September Neighborhoods Months of Supply Update

Let’s have a look at “Months of Supply” 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. Also, view a map of these areas here.

September MOS for King County as a whole came in at 6.57 (compared to 7.21 for September 2007 and 6.80 for August), bringing the current run to thirteen months—three times the previous record in the winter of 1994-1995.

In the graphs below, you’re looking at the MOS for the “Res Only” data from the NWMLS King County Breakout pdfs for the one-year period of October 2007 through September 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 that there are a few areas that appear to have no bar at all for a given month—this represents an MOS value at or close to 6.0.

Note: Area 100 (Jovita/West Hill Auburn) was over 21 in January, and has been clipped.

KC SFH MOS: SW King
Click to enlarge

KC SFH MOS: SE King
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Note: For Area 701 (Downtown Seattle) we’re using condo data.

KC SFH MOS: Seattle
Click to enlarge

Note: Area 800 (Vashon Island) was over 17 in September, and has been clipped.

KC SFH MOS: N King
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Note: MOS in area 520 (Medina, W. Bellevue) was over 19 in August, and has been clipped.

KC SFH MOS: Eastside
Click to enlarge

Ten of thirty King County areas were in seller’s market territory in September, ranging from 4.35 MOS in 705 (Ballard, Greenlake, Greenwood) to 5.96 MOS in 300 (Enumclaw). The city of Seattle continued to be the strongest region overall, with four of eight areas coming in below 6 MOS.

The cumulative MOS for Seattle proper increased slightly from 5.02 in August to 5.13 in September, down from 5.81 in September 2007. The Eastside as a whole decreased month-to-month to 8.03 MOS, up just barely from September 2007’s 7.97.

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

KC SFH MOS: Eastside
Click to enlarge

Breaking from the recent pattern, seventeen of thirty neighborhoods actually trended more toward a seller’s market than a year ago. Some of these are still in buyer’s market territory, but six areas swung from a buyer’s market in September 2007 to a seller’s market in September 2008. This was likely due largely to the spike in pending sales that we mentioned in the main NWMLS roundup. The most dramatic of these swings was in area 340 (Renton–Benson Hill), which went from 14.3 MOS last year to 5.7 this year.

The three toughest markets for sellers were Vashon Island (800) at 17.86, Medina / Clyde Hill / W. Bellevue (520) at 12.31, and Mercer Island (510) at 11.29. 520 continues its 10+ MOS streak, now at 13 months.

North Seattle neighborhoods continue to hold their title as the strongest markets in which to sell a home. The three best markets for sellers as of last month were the same as the last two months: Ballard/Greenlake/Greenwood (705) at 4.35, North Seattle (710) at 4.48, and West Seattle (140) at 4.61.

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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.

30 comments:

  1. 1
    Ben says:

    I suspect that many of these “pending” sales will turn out to have fallen through in the future months. I believe that there is a delay between banks saying “no more lending” and consumers seeing it in statistics.

    When the impact of the tightening of lending is apparent, prices will drop a lot, and listings will too (because anybody who absolutely does not *need* to sell will stop listing). But it does not take many sales to set the new price.

    One of my neighbours is trying to sell at 2006 – 2007 prices. I will see how that works out. It is below FHA limits so maybe somebody will bite.

  2. 2
    EconE says:

    Many, many, many more months of supply downtown than your chart shows.

    But we all know how good they are at keeping condos off the MLS.

  3. 3
    The Tim says:

    EconE, agreed. But unfortunately I’ve got no way of easily calculating the real MOS for condos, and SFH for are 701 are virtually non-existent, so I figure incomplete condo information is better than nothing.

  4. 4
    Joel says:

    If a sellers accepts an offer to buy that is contigent on the buyer selling their place is that counted in the pending statistics?

  5. 5
    Mark says:

    Enumclaw went from nearly 12 months of supply in August to 6 months of supply in September.

    They are special!

  6. 6
    Slumlord says:

    Quite a few of those downtown condos will become rentals, as will many of the unsold houses.

  7. 7
    EconE says:

    Totally agree with you Tim….I was just pointing out the obvious. ;^)

  8. 8
    masaba says:

    One thing that I always wonder about in these MOS charts is how to interpret the 705, 710 areas. I have been looking for a house in those areas for about 6 months, and during that time I have seen the asking prices steadily decreasing.

