NYT: “Even the Strong Are Weakening”

The Seattle-area housing market gets some national attention in an article in today’s New York Times:

While Wall Street is growing hopeful that the economy might dodge a recession, many economists warn that the pain in the housing market may last for several years. Even local markets like Seattle, which once seemed immune to the slump, are weakening. Prices nationwide might fall as much as another 10 percent before a turnaround takes hold, economists said.

In Seattle, where housing had held up better than much of the rest of the country in the last two years, home sales have slowed sharply. Sales in King County, which includes Seattle, fell more than 33 percent in April from the same month a year earlier while the number of homes for sales is up 55 percent. Prices of single-family homes have fallen about 6.5 percent from their peak in July 2007 to February, according to the Standard & Poor’s Case-Shiller index.

[Tukwila resident Dennis] Humphrey, who works in the home improvement division of Sears, has made offers on two homes but the sellers have refused to negotiate with him. He is willing to spend up to $300,000 and has enough money to put 20 percent down, but Mr. Humphrey said he is afraid to buy right now because he is worried prices are going to fall further and could wipe out any money he puts into a home.

“I am not afraid of the monthly mortgage payment, and I am not afraid of taxes, but I am afraid of losing the value I am putting in,” he said, adding that a friend recently bought a home near San Francisco that has fallen in value by $70,000.

“I believe the right deal will come along,” he added. “And I am in no rush.”

I think a lot of potential buyers in the Seattle area are like Mr. Humphrey: not in a rush, despite the frenzied claims of many local real estate agents and organizations that the time to buy is now, now, now.

This piece marks quite a turnaround from the “wow, look how immune Seattle is” kind of stories we were seeing in the national press as recently as midway through last year.

(Vikas Bajaj, New York Times, 05.28.2008)

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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.

11 comments:

  1. 1
    Gill says:

    And for the long-time “it’s better to rent” argument, check out this take:

    http://www.nytimes.com/2008/05/28/business/28leonhardt.html?hp

  2. 2
    biliruben says:

    I think the loose lending basically borrowed a good portion of those Seattle buyers who would have bought in 2008-10, and squeezed them into a house now.

    The downside is that a portion of those who could have reasonably afforded a home had they waited and saved up instead of buying an over-priced house earlier than was fiscally prudent, won’t keep there homes, and will be soured on homeownership for a long, long time. This will end up leading to a net-loss of homeowners in the long-term.

  3. 3
    TheHulk says:

    Meanwhile in other news, the NAR has been dealt a significant blow by the DOJ. Internet realtors like redfin and zillow can no longer be discriminated against. Now, these sites can compete against the likes of johnlscott or windermere on a more equal footing.
    http://www.networkworld.com/community/node/28143

    Now maybe we will see that horrible 6% commission come down to something like 3%.

  4. 4
    Gill says:

    Tried to post a link earlier twice but it didn’t take —

    There’s also another article in the same NYT about a long-time “renting is better” advocate changing their mind recently after a move to Washington.

    Just FYI, it’s on the cover of today’s Times.

  5. 5
    The Tim says:

    Sorry Gill, for some reason your earlier comment went into the spam bin. I have pulled it back out, as you can see @ #1 above.

  6. 6
    gill says:

    whoops! sorry for the double post!

  7. 7
    David McManus says:

    “TheHulk // May 27, 2008 at 4:44 pm

    Meanwhile in other news, the NAR has been dealt a significant blow by the DOJ. Internet realtors like redfin and zillow can no longer be discriminated against. Now, these sites can compete against the likes of johnlscott or windermere on a more equal footing.
    http://www.networkworld.com/community/node/28143

    Now maybe we will see that horrible 6% commission come down to something like 3%.”

    This was Slashdotted as well. Sounds like good news to me. We’ll see what actually happens.

    http://news.slashdot.org/article.pl?sid=08/05/27/2044207&from=rss

  8. 8
    TJ_98370 says:

    Hello Gill,

    A key phrase in your linked article –

    ….I’m still not sure how good our timing was. Based on the backlog of houses on the market, I fully expect that our new house will be worth less in six months than it is today…..

    The author admits knowledge of the risk of depreciation and considering other factors he still decides to buy. Good for him. He made an informed decision.

  9. 9

    […] that the Seattle housing market is cooling, it will be interesting to see what becomes of the BMW site, especially in light of the stalled […]

  10. 10
    vboring says:

    is that the same NYT article with the graphic saying that the historic buy/rent price ratio was 10-14. and now it is about 17.9 in Seattle?

    essentially, the idea is that if you’d pay $1k to rent it. you should expect to pay $1k*12(months)*ratio to buy it.

    so, if you are looking to buy a place for $400k, you may want to ask yourself if someone would rent it from you for $2400/mo (using the 14x buy/rent ratio).

  11. 11
    K.M. says:

    It is a well known fact in the real estate industry that the Pacific Northwest, and the Seattle area in particular, is always a year or two behind the national market. Prices here started inflating a couple years after the rest of the country, and now they are deflating a couple years after the rest of the country. This shouldn’t be a surprise to anyone.

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