general it looks like a high of 2.25 listed to pending in summer of 01, to a low of just over 1.0 in spring of 05. Today’s numbers are 1.8 listed/pending—on an upswing from spring of 05, but not off the charts in any way.

    I’m sure this is part of what goes into that “Months of supply” number you cite. That we’ve backed off from the white-hot market of the last few years is not a surprise, and also not an indication that the sky is falling.

    I’d also encourage you to be more careful about your choice of words. The absolute number of sales (2094) is the lowest for any August in that spreadsheet, but not lowest number altogether. Looks to me Aug 07 is about 1/3 of the way down the list when I data sort by number of pending sales from Jan 00 onward.

    By far the most interesting chart up there is the one with Supply and Demand, shown in absolute numbers. Looks like listings always exceed pending sales. What has been happening to “the other half” (the listings that don’t sell) all this time? Stay forever on the market? Give up stick it out in the same house? Put it up for rent? Certainly not all of them foreclose.

    Answering that question probably will give the best clue to what will unfold in the next year.

  28. 28
    The Tim says:

    Angie said,

    The absolute number of sales (2094) is the lowest for any August in that spreadsheet, but not lowest number altogether.

    Whoops. Good call. I worded it that way in my head, but somehow it didn’t make the translation to the print. I’ve updated it to fix the error. Thanks.

  29. 29
    patient says:

    Tim, keep the original wording in a safe place, you will probably need it when next months numbers are in…

  30. 30
    greater context says:

    some of the jump in supply is probably investors trying to time the market.

    any sign of dropping value will probably shake more of them out. any of them that have owned for more than a few years will be able and possibly ready to price aggressively if they expect things to go downhill for a while.

    maybe we’ll be talking about the evils of speculating investors rather than aggressive lenders

  31. 31

    HERE’S A GREAT NEWS STORY FROM THE EAST COAST

    This buffoon mortgage broker bought a $750K home that plummetted to $600K; so the answer? Turn it in to a brothel:

    http://wcbstv.com/topstories/local_story_252232548.html

    Its a real story and very humorous, there’s a video of it too.

  32. 32
    deejayoh says:

    Angie –
    MOS is inventory/pending sales. Right now we are just off the high set shown above in 3Q01. If I recall correctly from Tim’s spreadsheet – we’ve only been over 6 months (rule of thumb for “buyers market”) once or twice in the time period he has covered – so I am not sure how meaningful that is for us. Perhaps we never have a buyers market? Some would say so.

    In terms of listings exceeding sales, you are correct on that one. Safe to say most of the unsold units either languish on the market, reduce price until they sell, or get pulled. Foreclosured units generally are not on the MLS.

    IMO, the change in inventory is the key indicator as to where price goes. I did some analysis a while back showing how changes in inventory correlate to changes in price that was posted here, in case you are interested.

  33. 33
    Greg says:

    So basically, the market is normal now, instead of the craziness of the past few years.
    (at least in Seattle proper)

    In the ‘burbs, however, it look like a buyers market.

    Still waiting for those prices to go down though…hmmm….

  34. 34
    Grivetti says:

    FYI… here’s the numbers for the Hjarta sales office circa June 2006…

    price range

    One bedroom $309,000-$379,000
    …ARM?
    One bedroom with study alcove $325,000-$389,000
    …I/O maybe?
    Large one bedroom $359,000-$399,000
    …yeah, neg-am will get you in the door
    Two bedroom $479,000-$549,000
    … JUMBO-rama!!!

    No wonder that place looks like its falling apart before they even put it together (haven’t seen anyone pound a nail on that thing in months), God help those trying to squirrel out of their contracts, can’t say I blame them.

  35. 35
    Angie says:

    Deejayoh, I remember that—nice stuff. It’s a shame longer-term data isn’t available; I think that would make your conclusion much more robust (or reveal the limits of your approach). A five year dataset and with values experiencing a 1.2 year offset…better than no data, but a limited timeframe for sure.

    I’ve been in Seattle since the early ’90s. I arrived after a big run-up in prices (blamed widely on Californians cashing out equity and migrating north). Prices have been skyward-bound since, whether or not some benchmark or other proclaims that it’s a “buyer’s market”. Fifteen years is a long time to sustain a “seller’s market”!

