September Reporting Roundup: Motivated Buyers Edition

It’s time once again for the monthly reporting roundup, where you can read my wry commentary about the news instead of subjecting yourself to boring rehashes of the NWMLS press release (or in addition to, if that’s what floats your boat).

To kick things off, here’s an excerpt from the NWMLS press release:

Northwest MLS brokers say September activity reflects "healthy activity, positive trends"

“This market is proving to be challenging, but not for the reasons you might think,” said OB Jacobi, president of Windermere Real Estate Co. He pointed out interest rates are low, affordability is high, and confidence in the housing market is improving. “These are all good things, but the result is an influx of motivated buyers in a market where inventory levels have not yet caught up to the demand.” Jacobi, a member of the Northwest MLS board of directors, said one consequence is “stiff competition for move-in ready homes that are priced right, especially in neighborhoods close to Seattle.”

“In Central Puget Sound, 90 percent of sales activity is taking place in the more affordable and mid-price ranges, where the inventory level of homes for sale is low to healthy,” said J. Lennox Scott, chairman and CEO of John L. Scott Real Estate. “Historical low interest rates combined with lower adjusted prices are attracting home buyers and investors at a healthy sales activity level,” he observed.

“Historically, low inventory at these levels has led to stable or slight increases in home valuations,” said Northwest MLS director Joe Spencer, COO and president of John L. Scott Real Estate. “It’s too early to tell,” he added, “because there are a lot of crosscurrents in the economy, but it’s encouraging seeing positive trends in sales activity and listing inventory.”

That is some unexpected restraint on display by Joe Spencer. You can tell he really, really wanted to call the bottom there, but he managed to hold off, at least this month. I also have to say that I’m a bit surprised by Mr. Scott’s claim that we’re seeing a “healthly sales activity level.” Again, sales are lower than they have been any other years except for 2008 and 2010, and about 20% lower than where they were in the midst of the dot-com bust. I’m not exactly sure how that qualifies as “healthy,” especially to someone in the business of selling homes.

Read on for my take on this month’s local news reports.

Eric Pryne, Seattle Times: King County home sales up, median price down 8 percent from year ago

Buyers closed on 37 percent more houses in King County in September than in the same month last year, according to statistics released Wednesday by the Northwest Multiple Listing Service.

But the year-over-year surge may reflect past weakness as much as current strength.

Sales volumes plummeted in mid-2010 — and didn’t recover for several months — after homebuyer tax credits that were part of the Obama administration’s economic-stimulus package expired.

Fewer houses sold in King County last September than in any September since at least 2004.

Will prices rise anytime soon? The real-estate industry is facing some head winds “that are causing angst in the buying public,” Gardner said. Those head winds include new restrictions on “jumbo” mortgages, proposals to require higher down payments for nonconforming loans and talk of eliminating the mortgage-interest tax deduction.

But the stability in median prices since spring is a positive sign, Gardner said, and he doesn’t expect another big drop anytime soon.

Of course, Matthew Gardner also expected that home price appreciation would return in 2010… Overall, another great piece by Eric that highlights what’s really going on in the market.

Aubrey Cohen, Seattle P-I: Home sales cool but supply remains low

After posting big year-to-year gains in recent months, Seattle-area home-sale deals cooled off in a bit September.

Pending sales, which may not close but are the best indication of the most-recent activity, were up 24.3 percent in King County and 9.8 percent in Seattle from September 2010.

While not bad, these were down from jumps of about 34 and 28 percent in August and were the lowest increases since April, which was the last month that this year’s sales were compared with months last year when a homebuyer tax credit boosted sales. In fact, what the new totals may show is the wearing off of year-to-year gains boosted by a hangover after the tax credit went away last year.

That’s about the extent of the original content in this month’s P-I article, as the rest seems to be more or less a rehash of the NWMLS press release. I guess Aubrey was a bit busy with other projects this month.

Mike Benbow, Everett Herald: Home sales increase for second straight month in county

Home sales in Snohomish County rose 36 percent in September, showing an increase from a year ago for the second straight month, the Northwest Multiple Listing Service reported Wednesday.

There were 837 homes sold last month, compared to 615 in September of 2010. Sales were slow last fall because many of last years purchases were in the spring to take advantage of federal tax breaks offered to home buyers.

Not much meat here, either.

Rolf Boone, Tacoma News Tribune: Home prices plummet in Pierce County, MLS data show

Pierce County median home prices fell again last month, the fifth consecutive month in which median prices have fallen by 11 percent or more, according to Northwest Multiple Listing Service data released Wednesday.