    I don’t see how it can be a seller’s market when house prices are dropping. Is there any way to interpret this? Should we expect to see an upswing in housing prices in 705 and 710? Are the prices in those areas just being pulled down because of the ‘buyer’s market’ in surrounding areas? Or is it something more along the lines of what EconE is saying for downtown condo sales, that we really are not getting the full picture?

  9. 9
    vboring says:

    maybe October will finally be the month where MOS goes to infinity.

    with investments being decimated, higher lending standards finally biting down, and financial sentiment falling through the floor, it seems all but inevitable.

    of those factors, I’d guess sentiment is the most important one – far fewer people will be willing to make the biggest financial decision of their life while being pummeled by daily record-breaking bad news and talk of depressions.

  10. 10
    monkey says:

    Does anyone know what is the number area for Lynnwood in Snohomish County? Thanks

  11. 11
    patient says:

    vboring, I was just thinking the same thing. Who in their right mind put their signature on a mortage this October? It will be interresting to see.

  12. 12

    THE TRUCKS AND EQUPMENT ARE GONE FROM SEVERAL EAST HILL NEW HOME CONSTRUCTION PROJECTS

    It appears Halloween came early and they turned to “ghost town” bull dozed fields with no activity.

    I hear from Roubini’s site that Paulson can give the banks billions to ease credit, but that doesn’t mean they won’t just hoard the booty and sink us deeper into depression.

  13. 13
    HomeLoser says:

    ” I was just thinking the same thing. Who in their right mind put their signature on a mortage this October? It will be interresting to see.”

    I did. Refinanced my mortgage prepaying principal and decreasing interest rate to level where my mortgage payment + property taxes net of my tax shield is less than the rent I would pay to rent an equivalent place. FYI, rates have increased by 1% since my refinance.

  14. 14
    mukoh says:

    HomeLoser,
    Did the same with BECU recently. Rates were 1% lower post refi.

  15. 15
    patient says:

    Nicely done HomeLoser, though I was curious if anyone will sing up to more mortage debt this month. Refi’s I can absolutely understand.

  16. 16
    anony says:

    Tim, Ever graph or consider graphing mortgage rates with home prices over time for recorded history? I’m considering the theory that affordability determines home prices, so an increase in mortgage rates should correspond with a decrease in home prices. I’m wondering if it proved true in the past.

  17. 17
    The Tim says:

    anony @ 16,

    I believe the charts your looking for are here: King County Affordability: 1950-2007

  18. 18
    patient says:

    anony, I think The Tim or dj has posted a interest rate / price correlation post earlier. If I can remember right the correlation wasn’t as strong as you would expect. Things that are scewing it are peoples willingness to exept less affordability in a hot market and artificial/temporary low monthly costs by exotic mortgage products ( interest only, ARMs etc ).

  19. 19
    HomeLoser says:

    “I was curious if anyone will sing up to more mortgage debt this month. if anyone will sign up to more mortgage debt this month. ”

    Now is the time to reduce debt. I can’t believe anyone is dumb enough to take on more debt in this environment. However, I have been watching mortgage quotes provided by a broker who posts them and a significant percentage of these are cash out re-fis so it seems there are still a lot of idiots out there!

  20. 20
    anony says:

    Thanks. I see no correlation between interest rates and prices. It looks like affordability dropped through the floor when rates got insanely high in the 70s, and never recovered because as rates dropped, prices got insane.

    Wait, maybe that is the correlation I was looking for.

  21. 21
    Mike2 says:

    Ever graph or consider graphing mortgage rates with home prices over time for recorded history? I’m considering the theory that affordability determines home prices, so an increase in mortgage rates should correspond with a decrease in home prices. I’m wondering if it proved true in the past.

    You’d need to adjust for loan types and their market share, as well as down payments and underwriting standards in order to get a full picture of “purchase affordability”. Using interest rates alone the picture from the past few years would look like nonsense. Hardly any of the price movements were driven by rates on conforming loans.

  22. 22

    masaba,
    The term “sellers market” used here simply refers to the months of supply of inventory of unsold houses. It’s just one component. To get a clearer picture it would be useful to see total sales in September 05, 06, and 07 for those areas, and the months of supply then…And yes, sometimes prices go down because neighboring areas are going down, and sometimes prices are going down because they’re just too damn high and they can’t keep going up.

  23. 23
    Ready4Debt says:

    masaba,

    I have also been watching 705. The houses that are priced “right” sell within two weeks. The others are overly optimistic of the worth of their home- list high and keep dropping until they get a bite. It is hard to track since they keep listing under new MLS #’s but some of these houses have dropped $100k or more. It is pretty interesting. Good luck with your search! Things are only getting better for buyers- so long as you can still get a loan!

