September Reporting Roundup: Let the Games Begin

Okay, the biggest real story this month: plummeting sales, resulting in a record-high “months of supply.” The fake story: dropping median prices—which is most likely at least partly an illusion (so far), which can be largely attributed to… you guessed it: the plummeting sales. Let’s see what the news outlets chose to focus on…

There are just too many good quotes in this month’s articles to keep this post short, so click below to read the whole post.

Elizabeth Rhodes, Seattle Times:
Let the buyer rejoice: Home sales, prices fall

Reflecting mortgage-market turmoil and buyer uncertainty, the median selling price of King County houses has fallen two months in a row. It’s now back to where it was last spring — a sign that prices are softening as the number of for-sale homes continues to build.

King County’s median single-family home price last month was $450,000. That’s less than March’s $457,500 median and almost $32,000 less than this year’s high of $481,750, set in July…

More striking, however, is the pronounced oversupply of for-sale houses. Every month since May, the year-over-year supply has increased 40 percent or more from the same month in 2006.

Meanwhile, sales are lagging. Offers were accepted last month on 1,541 King County houses — a 32 percent drop from the numbers in September 2006. Likewise, the county’s condominium offerings were up (a startling 74.2 percent, including new condos), while pending sales were down 26.7 percent.

Despite this, King County’s prices are up over the past year. House prices were up 5.9 percent last month, and condos up 14.8 percent, compared with a year earlier.

Today’s down market has different dynamics. One factor is house prices that overshot wages, pricing out a significant number of buyers.

Another is the severe turmoil in the mortgage markets, which has locked out buyers with no down payments and spotty credit, and has made it more difficult for those seeking mortgages over the so-called jumbo-loan threshold of $417,000.

The latter issue, in fact, may have played a role in September’s median-price rollback by limiting sales of high-end homes. That would have the effect of lowering the median price.

To her credit, Ms. Rhodes did actually mention the serious slump in sales, and how the change in sales is likely affecting the median price. Of course, the huge drop in sales was given merely a passing mention, while most of the article obsesses over the median price. Pretty much business as usual at the Times.

I think this was my favorite quote from the article, from Windermere agent Paul Stickney:

“I realized there’s way too much inventory, or people are expecting there’s way too much inventory,” the agent said. So he doesn’t blame buyers for taking a wait-and-see approach. Since 2000, home prices have increased far faster than wages.

“Now I think there’s some correction to get those two things back in sync,” Stickney said.

I’m not sure Mr. Stickney realizes what he is implying here. For home prices and wages to get “back in sync,” there’s going to be a lot more price reductions than we’ve seen so far…

Aubrey Cohen, Seattle P-I:
Seattle home prices slip from last year

The median price of homes in Seattle dropped last month from a year earlier for the first time since at least 2002, according to statistics released Friday by the Northwest Multiple Listing Service.

It’s just a $50 dip — 0.01 percent — to $399,950, but the numbers here finally follow the trend of the national real estate market, which has been slowing for months.

One month of lower prices doesn’t mean much, said Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University.

“I think it is suggestive that there is some real softness in the (Seattle) market,” he said. “But at the same time, I think we’ve got a more resilient housing market than in many parts of the country.”

Matthew Gardner, a Seattle land-use economist who works with developers, does not put much weight on the Seattle median-home price, particularly because it excludes most sales of new condos, he said Friday.

Real estate professionals said some potential buyers are jittery, while some sellers have unrealistic expectations for prices.

“I think the media has kind of scared them,” said Kari Scott, an agent with John L. Scott Real Estate, referring to stories about the slowing market, particularly nationally.

Patrick Klimczyk, who moved to Seattle from the Skagit Valley six weeks ago, said he worries that he might buy just before prices start dropping, or that prices could continue to climb out of his reach if he waits.

“It’s a crapshoot,” he said.

Klimczyk said he put in offers below asking price on two homes in the past month.

“The owners would not accept my offers or meet me halfway,” he said, adding that they subsequently lowered their prices, by which time he had lost interest.

Yeah, “the media” has scared buyers out of the housing market. That’s the ticket. Not the actual reality of a slowing market, and declining prices… the media. Also I love how suddenly when the median starts declining, Crellin and Gardner jump on the “the median is meaningless” bandwagon. Welcome aboard boys. Enjoy the ride down.

Devona Wells, Tacoma News Tribune:
Home prices take rare tumble

Pierce County home prices dropped in September for the first time in years – the only Puget Sound-area county to see such a decline – as sales activity continued to ramp down.

