The P-I printed a real gem of a story this weekend, with a pretty bold prediction:
The nation is on track to build fewer homes this year than at any time since the end of World War II, adding to the woes of an economy that analysts said Friday has almost certainly entered a recession.
But with builders focused on selling the homes they have, rather than developing new ones, Seattle is headed for a serious shortage that could bring a return to double-digit price appreciation starting in 2012, according to one local analyst.
“We will see one to two years of double-digit appreciation, bringing home prices back to the peak that they were in 2007 or 2006, if not higher,” said Todd Britsch, president and principal of New Home Trends, a Bothell consulting firm.
Okay, first off, prices are currently at about 2006 levels. For prices to be at a point where one to two years of double-digit appreciation will bring them “back” to 2006 levels, they would have to fall another 15% or so from where they’re at now. That doesn’t necessarily seem too unlikely to me, but I somehow doubt that’s what Mr. Britsch meant to predict.
Secondly, why is the P-I turning to Todd Britsch for predictions, anyway? Note this prediction made by Mr. Britsch in November 2007:
Buyers, however, shouldn’t expect those deals to stick around much longer, said Todd Britsch, president of New Home Trends.
For buyers, now may be the best time, he said. Many of the incentives will likely disappear after the first of the year. Sales typically slump in the fall and pick up each spring.
“Right now it’s a buyer’s market and if I were sitting on the fence, today is when I would buy,” he said.
Today’s market is “a bump in the road,” and the market is stabilizing, not collapsing, he said. It’s unlikely the county will return to astronomical double-digit appreciation rates, but a strong economy will keep housing prices going up in this area during the next few years, albeit more slowly.
Let’s see what housing prices have done in the time since Todd made that claim. The latest NWMLS data at that time was October, so let’s compare October 2007 to September 2008 (11 months).
King County SFH: Down 6.5%
Snohomish SFH: Down 11.3%
Pierce SFH: Down 10.7%
Hmm. I think Todd Britsch has a different definition of “prices going up” than I’m accustomed to.
The remainder of the article expands on the spurious idea that the current downturn in construction will lead to an impending shortage of homes in the not-too-distant future a few years from now. The big problem with this claim is that the data simply does not bear out any kind of a housing shortage in the Seattle area.
New housing supply has been coming online at a rate easily exceeding increases in demand during the last few years (see this post and this post for details). Today’s slowdown simply gives demand some time to catch back up to supply. Of course, even this “catch up” hypothesis assumes that demand continues to increase which, given the current economic climate, isn’t exactly a given.
(Aubrey Cohen / AP, Seattle P-I, 10.17.2008)