    In terms of affordability, no, I don’t think it’s been a buyer’s market for quite some time, and (as you all celebrated so roundly of late) I don’t believe it ever will be again. Notably missing in Tim’s entry above is a factoid reported in the Times, that the median SFH price topped $500K in this set of numbers. Damn.

  36. 36
    Angie says:

    Hit the post button too soon–that’s SFH is Seattle. King County is a little lower, but not by much.

  37. 37
    BubbleBuyer says:

    I am right here and no I don’t own in Ballard. I am quite comfortable in my home financed with a fixed 30 year mortgage at 6.2% and 20% down. I am not concerned unless I lose my job and am unable to find an alternative employment opportunity allowing me to make mortgage.

    Good luck on timing the market. Perhaps you will prove the empirical research wrong or luck out by timing it perfectly.

    “Demersus said,

    on September 10th, 2007 at 2:00 pm

    Where BubbleBuyer today? He sounds very familiar, like someone who bought in Ballard.”

  38. 38
    deejayoh says:

    Ah, I’m not giving up on the buyers market yet – I’ve got a steak dinner riding on the C/S index sitting lower in July 2008 than it was in January 2007. But you are right, the last one was probably just before you got here – in 1990-1991.

  39. 39
    Old Ballard says:

    Every now and then, reading this blog is like hitting a dog in your truck then turning around just to watch it die. Hitting the dog was an accident. It couldn’t be help. It happen to fast to do anything to stop it. But you choose to turn around look.

  40. 40
    AndyMiami says:

    OK, even Aspen is now projected to fall. Yes, Seattle is even more special than Aspen…

    “No place will be immune,” said Ken Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California in Berkeley. “Inventory is increasing and the demand side is falling off. The psychology has become negative”… Home prices will decline 5% to 10% from last year’s peak in New York and San Francisco, and by more than that in Washington. Prices in second-home markets, including the Hamptons in New York, and Aspen, Colorado, also may fall, depending on the size of this year’s Wall Street bonuses, he said. Prices may start to drop in the NYC Metro area beginning in the fourth quarter of this year and continue falling 1% to 7% per quarter through 2008, according to estimates from Zandi… “People are adjusting their dream prices back to reality,” said Saatchi. “If they want to sell in this market, they have to drop the price”…

    NEVER IN SUCH A BEAUTIFUL DAY AS TODAY…..

    Keep eating mushrooms Seattleheads………it’s really not a very difficult equation..is it?

  41. 41
    george says:

    Supply soars? Creeps up maybe. Wake me when there’s 7 months supply.

    Meanwhile, 5 percent YOY appreciation in sunny Seattle.

    Question for the investment property owners: do you plan to wait until that drops to 1 or 2 percent? Or goes south? Or get out now?

  42. 42
    John says:

    Angie, so you think a 43% increase in inventory and a 26% decrease in pending sales are good news? Hold onto that median price increase. Because that’s the last thing you’ve got.

  43. 43
    Angie says:

    Deejayoh, I wouldn’t be surprised if you win that bet. Canlis? Though if we have the meltdown some here are predicting, you’ll be lucky if your gambling partner can afford the $6 strip steak at Denny’s. ;)

    Hold onto that median price increase. Because that’s the last thing you’ve got.

    Whoa. Put the antlers away, big fella.

    Those percentages are what they are. Not good if you’re in the RE or mortgage industry, which I’m not. But I don’t take percentages to be the be-all and end-all, ever—there is always a bigger picture. As I said, I don’t take these to mean the sky is falling.

  44. 44
    CKT says:

    Old Ballard-

    I like your analogy, but unfortunately it breaks down because the bubbleheads had nothing to do with this market breaking down, nor running over their own dog. it’s more like this:

    Some fool decides to play with his dog in the street. Someone says, “Hey, that probably isn’t wise. You’re dog could get hit by a truck and killed. Maybe you should do the sensible thing and not play in the street with your dog.”

    But the dog owner is just having too much fun playing with his dog in the street. “There’s just so much room! And tennis ball goes for, like, ever! And have you seen the view at the end of the road? There’s the tip of the Space Needle! This is the bestest, most specialist street in all the land!”

    Other dog owners see just how much fun the original dog owner is having, and soon he is joined by thousands of dog owners, all playing with their dog in the street.

