June Neighborhoods Months of Supply Update

Here’s the latest update on months of supply, or “absorption rates” for the 30 NWMLS areas in King County. For an explanation of what months of supply means, please refer to the original neighborhood MOS breakdown post. I apologize for the tardiness, I was hoping to have the color-coded map ready by this month’s update, but no luck. You can still see a good map of these areas here though.

Remember: Over 6 MOS is a buyer’s market, which gives buyers more negotiating power, but doesn’t mean homes are priced attractively for buyers or that it’s a good time to buy. Before this year, the longest that King County as a whole has sustained a MOS above 6 was 4-5 months in the winter of 1994-1995. June MOS for King County came in at 6.04 (compared to 3.50 for June 2007), bringing the current run to ten months.

In the graphs below, you’re looking at the MOS for the “Res Only” data from the NWMLS King County Breakout pdfs for the eleven-month period of July 2007 through June 2008. The bar graph is centered vertically on 6.0 MOS, so that it is easier to visually tell the difference between a seller’s and buyer’s market (i.e. – shorter bars mean a more balanced market). Each graph again has the same scale on the vertical axis and has the King County aggregate figure plotted in red on the far right, so they can be easily compared.

Note: Area 100 MOS was over 21 in January, and has been clipped.

KC SFH MOS: SW King
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KC SFH MOS: SE King
Click to enlarge

Note: For Area 701 (Downtown Seattle) we’re using condo data.

KC SFH MOS: Seattle
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KC SFH MOS: N King
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KC SFH MOS: Eastside
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Outside of the Seattle city limits, only areas 720 (Lake Forest Park / Kenmore) and 530 (East Bellevue) were seller’s markets. Within the city of Seattle, only three of eight areas were buyer’s markets: 385 (Beacon Hill), 700 (Queen Anne / Magnolia), and 701 (Downtown Condos). Last month six neighborhoods in King County were below 6.0 MOS. This month there were seven.

The cumulative MOS for Seattle proper dropped from 5.2 in May to 4.6 in June, up from 2.6 in June 2007. The Eastside also saw overall MOS drop, but stayed in buyer’s market territory with 6.5 MOS.

Here’s the bonus graph, which lets you directly compare each area’s MOS to its value one year ago. June 2007 is in red, and 2008 is in blue.

KC SFH MOS: Eastside
Click to enlarge

Yet again, every area was more of a buyer’s market in June than it was at this time last year, with MOS doubling in many regions.

The three toughest markets for sellers were Enumclaw (300) at 10.79, Medina / Clyde Hill / W. Bellevue (520) at 10.57, and Vashon Island (800) at 8.92. 520 is now in its tenth straight month of 10+ MOS.

The three best markets for sellers as of last month were Ballard/Greenlake/Greenwood (705) at 3.17, North Seattle (710) at 3.32, and East Bellevue (530) at 4.31.

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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.

46 comments:

  1. 1
    budbrad says:

    I think the supply numbers are artificially low, since agents have been telling people to take their homes off the markets in recent months.

  2. 2
    rentalbliss says:

    The areas I am watching in Snohomish county nothing is being added but nothing is selling or going pending either. I track through redfin and most are being pulled off market without going pending.

  3. 3
    Ray Pepper says:

    I track 98406,98407, 98332, and 98335 virtually daily. GOOD LORD! Nevada markets are moving more product then here in the NW. Why? Its obvious. Prices have come down 30-50%. My analysis: More and More Gems coming in 2009!

    Keep your powder dry!

    Ray Pepper
    Broker
    http://www.500Realty.net

  4. 4
    Buceri says:

    As we have discussed earlier this summer, we are reaching the point where the “I feel like moving” are pulling the listings, leaving the “I have to move out of the region for work” by themselves. Of course, I am generalizing; but it is obvious people are rethinking the upgrading.

    With a steady job situation, inventory should not grow much more. Maybe 14000 by fall.

