2007 Revisited
It’s that time of the year again. As the calendar rolls over, the real estate predictions start rolling in. But before we get to the predictions for 2008, let’s look back at 2007.
My own guesses as well as predictions from most of the frequently-quoted local real estate insiders were covered in this post from last January, save for Steve Tytler, whose predictions are covered here. Let’s see how we all did.
The Contenders:
- Bill Riss, chief executive of Coldwell Banker Bain
- Randy Bannecker, consultant housing specialist for the Seattle-King County Association of Realtors
- Glenn Crellin, director of the Washington Center for Real Estate Research
- Matthew Gardner, local land-use economist
- Steve Tytler, owner, Best Mortgage
- Tim Ellis, editor-in-chief, Seattle Bubble
You can go back to the post to see the full context of all of our predictions. However, for this post, I have condensed everyone’s predictions into a convenient table format for your convenience:
| Riss | Bannecker | Crellin | Gardner | Tytler | Ellis | King Co. SFH | |
|---|---|---|---|---|---|---|---|
| Listings: | – | – | – | – | >0% | >15% | +51% |
| Sales: | 0% | – | <0% | <0% | <0% | <-5 to -10% | -14.5% |
| Prices: | +10% | +6 to 10% | +3 to 5% | +5 to 9% | <=0% | -5% to +3% | -1.14% |
And the person whose predictions most closely matched the 2007 outcome was… Tim Ellis of Seattle Bubble! Steve Tytler gets the honor of being the only other person to be at all accurate, with his generic prediction of a “big increase” in inventory and a general reduction of buyers.
Note that the final reported median price change was almost exactly in the middle of my estimated range of -5% to +3%. And although my inventory and sales forecasts were the closest of the bunch, reality was unbelievably even more extreme than my predictions. So I either got pretty darn lucky, or after one year of following the market in my spare time, I had a better sense of where it was headed than the majority of those whose very livelihood is the market.
2008 Prognosticated
So that brings us to the 2008 forecast. First up, let’s check out what some of the same local real estate insiders are guessing this year:
Year-to-year drops should continue “for a little while,” said Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University. “I think that the next several months are still going to be challenging, but it’s a little hard to tell,” he said, adding that he also expects interest rates to increase during most of the year, potentially wiping out any savings gained by waiting.
Glenn also made some more specific predictions for the Pierce County market in a Q&A with the Tacoma News Tribune.
For 2008, Gardner is predicting anywhere from zero appreciation to home prices falling as much as 5 percent. “Do I think we’re going to see pain next year? Yes, I do. If there’s some glimmer of hope, it’s the fact we didn’t get terribly overbuilt because of the expense of land,” Gardner says.
I expect home prices to drop about 10 percent to 20 percent over the next year or so, and then the housing market will flatten out with very little appreciation or depreciation for a few years.
Conway anticipates average Puget Sound-region home prices will decline less than 1 percent next year, and sales will be down about 5 percent, before rebounding in 2008. “Given that we had a pretty good run-up in prices, some downward adjustment shouldn’t be surprising,” he says.
It would appear that after being so off base with last year’s optimistic forecasts, most of this year’s predictions are a bit more down to earth. The general concensus seems to be price declines of up to five percent. As with last year, Mr. Tytler is the most bearish of the bunch, and will probably be the most accurate as well.
The Tim’s Predictions
Personally, I’m expecting to see a continued surge in inventory, with year-over-year increases between 10% and 25% throughout much of the year. As prices stagnate and drop, the number of “must-sell” homes will only increase. Furthermore, when public sentiment shifts from “buy now or be priced out forever” to “sell now or be stuck there forever,” listings will continue to increase further.
Sales will probably continue their slide as lending standards continue to tighten (regardless of which direction interest rates go). I would guess that sales will be down at least 5% to 15%. Think of it this way: The record sales that we saw in 2005 and 2006 were basically just the housing market borrowing sales from the future. Well, the future is here, and the debt must be repaid.
I do not expect prices to drop like a rock, but I think that 5% is the minimum drop we’ll see in the median, not the maximum. I’d put the range at -5% to -10%.
So there you have it. Your doom and gloom for 2008. I may be way off base, but at least I’m willing to stick my neck out there and give it a guess. I have yet to see any signs that the market is “bottoming out” or at any kind of turning point. 2007 was the turning point, and we’re pretty plainly headed down into 2008. I don’t expect this mess to work itself out before the year is out.
What say you, the readers?