    But little did anyone know that a giant Mac truck from Sub Prime Trucking and Freight was out of control and careening towards all the dogs in the street. The carnage is awful, terrible, “horribile visu”. Everyone feels sad for the dog owners. But everyone is there to watch this unheralded bloodbath; how can you not? And of course the guy who gave the first warning is there to say, “I told you so…”

    But maybe this story would be better if you exchanged the dogs for ponies…

  45. 45
    bob barker says:

    Angie makes this observation which, if it were true, would totally undermine any claim about a bubble market in Seattle:

    “You’re crowing about a drop in pending sales and a rise in listed sales. Percentages are part of the story, but not all of it. I took your MLS data and charted the ratio of pending to listed from Jan 2000 to Aug 07. There’s some jumpiness in the data, but in general it looks like a high of 2.25 listed to pending in summer of 01, to a low of just over 1.0 in spring of 05. Today’s numbers are 1.8 listed/pending—on an upswing from spring of 05, but not off the charts in any way.”

    In fact, she’s completely misread the data. I went back and looked at the spreadsheet, and the only way you can come up with these figures is if you take the ratio of “NEW listings” to “pending sales.” But what would be the point of this? What matters is the ratio between the total number of houses sitting on the market and pending sales, and that figure is currently, as indicated in the original post, at 4.9 months.

    Moreover, I think it’s significant that these figures relate to SFH only. My expectation is that the potential for things to get really bad is even greater in the condo market, where lots of new units are coming on line in the next few months.

  46. 46
    Teacher Greg says:

    So, anyone expecting 11,000 listings tomorrow morning? It is like Christmas Eve….

  47. 47
    SKR says:

    I am a regular reader of this blog and I like the insights you all provide. I was a home owner till recently. I sold my home for a good gain. The reason for sale was not the gain but I needed more space for an expaning family.

    I am in a rental home now but would like to buy a home if possible. The home will not be for investment. I would like to have a place of my own to live and I hope to be there for 8-10 years at least.

    I can put all the gains from the previous home in the bank and continue renting and part of the rent will be paid off by the interest earned on this gain or I can put the gain towards a home and pay mortgaes. I can afford the mortgage. The former makes financial sense but as long as the house prices do not go down more than 30%, I will be okay buying too. I can second guess your advice to some one like me, but still what do you think ?

  48. 48
    The Tim says:

    bob barker said,

    Moreover, I think it’s significant that these figures relate to SFH only. My expectation is that the potential for things to get really bad is even greater in the condo market, where lots of new units are coming on line in the next few months.

    You’ve got a good point, Bob. I will definitely keep an eye on the condo stats, but I choose to stick to the SFH metric since it provides a consistent comparison for the readers. One thing that bugs me about the papers is how they pick and choose which stats to highlight each month. It’s Seattle proper one month, then King County next month, then King/Pierce/Sno the next. It gets confusing.

    Also, the problem with looking at condo inventory and sales is that a lot of it goes on outside the radar of the NWMLS. Most new condo projects only list one of each model on the MLS, and handle all the sales internally, so it’s a lot harder to track. The MLS condo action is almost entirely resales, which of course are going to get interesting in and of themselves.

    I also covered a few other reasons for the lack of condo posts here.

  49. 49
    John says:

    Those percentages are what they are. Not good if you’re in the RE or mortgage industry, which I’m not. But I don’t take percentages to be the be-all and end-all, ever—there is always a bigger picture. As I said, I don’t take these to mean the sky is falling.

    The bigger picture is the Seattle market is looking dicey. You can’t get giddy at the price increase while at the same time ignore the negatives.

    Today WaMu CEO said the housing industry is headed for a near perfect storm. A disaster can be a cumulation of events. Right now, the unemployment is low. I will give you that, but with the job losses in the housing industry, that can change.

  50. 50
    Angie says:

    Bob, thanks for pointing out my error—you’re right, I did mistake the column with numbers of new listings for the total active listings. You get what you pay for. ;)

    But what would be the point of this?

    Well, you could consider that ratio to be a measure of the flux in the market. Number of houses entering the market vs. number leaving. I still think that’s interesting—it’s always higher than one, averaging more like 1.5, so generally one third of of houses that are listed, what, vanish into thin air? Get pulled from the MLS and relisted later at a lower price (thus counted among “new listings”)?

    Even so—I don’t think any of the the data portend the sky falling.