  5. 5
    deejayoh says:

    Buceri – I think you are on the mark with your inventory projection. I have been saying this for a while. Inventory is going to stop growing – but the percentage of “must sell” is going to increase even as it may start to decline. That is when we will start to see prices fall. If you look at other markets you will see this. The most rapid price declines occur after inventory tops out.

  6. 6
    jon says:

    As the price drops, naturally the number of people willing to sell at that level will fall also. Looking at Miami (San Diego is so seasonal it is harder to tell), it seems that the acceleration downward in price began slightly before the inventory topped out. Why would a fall in inventory cause the price to fall?

    If the price in Seattle fell, that would cause supply to drop because more people would drop out of the market. With prices relatively stable in near the job cores, there is no reason to leave the market and so inventory just keeps building along with sales. With only 6 MOS still there is no real downward pressure, except in farther out areas. Sales have been going up so far this year, so we won’t see prices go down unless that changes.

  7. 7
    Jonny says:

    Don’t know if agents advising people to take their house off the market is having any real effect, but it seems to me that this could really backfire later. Instead of a controlled steady decline, we could end up with something more like a panic.

  8. 8
    Jonny says:

    “As the price drops, naturally the number of people willing to sell at that level will fall also”

    right, this is true until some kind of tipping point (in human psychology) is reached, at which point people become more willing to sell for whatever they can get because all they can see in the future are further declines.

  9. 9
    EconE says:

    If agents are advising people to pull their homes off the market they certainly don’t seem to practice what they preach from what I can see when I look at who is selling what.

    Maybe the agents just don’t want the competition from their clients and would rather sell their flips than sell a clients house for a piddly 6%.

    Funny what you see when you look really closely.

  10. 10
    Buceri says:

    Jon – Miami is an animal all by itself; it has a ton of crooks, a ton of summer homes foreign owned, and no jobs. Nobody knows when the market will bottom out there. Some condo buildings are showing 40-50% foreclosures. The whole place is a mess.

  11. 11
    patient says:

    There could also be a fair amount of seller that stubbornly held on to the listing price with no offers that understands that they need another strategy. That could be to de-list for a couple of months while doing some of the fixes that their agent and/or buyers have suggested/requested and come back “fresh” with a more attractive listing and a strategy to lower the price quickly and aggressively before the listing goes stale. Somewhat dangerous in this market but it in some cases it might be more effective than to chase the market after the listing has gone stale. I personally know two people who are going to try just this.

  12. 12
    jon says:

    I certainly agree that Miami is a peculiar case. I was just quickly looking around for a case with a clear peak in inventory so I could see where the big price change was relative to that. If there is a better example somewhere else, I didn’t find it. I remain dubious that a drop in inventory will be a leading indicator for a drop in price.

  13. 13
    Tozour says:

    Is there anyway to track houses that come onto the market and then get pulled off?

  14. 14
    david losh says:

    The absorption rate is a false statistic. The first thing you learn as a seasoned agent is that every property is for sale. People may tell you no but if you offer the right price or terms most people will sell. In that regard every property is supply.
    There again buyers are looking for a certain thing, each one different. Every one is buyer for the proper price and/or terms. You all here are buyers if the price is right. It’s always the same.
    Second is that the value of Real Estate never changes. Values set by different entities may be different but the core value as shelter is tied to the ability of the consumer to afford it. Whether your rent or own people need housing units.
    Any projections concerning supply and demand have to be based on actual supply. We have increased supply in reality by thousands or maybe millions of housing units. We just had a housing boom.
    Demand for those housing units seems to be pretty good. So let’s talk about price. What will consumers pay for those housing units? After all a property is worth what ever some one will pay for it. How much would you pay? Probably less than you would a year ago, maybe more than you would next year, but the price is always negotiable between a buyer and seller.
    My question is why buyers are still paying too much for properties today. Are real estate agents really that good at selling people over inflated prices, or is the public uninformed about core housing values?

  15. 15
    Greg Perry says:

    Historically, from the supply side, it is not unusual at all for inventory to level out and start dropping in June and July and continue dropping through the remainder of the year.

    From the demand side for SFH, every month in 2008 has seen increased Pendings from the previous month.