  24. 24

    “If a sellers accepts an offer to buy that is contigent on the buyer selling their place is that counted in the pending statistics?”

    I don’t see an answer to Joel’s question. I would expect Contingent sales to still be Active sales as they are in the mls and on public sites. Usually another buyer without a home sale contingency can bump the buyer who is “pending”, so it is considered Active.

    There are currently 156 contingent sales in King County.

    It looks like less than 15% of pending sales are short sales using the word “subject” as in subject to lienholder approval and “Short” as an agent remarks search. Unless you add the total of those two searches together, in which case short sales would represent 25% of pending sales.

  25. 25
    jonness says:

    “Ever graph or consider graphing mortgage rates with home prices over time for recorded history? ”

    I was curious about the same thing, so i built a tool that does this for 330 U.S. cities. It’s the “Median Home Price vs. Mortgage Rates vs. GDP Charting Tool” available at housingcorrection.com

    If you don’t want to see GDP, uncheck the “Display GDP” checkbox before you submit the form.

    You can mouse over any data point to get the exact mortgage rate or median house price. By default, I multiply the mortgage rates by 10 so they’re easier to see. So if you mouse over, move the decimal place in your head to get the correct mortgage rate reading. Otherwise, uncheck the “Multipy Mortgage Rates by 10” checkbox to get the actual mortgage rate when you mouse over the data points.

  26. 26
    richie says:

    I have seen quite a few pending sales d bounced back to the market because the new tougher requirement to qualified a mortgage. Gone are Alt-A mortgages. Gone are subprime mortgages. Gone are 80% on the first mortgage and 20% on the home equity line. Gone are 0 down payments on conventional mortgages. If one does not have a FICO score of 700, one will have a great difficulty to get a mortgage at a reasonable rate. The current debacle in the Wall Street has squeezed the amount of down payment that many home buyers were counting on.

    Do you want to trust NWMLS?

  27. 27
    richie says:

    Ready4debt said

    “The others are overly optimistic of the worth of their home- list high and keep dropping until they get a bite. It is hard to track since they keep listing under new MLS #’s but some of these houses have dropped $100k or more.”

    Houses over $700,000 are very difficult to sell becasue of tougher standards for new mortgages. Many sellers were forced to drop the price not because they overpriced their houses but because the demand is not there. This is why you would see some of these houses dropped $100,000 or more. Buyers are scare because they don’t want to catch falling knives.

  28. 28
    jonness says:

    anony:

    When I looked at mortgage rates vs. home prices a few months back, I concluded lower rates = higher prices, but the correlation is very loose. IOW, you can see a general trend, but things don’t change much from quarter to quarter. IMO, easy to get mortgages are a bigger factor in higher home prices than cost of the mortgage. However, when taken together, the two factors work with synergy to create a housing bubble.

    Most Americans decision on whether or not to buy a house depends on what the banker tells them. Introduce predatory lending practices, and a lot of homes start to sell, and prices begin to skyrocket. IMO, although cheap credit and easy credit are factors in the high cost of houses in recent times, easy credit is a much larger factor than cheap credit in driving up home prices.

    If I am correct, this means that no matter how much the Fed rate lowering ends up helping mortgage rates, house prices will still come down because supply will continue to outstrip demand. Tighter lending standards are being imposed which will ensure people actually qualify for the loans they’re getting. This will subtract from the percentage of Americans who own homes.

    Because home loan percentages will adjust back to normal levels, homeownership levels will continue to adjust back toward normal. This will ensure home prices come down. See the chart in the link for a graphic example of where Seattle house prices are heading.

    Homeownship Percentage

    We are in a recession, and consumer spending is plummeting. Home prices are had at least for now. In the future, if we see massive inflation, it could go the other way. However, the economic forces in play are currently highly deflationary. It would take a change in current policy in order to bring on inflation; thus, you will have time to react prior to it being instituted if it does come our way. IOW, the money injected into the system will be hoarded by the banks, so it will be difficult to jumpstart inflation by bailing the banks. OTOH, if other countries stop buying our debt, and we decide to print disconnected money, all bets are off.

  29. 29
    Alan says:

    . Many sellers were forced to drop the price not because they overpriced their houses but because the demand is not there.

    Um… Prices are dictated by supply and demand. If the price is too high for the demand, then the house is overpriced by definition.

  30. 30

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