Homeowners hoping to get some good news about home prices didn’t get the answer they wanted in September as median prices fell 12.94 percent to $191,750 from $220,250 in September 2010, the combined single-family residence and condominium data show.

I think what he meant to say was “home buyers hoping to get some good news about home pricees got exactly what they wanted in September as homes became even more affordable, giving up the unsupportable gains of the bubble years.”

Rolf Boone, The Olympian: Thurston home sales flat for fifth month

Thurston County home sales were flat in September, the fifth consecutive month in which year-over-year home sales have barely budged, according to data released today by the Northwest Multiple Listing Service.

Super short blurb in the Olympian this month, with a promise of “more on this story” in “Thursday’s Olympian,” but so far nothing more has shown up on the website. Perhaps only the print readers get the goods now.

(Eric Pryne, Seattle Times, 10.05.2011)
(Aubrey Cohen, Seattle P-I, 10.05.2011)
(Mike Benbow, Everett Herald, 10.05.2011)
(Rolf Boone, Tacoma News Tribune, 10.06.2011)
(Rolf Boone, The Olympian, 10.05.2011)

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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

    “I also have to say that I’m a bit surprised by Mr. Scott’s claim that we’re seeing a “healthly sales activity level.”

    Why surprise? Since when has J. Lennox Scott been known as the great truth teller?

  2. 2

    I posted a link before to the coverage of RE matters by the San Francisco Chronicle. When they come out again I’ll post a link, but it’s far superior to any of our local coverage.

    But to be fair, this data is about as exciting as watching grass grow. Here’s the King County median for the YTD, starting in January. Tell me how you’re going to say something exciting about that.

    356,000
    334,000
    345,000
    349,950
    345,000
    345,000
    350,000
    350,000
    349,550

    January was a drop from the prior periods, but after you cover that, there’s not a heck of a lot else to say.

  3. 3
    David Losh says:

    I don’t understand what buyer’s are thinking. I know it’s hard to wait when you have waited for years, in a one bedroom apartment, with a baby that is now three years old, and your bank account is loaded with that prized 20% down, and three months of reserves. It’s hard to wait, but my God, the prices are so expensive.

  4. 4
    Scotsman says:

    “The world is facing the worst financial crisis since at least the 1930s “if not ever”, the Governor of the Bank of England said last night. ”

    http://www.telegraph.co.uk/finance/financialcrisis/8812260/World-facing-worst-financial-crisis-in-history-Bank-of-England-Governor-says.html

    “Robert Zoellick, the World Bank president, warned “the world is in a danger zone” as the economic crisis in the United States, Europe and Japan threatened to ravage the rest of the global economy.”

    http://www.telegraph.co.uk/finance/financialcrisis/8782256/World-Bank-chief-Zoellick-warns-world-in-danger-zone.html

    Whatever. In other news, Detroit leads by 2 in the play-offs. It’s a great time to buy a house!

  5. 5

    Any team that beats the NY Yankees can’t be all bad. If the Tigers pull this off we should all show our gratitude by buying houses. In Detroit.

  6. 6
    Jonness says:

    The global economic outlook is absolutely dire. But I see a high probability that the can will be kicked down the road on Greece and the banks for a while longer. It’s pretty much holding everybody else hostage at the moment. We might even get a little stock rally in the meantime. Looking at the bigger picture, we are at an extremely scary point in the world economy. Nothing like this has happened in any of our lifetimes.

    As far as inventories being low amidst a collapsing housing bubble, this is quite normal as sellers continue to hold out for higher prices but wind up continually chasing the market down. My questions to these sellers are, how deep are your pockets, and how long can you endure the pain before you panic and get out with a multi-hundred thousand dollar loss compared to the top? These Spring bounce mini-rallies are selling opportunities. Recognize them as such, and take advantage of them while they last.

    Economic change leads to new economic winners and losers. The economic losers continue to fret about what their prized assets were worth yesterday compared to today. Economic winners trade out of the collapsing asset class as soon as possible, continue to grow their wealth, and patiently buy in when the losers’ pockets are finally emptied out from sustaining relentless and ongoing asset price drops.

    Look, this is not rocket science. We are clearly amidst a drawn out debt deleveraging cycle. Be extremely careful about levering your life savings into a collapsing asset class at a time when the rest of the world is moving in the other direction. We recently experienced a pathetic seasonal bounce, and most likely we are now heading for a new post peak low.