    This is not normal.

    Normally, we would see increased Pendings in the spring months with fewer in June and July.

    Measured by absorption, KC SFH since Feb have remained almost flat @ 6.7,6.8.6.7 and 7.0 until June which came in @6.3.

    BTW, last week was a good sales week for both Seattle and the Eastside with increases in Pendings in most areas from previous weeks

    We’ll see in a few days whether overall Pendings continued to increase MOM and if inventory continues to absorb in the month of July.

  16. 16
    Greg Perry says:

    David Losh,
    “The absorption rate is a false statistic.”

    You could not be more incorrect.

  17. 17
    Cheapseats says:

    “You could not be more incorrect.”

    You underestimate him!

  18. 18
    biliruben says:

    Statistics don’t kill people, Realtor’s kill people.

    David Losh for President!

  19. 19
    TJ_98370 says:

    Cheapseats –

    I think it’s “You misunderestimate him!”

  20. 20
    a person says:

    it would be tricky to track, but i’ve noticed more people using agents to rent properties, and as well, i’ve seen a goodly fraction (20-30% based on driving around) of homes pulled off the market put up for rent at ridiculous prices (generally set at a rental rate close to the presumed mortgage, heh).

    considerig that a mere 2 years ago, i was told by numerous people that rental agents basically didn’t exist here, that shift, however small in my little neighborhood is a major change.

    also, the people with 4-5k mortgages asking 3500 for a 3bd/2ba house mask the severity of the situation. they can’t sell, and so they are actually expecting to rent out at 50-100% of current home rental prices. i go by some of these places and darn near burst out laughing.

    but as far as tracking it, since much of this is signs put out, it is harder to quantify how many pulled overpriced homes are now being offered as wildly overpriced rentals. would be an interesting pool of data, if it could be tracked, though. maybe via craigslist.

  21. 21
    deejayoh says:

    Cheapseats, I believe the correct term is “misunderestimate”

  22. 22
    deejayoh says:

    grr. tj beat me to it. refresh. refresh

  23. 23
    TJ_98370 says:

    It’s okay DJO. There are enough Bushisms for everyone.

  24. 24
    david losh says:

    My question is why people are still paying over inflated prices for housing units? I agree there are pendings, some good, some ridiculous, it’s all over the board. As far as absorbtion, look at the number of Real Estate professionals who have thier houses on the market. They know this is the last gasp. Lot’s of inflated inventory numbers.
    About those rents; sure as shooting rents have edged up, I heard as much as 23%. Last gasp, Lease Options, declining Real Estate property values, rents will have to be lower due to all those worthless housing units that were created by the master Builders Association and sold by the REALTORS who didn’t know the difference between housing units and Real Estate. Real Estate is dirt.

  25. 25
    Alan says:

    Hmmm… the inventory tracker just corrected downwards 678.

  26. 26
    Rentersarelosers says:

    Alan,

    Wazzamatter? nervous?

  27. 27
    Scotsman says:

    “My question is why people are still paying over inflated prices for housing units? ”

    Ummm, because they’re stupid? Well, to be fair, let’s say they’re uninformed, make more money than they know what to do with, are pressured by their spouse/friends/parents, etc. And don’t forget the tax deduction!

    Seriously, prices are down, interest rates are likely to go up, there’s a huge selection, it’s a buyer’s market, the housing bill will be driving prices up soon, etc. Buy now or be priced out forever!! Cripes, Davis, what kind of a Realtor are you!?

    On the other hand, it looks like the market wasn’t very excited by the housing bill after all- dropped 240 points today. Oops.

