Affordability Rose Despite Market Heat-Up in Q4

The latest issue of Sound Housing Quarterly has been published (Q4 2009). Sound Housing Quarterly is a subscription-based sister project to Seattle Bubble.

With this latest release we have made a few notable changes. First and probably most interesting to the readers here is a new lower price. Now you can subscribe for a full year for just $60, or purchase a single issue for $20. Second, beginning with this issue we are now also covering Whatcom County. The real estate statistics covered in Sound Housing Quarterly now include 65% of Washington State by population.

Here are a couple of highlights from the fourth quarter issue.

The Real Estate Heat Index (a proprietary index I created that uses supply, demand, and home prices to calculate the general “heat” of the housing market) rose in six of the eight Puget Sound Counties I track in the fourth quarter, declined in Thurston and was flat in Skagit. Here’s a look at King, Snohomish, Pierce, and Kitsap:

Real Estate Heat Index: King, Snohomish, Pierce, Kitsap

Meanwhile, affordability actually increased in all eight counties, thanks to median home prices continuing to decline from Q3. That said, after updating the affordability index with the OFM’s October 2009 income estimates, the recent trend line for affordability was adjusted lower. As a result, the latest reading still came in below pre-bubble levels in all eight counties.

Affordability Index: King, Snohomish, Pierce, Kitsap

The full version of Sound Housing Quarterly includes detailed data and analysis for King, Snohomish, Pierce, Kitsap, Thurston, Island, Skagit, and Whatcom counties.

Head over to HousingQuarterly.com to subscribe to Sound Housing Quarterly. You can also download a free single-page summary of this quarter’s report, or head over to the free archive to check out last year’s Q3 and Q4 reports in full at no charge.

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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.

12 comments:

  1. 1
    Vicki says:

    Does the personal income component of the affordability index include unemployment or is it average (median?) income among those who do have a job?

  2. 2
    deejayoh says:

    I think it bears pointing out that the OFM has KingCo HHI dropping for the second consecutive year, from $64,714 to $62,810, or 3% off. That is obviously affecting affordability and is a trend that is likely to continue until unemployment drops.

    I recharted the income vs. median home price scatterplot using this and it gives a really odd pattern. If I have some time I will update my post on that later.

  3. 3
    The Tim says:

    RE: Vicki @ 1 – Well they don’t go into detail on their methods, but since it is “median household income,” I think it’s safe to assume, as Deejayoh points out above, that if more and more households are having people lose jobs, that the median income for all households would be falling, which it is.

  4. 4

    RE: Vicki @ 1

    I Had the Same Type of Table Skew Question

    This horrifying recession/depression we’re in with no end in sight has forced many families/friends in cohabitation, that we’re living in separate households. This is a pragmatic fact of 2009.

    It has also clearly skewed the household income significantly higher recently in error, because the multiple incomes now cohabitating aren’t necessarily multiple income all together household income home buyers. Its mostly single incomes and a smaller percent duel married incomes that buy homes; not daughters/sons, parents and friends living in today’s safe haven cohabitation homes/apartments.

    Affordability may actually be going way down lately, if you correct the charts above to this recession/depression cohabitation income anomaly per household.

  5. 5
    David Losh says:

    This is a good spot to post this because it does have to do with what people can afford.

    People who are buying houses today do have income and are buying better houses for the dollars they spend. The discussion that I have with Real Estate agents has to do with the condition of the property as much as the price. If you sell, your property needs to be in good condition, great location, and at a reasonable price.

    In terms of affordability we have a client now who is trading laterally into a better condition home in Kenmore, from Ballard. The Kenmore house is nicer, finished, bigger, better yard, and less money. They still have to sell the place in Ballard but it is in great shape, great location, and decent view.

    My only point is that a buyer’s dollars are buying better condition properties today.

  6. 6
    seattle says:

    David Losh @5. I have to agree with your comment. Houses are certainly selling and there are plenty of buyers. Even 500,600 700K houses in good locations are selling without problems. At the same time certain locations are struggling e.g. South of Downtown Seattle through Thurston County, North Snohomish county etc. These locations have dropped prices dramatically and sales have taken a hit. But other locations in the east side are still selling at or above 2007 prices. In these locations there are still multiple offer situations for nicer properties. I think it all boils down to income and employment. It looks like our area has a lot of creditworthy people with good income/jobs. I do not believe prices will down much further.

    BTW, I am not a real estate agent or agent of RE company. Many of the folks here jump to that conclusion when they see an opinion that does agree with theirs.

  7. 7
    pfft says:

    By softwarengineer @ 4:

    RE: Vicki @ 1

    I Had the Same Type of Table Skew Question

    This horrifying recession/depression we’re in with no end in sight

    you mean the recession that ended in August? that one we’ll never get out of?

  8. 8
    altt says:

    Well, I guess you can already say we’ve hit bottom. That doesn’t mean that home values are going to be back up to where they were in 2006 – 2007. There are still some homes that are priced too high based on what they were worth then. We are back to where we were in 2005 for home prices. The available inventory is going down in Issaquah/Redmond and Sammamish but in Bothell it seems they were hit a bit harder and they still have a lot of inventory but it all depends on the price range. Also, we’ve heard that banks are holding the Foreclosure – Bank owned properties and will be releasing them slowly as to not over-saturate the market. As for your question of will Sammamish market fall further? Not sure if you’re comparing this to the ’06/’07 pricing or just wondering if it has stabalized and will begin to go back up. I know homes are selling there and there is new construction there as well. That doesn’t mean that the value of the homes will not drop further because as I mentioned, homes are back to what they were valued at in 2005.

  9. 9
    ThesePricesSuck says:

    RE: David Losh @ 5 – What gave it away? The huge drop in prices? Seems like a pretty obvious statement, even for you.

  10. 10
    David Losh says:

    RE: ThesePricesSuck @ 9

    What’s not obvious from data is the condition of properties. Last year a lot of crap was selling for the same price as a good condition homes this year.

    What’s not obvious is that those homes that are selling today are still way over priced.

    Data doesn’t tell a story.

  11. 11
    shawn says:

    RE: David Losh @ 10 – that does seem to be overlooked, the quality that a dollar now can get in a home versus in the height of the bubble. How is that qantified, can it be, is anyone doing it?

  12. 12
    David Losh says:

    Ardell actually got me paying attention to the condition aspect with her insistence of a bottom call.

    I would like to see if there was some proof that $750K or $500K buys you more today than a year ago.

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