  7. 7
    2kt says:

    RE: Jonness @ 6

    There he goes again.

  8. 8
    johnnybigspenda says:

    RE: Jonness @ 6
    Would you call yourself a “declinist”?

  9. 9

    RE: johnnybigspenda @ 8

    Being Pragmatic About the REAL UNEMPLOYMENT RATE

    Doesn’t make you a “declinist”, it makes you a sensible economist.

    Putting lipstick on the pig economy doesn’t make you a better economic predicter, it does make you one who is in “denial” though.

    BTW, I go into “denial” all the time for mental distraction from issues none of us can fix….nothing wrong with that at all in my book….its bad when you bank too much money on it’s obvious “Peter Crying Wolf” fairy tales.

  10. 10
    The Desponder says:

    It’s surreal how in just a few years perceived wisdom went from “buy now, or be priced out forever” to the actual wisdom of “get out now, before it’s too late” (for SOME people, in SOME situations). ZeroHedge has noted that “prime” indices are looking like the new sub-prime as they are ready to tumble, and one poster adeptly noted:

    “there are a lot of trapped people who can only sell at a massive loss. Underwater people are reaching the breaking point, many are seeing reality “it ain’t coming back”. Without it coming back the defaulters will finally increase in large numbers as they give up.

    Not sure I buy the pace of the predicted disaster, it may come in a long drawn out disaster. Either way, this is bad news for the housing markets and those who provide the loans to the housing markets. Losses will be massive and home owners will never think the same again when an RE agent gives them the hard sell.”
    http://www.zerohedge.com/news/primex-time-next-subprime-trade-has-come

  11. 11
    No Name Guy says:

    RE: Ira Sacharoff @ 5

    (digging in pocket….) Yup, I have $5….that should get a Detroit starter home. :-)

    Oh, and 2kt and johnnybigspenda: You two obviously like the blue pill. Jonness is just sayin’ the red pill reality.

    Keep the powder dry…..patience…….patience.

  12. 12
    Scotsman says:

    RE: The Desponder @ 10

    “Not sure I buy the pace of the predicted disaster, it may come in a long drawn out disaster”

    That’s the proverbial $64 question. The process has already drawn out much longer than many anticipated. But there are real limits involved here, and we’re closer to them than we were.

  13. 13
    NESeattleSeller says:

    Although the global financial situation has its flaws, the local market for real estate does not seem to be falling, or failing as fast as some say. Rents are rising (http://rentbits.com/rb/t/rental-rates/). For some in-city houses purchased at 2005 and even early 2006 prices, the rents are very close to paying PITI and even some maintenance and vacancy. So even those who are underwater can, in some cases, rent the house, move to cheaper digs and still make all their payments. The unemployment rate for those with at least a bachelor’s degree (including those with more) is near 4% or less. We have lots of them here in Seattle. The population of well educated potential home buyers in Seattle doesn’t seem to be dropping. That is why you see houses in View Ridge, Capitol Hill, Queen Anne, etc. selling in days with multiple bidders. And also why the new construction in outer Marysville is languishing.

  14. 14
    ARDELL says:

    We need a “motivated sellers” edition. Showing 4 houses. The two vacant houses were easy. :) The one occupied by “a very friendly and accommodating tenant” per listing agent, hung up when I called before I even spoke. The one occupied by an owner/ seller…took the lock box OFF and will have no showings unless his listing agent is present.

    Made me wonder if more vacants sell than occupied homes. Answer was yes..63% of solds were vacant. Then I checked on the “tenant occupied”. 21% of those for sale tenant occupied…but only 4% of those that sold tenant occupied

    Seriously people, if you don’t really want to sell your house…don’t list it as being “for sale”. It just makes it look there is more “inventory” than there really is.

  15. 15

    RE: ARDELL @ 14 – I mentioned earlier this week having trouble showing two owner occupied homes to our clients. They made an offer on another property, without even looking at the two. One of the two I’d had trouble previewing the day before. Neither were short sales or in foreclosure, so they aren’t just putting on a show of pretending to try to sell.

  16. 16
    ARDELL says:

    RE: Kary L. Krismer @ 15

    Same here Kary. Neither of the occupied homes is a short sale or in foreclosure. The two vacants are bank owned.

  17. 17
    ChrisM says:

    RE: Kary L. Krismer @ 15 – Are they asking/demanding for essays from potential buyers about how wonderful the house is?

  18. 18
    Scotsman says:

    RE: ChrisM @ 17

    I’d guess the warm, fuzzy feeling they had for their real estate agents in 2005-2007 has passed.