  28. 28
    david losh says:

    Uninformed is my vote.
    I have a Real Estate license in the State of Washington. I resist and currently don’t pay REALTOR dues. They have severally damaged the Real Estate profession. They lobby to destroy wetlands, farm land, poison creeks, rivers, and streams with silt run off.
    They lobby for easy plan approval which in turn has destroyed our neighborhoods and ultimately our way of life. They are whiners.
    REALTORS have given us a bunch of designations, CRS, AB, EPRO, something and some thing else to give a very false sense of security.
    The bottom line is that 80% of people with Real Estate licenses have no clue about Real Estate, the Real Estate business, how it works, or how to put a deal together that is fair.
    These same people pay REALTOR dues to look legitimate.
    This site is the very best proof that in all the REALTOR designation web sites, blogs, or internet based business models, an electrical engineer, with no working knowledge of Real Estate has put up the most difinitive Real Estate forum that I have been able to find.
    I may take issue with the statistics but they are there for people to see in a very transparent way, if not the only transparent site on Real Estate matters. This guy is asking for donation, or advertising, which is legitimate. In my opinion he’s not looking to reach into my pocket or any one elses without giving value in return.

  29. 29
    george says:

    I’d like to hear from agents on this. Do the sellers you work with know what it’s costing them to have that overpriced bungalow sitting vacant for a year? Do the sellers you work with realize how much money they’ve lost already by chasing this market down?

    Why take it off the market? Drop the price and sell while you still have a paper gain to show for your troubles.

  30. 30
    Rentersarelosers says:

    George,

    Why don’t you just make an offer?

    That’s the biggest problem in my opinion., You Bubbleheads are sitting there day after day waiting for price drops, and you get upset when they go off the market.

    There are many sellers that DON’T have to sell, we want to sell to move on to another life. But, being on the market, constantly being interupted to show our homes that we LIVE in gets old real quick.

    Stop being a LOOKY LOU, if you are serious, make a friggen offer.

  31. 31
    Ray Pepper says:

    Every day I hear from Sellers.

    They ask how low should I go?
    What price will it sell at?
    What should I do?
    Should I list with a Larger Brokerage to trigger the sale?
    If I lower the price the Buyer will offer lower anyway, right?
    Should I add a Buyer Bonus?
    Should I cancel and try next year?

    and to each question I always answer what I did before they listed it :

    Do you have to sell now?
    Can you rent the property?
    Can you accept a contract?
    Are you the best deal on the block?
    If you were the Buyer would you buy your home?

    The sellers do know what its costing them to leave vacant. Boy do they!

    I just visited a builder today with 20 overpriced vacant homes and NONE have sold. I advised them as I do all builders. Lease option the homes and find a good tenant or give them back to the bank.

    The bleeding is quickly becoming arterial for builders and they must conserve capital or say good night!

    Ray Pepper
    Broker
    http://www.500Realty.net

  32. 32
    Rentersarelosers says:

    Ray,

    What do you hear from buyers every day?

  33. 33
    Greg Perry says:

    George: Do MY sellers know the cost?

    You bet your bippy.

    Do all MY sellers take MY advice?

    Not always. They have their goals, emotion and financial concerns to deal with.

    Do all sellers (working with the thousands of agents out there) know the cost?

    Some do, some don’t

    Ray has some good question/answers on #29.

  34. 34
    Herman says:

    Off topic: I’ll bet that most people here do not want to use a full price realtor. What services do the readers of this blog value, though, that they would pay for?

    I would value at 0.5-1.0% on the buy side:
    1) Unlocking the doors.
    2) Legal counsel as the offer is prepared

    I would value at 2.0-3.0% on the buy side:
    1) Personally pre-screening all homes before bringing me to them
    2) Assistance with the logistics of relocation
    3) Accurate, intelligent, and open advice about fair market value
    4) Noting obvious flaws in construction or quality, prior to paying for an inspection
    5) Notice of homes prior to reaching the MLS
    6) Insider information about builder/selling agent reputation, or seller motivation
    7) Convenient transportation while home viewing
    8) Preparation and execution of the offer

    I have not had an experience with an agent that includes (1) or (3). I do not value references for home inspectors or mortgage brokers because I think they create a conflict of interest with the agent.

  35. 35
    what goes up comes down says:

    greg sounds like you are cheerleading again — everything is great

  36. 36
    what goes up comes down says:

    greg, I would like to point you to the forum post of Eastside Flops. The number of cases of people taking it in the shorts just on buy versus sale price not too mention anything that actually went into the house is eye opening. The summary as posted there is as follows:

    Here are some observations so far….