    SKR, congrats on the new addition to your family. My advice would be to sit tight where you are for a while for a couple of reasons. One, if you’ve just had a baby, there’s enough upheaval in your life already. Wait until at least one adult in the family gets a full nights’ sleep most nights, and preferably both adults, before making a big decision like buying a house. Two, who knows how this is going to shake out, why not sit tight and watch for a while? Prices will probably drop somewhat (though my guess is not by >30%). Best of luck to you and your family.

  51. 51
    Snake Plissken says:

    OK, so demand is dropping, inventory is rising, prices are falling… since bubble-heads know everything, and can predict the future with amazin accuracy, what am i supposed to do? Piss my pants and curl up on the floor?

    Or maybe I’ll strap on a pair and keep working and paying my mortgage every month until the darn house is 100% mine. How does that sound for a plan ladies?

  52. 52
    geon says:

    “Or maybe I’ll strap on a pair and keep working and paying my mortgage every month until the darn house is 100% mine. How does that sound for a plan ladies?” — Snake Plissken.

    Sounds like great plan to me—back to reality. How old will you be if you can happen to pay it off? I don’t think paying off your mortgage was part of the equation for most house buyers in these parts for the past five years.

  53. 53
    bitterowner says:

    “Or maybe I’ll strap on a pair and keep working and paying my mortgage every month until the darn house is 100% mine. How does that sound for a plan ladies?”

    debt = testosterone
    common sense is for pussies
    (chest thump)

  54. 54
    Chris says:

    Condo sales are tough to ignore, seeing as there’s over 3000 listings in Seattle alone, and, as The Tim says, these are only resales – there’s another 1000 or so in the completion pipeline in the next year, not including conversions

  55. 55
    Chris says:

    Condo sales are tough to ignore, seeing as there’s over 1300 listings in Seattle alone, and, as The Tim says, these are only resales – there’s another 1000 or so in the completion pipeline in the next year, not including conversions

  56. 56
    Angie says:

    I’ve always thought I had a good measure of common sense, but I didn’t realize it had anything to do with my genitals.

    On second thought, that might explain a thing or two. Like that bit about asking for directions when you’re lost…?

    One of the things that makes the Seattle Bubble so fun to play in is that it’s such a boy’s club. All the dudes being so dudely! A refreshing change from my usual virtual hangouts. And numbers to boot!

    I strap on a pair every morning. Well, it’s more like hoisting them up, but the process has the same apotropaic effect.

    Hey, how ’bout that Weyerhauser news? Looks like the building materials industry is battening down the hatches.

  57. 57
    Sen says:

    SKR,
    Try this lovely NY Times rent vs. buy calculator, which lets you play with various numbers. I think you should rent for a while.

    http://www.nytimes.com/2007/04/10/business/2007_BUYRENT_GRAPHIC.html?ex=1189656000&en=3297558dbd771a23&ei=5070

  58. 58
    Olaf says:

    The fundamentals are lousy, and rational sellers would start to figure out that it makes sense to cut your price NOW rather than incur the costs of keeping your unsold house on the market for six months … or years. But home-owners in this market are completely irrational. I think it’s greed-poisoning to the brain. This week we made an offer on a house that’s been sitting all summer. We offered less than they’re asking, but it would STILL constitute a huge appreciation since they bought it. (They paid $390K in 2004; they WANT $550K. We offered $500K. You’d think they’d take the $110K profit and be glad to unload it even as the market heads into the tank.) But noooo… they’re going to hold out for $550K. So my question to the group: how long will Seattle home-owners cling to their super-appreciation greed (and, more to the point, how long will they cling to their unsold houses?)

  59. 59
    greater context says:

    even the PI is seeing the light

    http://seattlepi.nwsource.com/business/331159_housing11.html

    though, this light may not find its way over to the seperate building reserved for the RE section

  60. 60
    S-Crow says:

    Olaf-

    Curious, was the 50K below strategy suggested by your agent (if you had one).

    Thanks!

  61. 61
    TJ_98370 says:

    The August statistics are almost irrelevant because the real estate market is undergoing a major transition.

    The secondary mortgage market has taken a major hit, which has resulted in tightened lending standards. Many would-be home buyers are now truly priced out of the market and the results of this development are just beginning to be felt and show in the statistics.

    Affordability is the elephant in the living room that cannot be ignored forever. Loose lending standards and easy credit has lead to the real estate boom we have experienced the last few years and many people have bought homes they really cannot afford. Real estate sales financing is a different game now and there will be downward pressure on prices.