The median home price, including houses and condominiums, declined 2.4 percent year-over-year, from $276,670 in September 2006 to $269,925 last month, according to figures released Friday by the Northwest Multiple Listing Service. Median means half sold for more and half for less.

Historical data show monthly Pierce County price increases since at least November 2003.

Sales activity also lagged, with 40.5 percent fewer homes sold in September compared to the same month last year.

The price drop and sales slowdown accompany a growing array of incentives for buyers and their agents, including cars, discounted closing costs and furniture shopping sprees.

Agents on Friday, however, largely portrayed Pierce County’s one-month price decline as more anomaly than trend and what’s to be expected in a market normalizing after the boom years of 2004 and 2005.

Ms. Wells did a fairly good job of simply reporting the not-so-pleasant facts about Pierce County’s market. I kind of like the way she presents the stark data, then discusses the denial that agents are experiencing. “Normalizing.” Heh.

Mike Benbow, Everett Herald:
Home sales down 31 percent in Snohomish County

A day after Forbes magazine declared the housing market in the Seattle area the most stable in the nation, local statistics showed that home sales in Snohomish County had dropped 31 percent from a year ago.

Is there a conflict here?

No, say the magazine and local housing officials.

“It looks like the market has kind of taken a deep breath and just corrected itself a little bit,” said Nathan Gorton of the Snohomish County Camano Board of Realtors.

As for price appreciation over the past year, Gorton said 4 percent is nothing to sneeze at. “I’m fine with 4 percent,” he said. “I hope to see single digits right now. It’s a good time to be a buyer right now.”

Gorton was glad to see the Forbes piece because he thinks there’s a lot of confusion of the local market because of all the national stories about a mortgage meltdown in much of the country.

“I talk to a lot of buyers’ agents whose customers are saying they just want to sit back right now because they don’t think it’s a good time to buy a home,” he said. “They think, ‘Oh my gosh, the market is falling apart.’ Nothing could be further from the truth.”

Oh, I don’t know. I can come up with something that’s further from the truth… how about “it’s a good time to be a buyer right now.”

The little blurb is all I could locate from the Olympian. If anyone has a link to the usual full write-up, let me know and I’ll add it.

It will be interesting to watch the increasingly ridiculous gyrations of local real estate salespeople as the market continues its downward path, and they come up with more and more outrageous statements that fly in the face of reality. It looks like the bubble deflation show has finally rolled into town.

(Elizabeth Rhodes, Seattle Times, 10.05.2007)
(Elizabeth Rhodes, Seattle Times, 10.06.2007)
(Aubrey Cohen, Seattle P-I, 10.05.2007)
(Devona Wells, Tacoma News Tribune, 10.06.2007)
(Mike Benbow, Everett Herald, 10.06.2007)
(Rolf Boone, Olympian, 10.05.2007)

0.00 avg. rating (0% score) - 0 votes

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.

26 comments:

  1. 1
    deejayoh says:

    As for price appreciation over the past year, Gorton said 4 percent is nothing to sneeze at. “I’m fine with 4 percent,” he said. “I hope to see single digits right now. It’s a good time to be a buyer right now.”

    In a couple months he’ll be saying “I’d have been fine with 4%, if it could have stayed there”

  2. 2
    Matthew says:

    The trolls on this site will be few are far between from this point on. My predictions look to be coming true, negative YOY appreciation in the fall-winter. Enjoy the ride down everyone!

  3. 3
    Disbelief says:

    “The trolls on this site will be few are far between from this point on”

    hmm, maybe just the opposite for a while as some people now forced to “face the music” will be venting their frustrations instead of owning up to their mistake.

  4. 4
    Affluent Bitter Renter says:

    “The trolls on this site will be few are far between from this point on.”

    We’ll see when http://seattlemetrorealestate.blogspot.com/ shuts down.

    The header of that blog:
    “SEATTLEBUBBLE?
    THIS IS A FORUM FOR POSTING ACTUAL FACTS ABOUT THE SEATTLE AREA REAL ESTATE MARKET. IT IS DESIGNED TO COUNTERBALANCE THE HYSTERIA AND HYPE FOUND ON SEATTLEBUBBLE.BLOGSPOT.COM WITH ACTUAL FACTS”

    Some prior posts on that blog:

    “Seattle Bubble Believers frustrated yet again”
    “December was another bust for Seattle bubble-belivers (sic)”

  5. 5
    Dr Doom says:

    The Tim:

    This blog is excellent.