  19. 19
    Jonness says:

    There is a lot of money in this world that needs to go somewhere. Investors can’t simply sit on cash forever or it will be eaten to death by inflation. The retirement model can’t stand for this, so it creates hot money flows which are constantly shifting in and out of different investment classes. The key is in understanding classic investment cycles so you know which investment classes to pour into and out of at specific points in time. SFR housing will come back into vogue in due time, but it must first be cleansed of its excesses and impurities. Currently, it has a long ways to go before this occurs.

    Those who have spent the last 5 years claiming Seattle is special and immune from the ongoing macro forces have lost their rear ends clinging to this mantra while their economic futures have been annihilated. Meanwhile, the smart money has shifted out of their anointed asset class and poured into the greener pastures of elsewhere. Sometime after the housing market hypers finally give up, the money flow will shift back.

  20. 20
    Jonness says:

    By johnnybigspenda @ 8:

    RE: Jonness @ 6
    Would you call yourself a “declinist”?

    No. I invest money in different investment classes at different times. Just because I’m currently out of housing doesn’t mean that I’m not into something else and quite bullish on it. It’s not wise to leverage into an obviously depreciating asset class. It’s much better to put your money somewhere where it earns a profit than take a massive loss in yesterday’s big winner.

    The biggest key to winning this game is to stay emotionally detached from your investments. Unfortunately, most home owners cannot do this when it comes to their own homes, and this is currently leading many of them down a path to destruction.

  21. 21
    ARDELL says:

    RE: ChrisM @ 17

    I’m not sure how fair it is to jump to this conclusion, but when an owner is difficult about simply seeing the house, we get the impression they are not going to be the most reasonable people when negotiating price and inspection.

    Do they want essays?…hard to say. I’m looking at one that has been on market since early 2010. Great house really, but acting like he’s doing everyone a favor to let them in to see his house is not going anywhere. He just took it off market again, probably so his days on market go back to zero in early 2012. He did that last year. He also tried, unsuccessfully, to sell it in 2003.

    He’s had three different agents…but apparently not one has had the blls to tell him that the problem is him and not the house. :)

  22. 22
    ARDELL says:

    RE: Scotsman @ 18

    I just had an agent call me because the seller has accepted an offer, got 3 within the first 4 days, but the seller’s children are mad that it sold so quickly. They want to rescind the contract and list it for more money. They only paid $72,000 for it years ago. It sold for $250,000, full price of what they were asking.

    Just checked…it’s back on market, but at the same price. How does a house not sell that has three offers in the first 4 days? Crazy market. Once the seller thinks they are giving the house away, they refuse to address things they should at time of inspection.

    Another…why do pending sales fail? Was it really the inspection? Or because the seller is mad that it sold at that price?

  23. 23

    RE: ARDELL @ 22 – That’s why I like to use fishing as an analogy to selling a home. You never know when the bite is going to come. That it comes on your first cast doesn’t mean that you are a great fisherperson with fantastic technique. And if it takes 8 hours to catch the first fish it doesn’t mean that you suck.

    I had a listing sell fairly quickly, where it only took four days to go Pending Inspection. Two of those four days were weekend days. No one else ever went into the house besides the buyer and the buyer’s agent. That it sold so quickly didn’t mean there was a lot of demand for the house or that it was priced too low. We just happened to catch the attention of a buyer who was looking for that kind of house in that area at that time.

  24. 24

    By Kary L. Krismer @ 23:

    RE: ARDELL @ 22 – That’s why I like to use fishing as an analogy to selling a home. You never know when the bite is going to come. That it comes on your first cast doesn’t mean that you are a great fisherperson with fantastic technique. And if it takes 8 hours to catch the first fish it doesn’t mean that you suck.

    I had a listing sell fairly quickly, where it only took four days to go Pending Inspection. Two of those four days were weekend days. No one else ever went into the house besides the buyer and the buyer’s agent. That it sold so quickly didn’t mean there was a lot of demand for the house or that it was priced too low. We just happened to catch the attention of a buyer who was looking for that kind of house in that area at that time.

    Good analogy, but one major difference:
    When you cast the bait and lure in the home buyer, you don’t club them over the head and kill them, tempting as it may be at times.