  62. 62
    NotaBull says:

    I always thought the “months of supply” statistic was a little bogus when it came to describing a market as a buyers market or a sellers market when it crossed the 6 month point.

    I bought a house in July of 2003 when the market was supposedly at 3 months of supply. It was certainly not a solid sellers market as the statistic would imply. It wasn’t a solid buyers market either. In fact, it felt pretty well balanced to me. There was no particular rush to find a place, and I put an offer in for lower than the sales price and got it accepted. Oh, BTW, they paid closing costs too. That was pretty standard at the time, IIRC. Oh, and I found out near the closing time that the property was entering foreclosure as the sellers had not paid the mortgage in 6 months. They lost jobs and had to move out of state. Hardly a hot sellers market…

    Right now, there are just tons of properties out there and I get an email every day telling me about price reductions of properties on my “watch list”. Yet, the MOS is supposed to indicate a slight sellers market. Nonsense.

    As an aside, in the properties I watch (Issaquah/Sammamish, 400-600K) I am now getting 1-2 price reductions a day on average. This has changed from about .5 a day just a few weeks ago. Hardly scientific, but I’m seeing the asking prices drop significantly. Of course, I’m in jumbo land (other buyers, not me!) and so I imagine that this segment of housing is going to continue to act to compress the market. Interestingly, this is happening at the same time as the first time buyers can’t get 100% loans, so it seems we’re looking at price pressure from the top *and* the bottom of the market.

  63. 63
    betamax says:

    people always start talking about balls when they’re getting screwed.

  64. 64
    John says:

    So my question to the group: how long will Seattle home-owners cling to their super-appreciation greed (and, more to the point, how long will they cling to their unsold houses?)

    As long as they still have a profit, they are not going to capitulate. For those who are in worse shape, they will hand over more of their paychecks and dig into their savings before they give up on their homes. This will take awhile.

  65. 65
    NotaBull says:

    “So my question to the group: how long will Seattle home-owners cling to their super-appreciation greed (and, more to the point, how long will they cling to their unsold houses?)”

    I think it depends on the mix of sellers. Some people just want to cash in, and maybe downsize or move somewhere cheaper. They’re not desperate, and they don’t *need* to sell.

    Others, however, MUST sell. Foreclosure, divorce, death, etc. It is the MUST sell people that are willing to lower prices because they must sell. Those people will drive the prices down.

    In San Diego in 2006, things were obviously looking shaky in the summer. However, sellers were still bullish. Their properties were the best ones, had the corner lots, the granite and so on. The ones that needed to sell (I know of one personally) left their properties on during the winter and got desperate once the spring season came and the want-to-sells also listed their properties.

    In fact, the seller I’m referring to took 9 months and 3-4 price reductions (of about 100K) before the property sold. Each reduction is a “loss” in the mind of the confused seller, even if they’re making tons of money compared to when they bought it. What brings them down faster is the NEED to sell.

  66. 66
    Sen says:

    Olaf,
    It’s a good question. One thing to consider is that it’s not always super-greed that keeps sellers from lowering prices rapidly. Some are selling because of divorce, for example, which can be costly. Also the homeownership might not have been so profitable if a lot of money had to be spent for unexpected repairs. Leaks are a huge problem in Seattle, and because of a loophole some small builders have no construction insurance. So although on paper it looks like there is a big profit, after such expenses plus selling fees, all the monthly mortgage payments and possible home-equity spending, there may not be that much money left. And right now the majority of Seattlites aren’t sure what will happen to the market, what with the Fed making soothing remarks about fed cuts.

  67. 67
    The Almighty says:

    Hi Tim –

    Now that your YOY graph is going into negative territory you’ll want to change where the Month axis is shown.

    If the chart is being done in Excel right-click on the vertical axis, select Format Axis, then change the setting for Category (X) axis Crosses at: to a negative number. In the case of your chart use -35.

    Hope that helps.

  68. 68
    B&W Nikes says:

    “Despite the higher inventories, home prices remain high, as low interest rates and expansion of local businesses continue to fuel demand for housing.” Seattle Times Wednesday, August 12, 1998

  69. 69
    Olaf says:

    Good points, all. We like to think that people go around making decisions based on meticulous cost-benefit analyses, when more often than not it’s all about sheer cussedness. No WAY are they going to sell for less, they say, and no WAY am I going to buy at these inflated prices, I say. And a real estate standoff is born!
    S-Crow, to answer your question, it was MY idea to offer $50K less, not my agent’s. I’d seen the property re-list itself under new MLS numbers over the summer, and I figured the owners might be getting antsy by now. For all I know, their agent never told them about my offer. We did it verbally, just to test the waters, and he rejected it out of hand. If the house sits for another month, I might just call the owners directly to make sure they KNOW our offer’s out there.