    I am down south in Sacramento (close to the epicenter of the house market collapse). I have been working on models to predict house prices locally and downloaded your Seattle data to cross check the modeling I have done. Today I came back and dug through the past postings and would like to reopen the very exciting July 8, 2007 post called Mythical Equity Locust from deejayoh. It is a great post.

    What I have to add is that the strongest price correlation to inventory is seen by using the monthly absorption rate. I use the OFHEO price data which is a Case-Shiller method. Absorption is the inventory level divided by the monthly sales.

    In Seattle the correlation is 83% (R Squared = .833) with a 1% change in absorption resulting in a .44% change in OFHEO house price.

    In Sacramento the correlation OFHEO to absorption rate is 86% with a 1% change in absorption resulting in a .42% change in OFHEO price.

    In both cases the data indicates a 9 month delay between absorption rate and the price change. Monthly absorption rate is the reciprocal of months of inventory.

    The OFHEO data shows a clear price bubble in Sacramento that peaked the first quarter of 2005. Seatlle bubble is not as large as Sacramento and is delayed by a year. Both data sets imply the issue is simply inventory levels and a speculative market collapsing. I suspect what is migrating is money and an attitude in addition to the people.

    Is this interesting to you? Or can you point me to any other analysis? I am trying to find the best predictors of the future market. Absorption predicts price. What are the leading indicators for absorption?

  6. 6
    Dr Doom says:

    Correction:

    The Absorption Rate is the monthly sales divided by the inventory level not the other way around as was typed. Absorption rate is the reciprocal of months of inventory. Sacramento currently is at a 9% monthly absorption rate or about 11 months of inventory. Seattle was at a 30% absorption in June 07.

  7. 7
    rose-colored-coolaid says:

    “The trolls on this site will be few are far between from this point on”

    Expect to see a few more for a while at least. Here’s how it will play out.

    1) Real estate worker has no job, stumbles on blog, is angry ‘we are ruining his/her job’, and becomes new troll.

    2) Said troll runs out of money, has to troll at public library : troll rates decrease.

    3) Trolls lose homes to foreclosure and are too busy to troll : trolls gone.

  8. 8
    James says:

    “Oh, I don’t know. I can come up with something that’s further from the truth… how about “it’s a good time to be a buyer right now.”

    Yes that’s very very far from the truth. Don’t get sucked in people. This is definitely NOT a good time to be a buyer. The market psychology is only in the beginning phase of its change.

  9. 9
    RE Agent Deluxe says:

    Wow….sure ALOT of experts around here.

  10. 10
    MrRational says:

    Dr. Doom,

    The OFHEO data also shows that we’ve been through this before with much larger appreciation:
    http://seattlebubble.com/forum/viewtopic.php?t=703&highlight=

  11. 11
    Believer in Reality not Realty says:

    No, Seattle is not immune from reality and yes, what is happening across much of the rest of the county can and is starting to happen here. Here is the proof.

    I am currently a renter in Kenmore. There are four new single family housing developments on my street, plus several new in-fill homes. The signs for the one of the tracks have been advertising all summer that they are “Value Priced in the $600’s”. Well, I just noticed yesterday that they are now “Value Priced in the $500’s”. In addition, all summer very little work was being done at any of the developments and this was during the best weather of the year. Then in September, as the bad weather set in, the pace of construction took off like a rocket. Even though there may be other reasons, it seems like more than just a coincidence that this happened right after the credit and lending meltdown in August. Are developers starting to panic here now too?

  12. 12
    LeftOverpricedSeattle says:

    Anyone take a look at Gary and Debbie Metter’s home in Bothell from Liz’s article?

    Their agent seriously wonders why the home hasn’t sold yet?

    http://tinyurl.com/2k38ma

    I can think of a thousand and one reasons why it is STILL overpriced at $629,950.

    How I wish KC still allowed people to review DOT’s on the Recorder’s website because I would LOVE to see how much their current mortgages are.

    They should try to get $500K for it and RUN!

  13. 13
    curioser says:

    RE Agent Deluxe…

    Nobody said they are experts here, nor is it required. How did Bob Dylan say it, “You don’t need to be a weather man to know which way the wind blows?”

    Seems experts are often used to confuse things anyways.

  14. 14
    old timer says:

    @ LeftOverpricedSeattle

    Gee, I AM old. $630K and the third bath is only plumbed?
    And, are those chairs in the front yard the ‘courtyard patio’?