    – Many folks who purchased a SFH in/after 2006 are underwater on the Eastside.
    -Even with these lower prices, many homes are still expensive if you take the long-term appreciation rates into account
    -It’s been hard to find condos/townhomes that are underwater from the 2006 prices
    -Moral of the story for current homebuyers on the eastside: Don’t buy a home on the Eastside now. But if you have to, don’t pay more than comparable sales in 2006

  37. 37
    what goes up comes down says:

    guess it won’t be that foreign currency saving the RE market,

    http://www.csmonitor.com/2008/0729/p01s04-ussc.html

    “It’s a perception reflected in the numbers. The world’s long-haul international travelers have jumped by 35 million since 2000, yet America has been largely overlooked by those new travelers, despite favorable exchange rates resulting from a weak dollar and attractions like Disney World and the Grand Canyon. In fact, the annual number of foreign visitors to the US is about 2 million lower than in 2000, leading travel-industry experts to figure that from 2000 to 2007, the US economy took a hit of about $150 billion.”

  38. 38
    Buceri says:

    Wow – according to the inventory tracker, over 600 units sold in the past 12 hours.

    CRAP!!! we missed the bottom. RUN!!!!!!!

  39. 39
    Matthew says:

    Buceri,

    Normal end of the month purging. :)

  40. 40
    jon says:

    Oh come on, didn’t you feel the disturbance in the force? It was like hundreds of sellers crying out in despair and taking their houses off the market.

  41. 41
    Greg Perry says:

    “greg sounds like you are cheerleading again — everything is great.”

    Hmmmmm, just pointing out a few facts. Just like when I reported 3 months of unprecedented rate of inventory absorption increases in the 3rd quarter last year.

    Actually, I find this market fascinating. The supply side numbers hold no surprises at all to me. I am completely surprised at the gradual, yet steady increases on the demand side, especially moving through summer. I would have not predicted what we’re seeing.

  42. 42
    The Tim says:

    Greg @ 15:

    From the demand side for SFH, every month in 2008 has seen increased Pendings from the previous month.

    This is not normal.

    First off, the statement that SFH pendings have increased every month in 2008 is not true. Here’s a chart showing 2000-2008 January-June SFH Pending Sales for King County, indexed to January:

    King County SFH Pending Sales (Indexed)

    Pendings decreased from April to May. Also note that 2008’s January to June total change is pretty close to the average (red dashed line), so I don’t really see what’s unusual about the change in pendings we’ve seen in 2008 so far.

    Minor month-to-month changes seem somewhat irrelevant though when you consider how drastically lower the total monthly volume has been in 2008 compared to previous years:

    King County SFH Pending Sales Volume

  43. 43
    TheHulk says:

    Hmmm Tim, a simple graph really is worth a thousand(s) of unsold homes! :)

    I wonder how greg is going to respond to cold hard facts rather than unsubstantiated claims.

  44. 44
    The Tim says:

    I don’t think Greg was trying to mislead, he probably just overlooked May, or meant something different than I thought. He has built a reputation here of being interested in the facts and not blind clichés, and I’d prefer to give him the benefit of the doubt.

  45. 45
    Steve Tytler says:

    Tim, thanks for the hard work on these charts.

    They show what I have said many times in the past: The Puget Sound region is NOT a big, homogenous housing market. It is composed of many different neighborhoods with radically different housing markets.

    That’s why using the King County median housing price to track market trends is so misleading. You need to know what is going on in your particular neighborhood to really understand current market trends.

    If you are trying to sell a house in Puyallup you are facing a MUCH worse housing market than if you are selling a house near Green Lake in Seattle.

    Overall, home prices are falling everywhere. But some areas are falling much worse than others.

    Keep up the good work!

  46. 46
    Greg Perry says:

    The Tim,
    Thanks.

    I’m sending you some information via email.

    Steve Tytler.

    I agree with everything, including the work done on showing the individual areas.

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