  70. 70
    The Tim says:

    Olaf, I wouldn’t be at all surprised if the owners never saw the offer. Consider the attitude displayed in this post by a local real estate “professional.” Apparently making an offer more than 1-2% below asking is considered “ridiculous.”

  71. 71
    Olaf says:

    You’re right. What kills me about this attitude is the concern about “insulting” a seller. It’s business, not courtship! If you don’t like the offer, fine, don’t take it, but don’t start yammering about your feelings!
    Another bright side to this softening market is that buyers no longer have to worry about writing those asinine letters introducing themselves and promising to love the house and making other lovey-dovey overtures. Here’s my money. Take it or leave it.

  72. 72

    […] Supply soars demand drops like a rock […]

  73. 73
    Goldeneye says:

    Looks like, of all of you, only Angie has some sense. I have been sitting on the fence for the last 3 years in Seattle, waiting for the prices to fall, and have paid dearly for it. The house which I did not buy in 2004 for $350K is today worth $650K – way above what I can afford. In 2004 I made the fatal mistake of reading bullshit mags like the Economist etc which were perenially predicting a RE bust. Wish I had done what others had done.

  74. 74
    In Exile says:

    I am with you Golden eye. In June 2003, I read the Economist piece on the housing bubble and didn’t buy the house on Mercer Island–small house–for $350,000. Now it would be over $700,000. We could have sold twice and pocketed the increase. Instead, we rented, and have been so absolutely miserable as tenants.

    We are ready to buy, probably not in Seattle as we can’t wait any longer. Our kids have gone 9 years now as tenants.

    A house is a place to live, not an investment. And we don’t like the attitude of landlords, want a dog, and are sick of telling our kids to be careful of the property because it doesn’t belong to us.

  75. 75
    In Exile says:

    I am with Goldeneye. We decided not to buy in June of 2003 after reading an Economist piece on the housing bubble. We still regret that we didn’t buy the little house on Mercer Island for $350,000 in April of 2003. We could have sold twice over, and that house would now go for $700,000.

    Meanwhile, our kids have been raised as tenants, our stuff in storage. (We had bought in Seattle in 1990, too high, but did it for the dog. Prices stagnated in Seattle until 1997. We went overseas and foolishly sold our house in 1998; we then came back in 2003 to a very different Seattle.)

    Now, we want a dog, are tired of landlords and being tenants. We will move somewhere other than Seattle, which has bad schools, too much congestion, and is not special in the suburbs. We can’t bring ourselves to return to one of the islands–our first house in ’89 was on Bainbridge–as our Seattle friends and family suggest.

    Don’t know how long it will take for prices to come down (Oh, I too get daily notices of price drops from Redfin, but these houses are still pretty grim.), but I fear that if there is a big price drop, we’ll all be hurting because the economy will probably be in recession.

    We just can’t wait much longer as we are getting too old and weary. And we want our kids to have a home of their own before they grow up, and we want a dog. We’ve decided to try not to live our micro lives by macro trends or macro guesses.

  76. 76
    John says:

    ROFL. So many people reading that same Economist article coming out of the woodwork. Want a dog that bad huh?

  77. 77
    Markor says:

    Olaf, put yourself in the seller’s shoes. Few people are going to think “I’m still making 110K after a 50K price cut, so I’ll take the offer”. More likely they’ll be thinking about the money they need for their next house. If they’re relocating in the Seattle area then they aren’t going to take a 50K price cut unless they are confident they can get a similar bargain from another seller. Prices may well tank across the board, but until that’s obviously happening your strategy is unlikely to work.

    I’ve been keeping a close eye on the Eastside market

  78. 78

    […] this story a precursor to next month’s news that sales have continued the historic slide that began with last month’s 26% YOY drop in pending sales. Speaking of which, as was pointed out in the forum by AmazedRenter, according to RE/Max (via USA […]

  79. 79

    […] were higher than every year outside of 2003-2006. Of course, with the tightening mortgage market, sales in August came to a screeching halt, coming in lower than any August since 2001… but we’ll let that slide, since Forbes […]

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