    No bubble here, please keep on walikng…..

  15. 15
    deejayoh says:

    Anyone take a look at Gary and Debbie Metter’s home in Bothell from Liz’s article?

    Their agent seriously wonders why the home hasn’t sold yet?

    They should call that place “wall paper world”. ugh. Looks like my grandma just moved out.

  16. 16
    Alan says:

    They should call that place “wall paper world”. ugh. Looks like my grandma just moved out.

    Much of the house has a funky wallpaper where they took regular wallpaper, ripped it into pieces, then glued it to the walls. I didn’t like it at all. The kitchen is also a little dated.

    However, I would rather buy a home with old, dated stuff that I can replace with what I choose rather than pay a huge markup on what someone else thinks will raise the home value.

    It is a very nice house. I’d estimate its value around $420k in a normal market.

  17. 17
    confused says:

    Gary and Debra Metter that live at 10906 NE 197th St bought that place in 02/2001 for 355k and financed the whole amount. They refinanced in 03 for 346k adn then in 05 took out a 138k 2nd from etrade. So currently their loan balance is 484k. That would be $2900 a month on a 30 yr fixed rate at 6% which you cannot get anymore, jumbos are 7%.

  18. 18
    LeftOverpricedSeattle says:

    However, I would rather buy a home with old, dated stuff that I can replace with what I choose rather than pay a huge markup on what someone else thinks will raise the home value.

    I know exactly what you mean. I bought a home in a non-bubble market and have spent several weeks removing wallpaper from every room in the house. Thankfully, plaster walls can take a steamer so we made short work of it.

    Of course, homes built in the 20’s and 30’s where I now live are well under $200K for ones in livable condition with no major issues. Seattle may be nice, but it’s not THAT nice, regardless of what the shills and agents may try to tell you.

  19. 19
    george says:

    Nice roundup.

    Notice Matthew Gardner in the PI is quoted as “a Seattle land-use economist who works with developers.” Is that the first time?

    Seems like a very smart guy, but I’m happy to see his professional role identified correctly in one of the two newspapers.

  20. 20
    what goes up comes down says:

    “Gary and Debra Metter that live at 10906 NE 197th St ” better take the suggestion of 500K or in this market they are soon to get screwed, in a nutshell these people are a perfect example of how this bubble will end up destroying some people. Who in their right mind would pull out that type of cash?

    The people who think the economy is not in a risky state better start understanding it was people doing this kind of stuff that kept things going. It was not wage growth it was people using their houses as ATMs. Yikes!!!

  21. 21
    notabull says:

    I don’t think it’s a good idea to be posting full names and addresses on a public blog, even if the information is public record. I know people have different opinions on this, and this is just my opinion on the matter.

  22. 22
    Truth says:

    Great site! I really enjoy the content.

    A recent article stated that three economists conducted a study that concluded using a realtor vs. for sale by owner (fsbo) did not increase the sales price of a house. If that is true, then I would guess in a slowing housing market people would increasingly sell their house by fsbo (since the owners would try to save the 6% commission).

    Have you guys seen any research on whether fsbo listings increase or decrease during a housing slow down? If fsbo listings increase/decrease as a percent of mls listings, then the mls listings would either be understated or overstated.

    Thanks.

  23. 23
    confused flippergirl says:

    Glad I found you all, I am not alone! Just wanting to be fair and competitive as I seller, and my pricing thoughts are changing DAILY. Who knows which way it’s heading? I am just a designer that will be more conservative going forward but, not throwing in towel.
    I love giving people beautiful homes and I think Seattle will stay a very desirable place to live!! I also do rentals and lot’s of new people moving here DAILY. No slow down there. Those people eventually will want to buy.

    I am commited to staying positive and fair! But what is fair anymore??? Urggg.

    PS.I agree, should not post names and addresses of people on blogs without permisson. Maybe names have been changed.

  24. 24
    what goes up comes down says:

    confused flippergirl — now that is an appropriate name if I ever saw one.

  25. 25

    […] you thought last month’s reporting was fun, just wait till you get a load of the goomy tone of the latest wave of […]

  26. 26

    […] is falling apart.’ Nothing could be further from the truth.”For comparison, here were my comments about these stories at the time:It will be interesting to watch the increasingly ridiculous gyrations of local real estate […]

Leave a Reply

Use your email address to sign up with Gravatar for a custom avatar.
Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <s> <strike> <strong>

Please read the rules before posting a comment.