  25. 25
    The Desponder says:

    RE: ARDELL @ 22 – Wow. That’s a crazy story. I had a neighbor who paid $95k for her townhome in the late 90s. She put it on the market for $310k in spring of 2008 and finally took it off after no interest right before the collapse, having only lowered it to $307k. In 2010 she put it on again for $269k and lowered it all the way to $239k without getting any interest. In Spring of 2011 she put it on for $229k and it finally sold for $200k mid-summer. Is it denial or greed?
    Either way, she could have sold the unit easily for $295k in 2008 (In 2008 I bought the almost identical neighboring unit that was listed simultaneously.). She ended up losing $100k in selling price, and had to carry it for three extra years as a rental because she was not motivated to sell. It seems the paradigm shift regarding RE has not yet fully happened. It’s 2011 but people are still living in 2006.

  26. 26

    RE: The Desponder @ 25 – That’s the classic example of chasing the market down. It’s very likely her agent warned her about doing that, but she did it anyway, thinking her place was worth more than what she was being told.

  27. 27
    Scotsman says:

    RE: Kary L. Krismer @ 26

    “It’s very likely her agent warned her about doing that”

    Right. Or that her agent told her what she wanted to hear in order to get the listing figuring what the heck- maybe she’d get lucky, or the situation would change, or that the seller would become more realistic over time.

    Several homes in my neighborhood starting in the $800K range chasing the market down to the $500K range and still not selling. Nest spring they’ll all be back at $475K or so- and not sell.

    When real estate agents start telling buyers homes are like cars- expect it to fall in value despite repairs, new wheels, etc.- then there will be some honesty in the business. Sure, they won’t go to zero, but don’t count on them going back up anytime soon. Might be the equivilent of a whole life insurance policy’s cash value at some point- worst savings account in the world, but with other benefits, i.e. shelter.

  28. 28

    RE: Kary L. Krismer @ 26
    Just like there are delusional sellers there are delusional agents, especially when they’re trying to get a listing.
    I was interviewed by a potential client in the summer of 2008, who wanted to sell his house in Wallingford. He asked me what I Ihought the house would sell for. I told him 475. This was a house with great bones, A Foursquare built in 1912 that needed a ton of work. Horrible tiny kitchen, ancient windows,ancient oil furnace, only 1 bath, and a wet basement with the narrow ” stairs of death” leading to it. It was also on a tiny lot.
    He told me that another agent had told him that he could easily get 550-600 for that house.
    I told him that if another agent could get 550-600 for that house, more power to him, and if that agent really could deliver on that, he should use that agent, because I thought that nobody in their right mind would pay 550 considering the condition of the house. The other agent would have had to have skills in hypnosis or advanced mind control techniques to sell that piece o’dookie for 550.
    He used the other agent. It got priced at 569,950.A month later, it got reduced to 539, another month after that it got reduced to 509, another month after that it got reduced to 479, and it sold shortly after that for 475. He was lucky to get it.

  29. 29
    ARDELL says:

    RE: The Desponder @ 25

    I’m not saying the children were wrong, btw. Not sure what’s going to happen now. An interesting one to watch. They are probably trying to fire the agent. The agent just let it go from Pending Inspection to Active at the same price, but with the seller likely wanting a minimum of full price, “as-is”. Hard to put that train back on the track.

    As to your neighbor, that’s the standard “tug of war” stance. Happens at almost every $100,000 marker point, and is standard for the 21 years I’ve been in the business. That first number has a huge psychological impact. Craziness. The seller wants 3-something and the buyer wants to pay 2-something. The seller wants no less than $305,000 and the buyer wants to pay $295,000.

    One of the hardest parts of listing is to avoid the $310,000, the $259,000, the $1,050,000. All seller oriented lines drawn in the sand. Crippling…as you saw with your neighbor. Especially now with the internet, someone at $310,000 misses their entire market of people looking “up to $300,000”. They are invisible to that market at $310,000. They need the person stretching up from “up to $275,000” and they lose them to the $275,000 to $300,000 sellers.

    Past $300,000, increments shift from $25,000 increments to $50,000 increments. At $310,000, most of those buyers are looking at $300,000 to $350,000 and skip right over a $310,000 and buy a nicer one for $325,000 or more.

    It’s a classic example. Thanks for sharing that one. The $3,000 price reduction from $310,000 to $307,000 is priceless! That makes everyone run the other way. No one wants to deal with a seller who thinks that is a “price reduction”.

  30. 30
    ARDELL says:

    RE: Kary L. Krismer @ 23

    Actually…the home WAS under-priced. But that’s not what the agent who called wanted to hear. It should have been listed at $279,950, not $249,950, and it should have been spruced up a bit with better photos. She likely would have gotten full price less concessions and repairs. Net of $275,000 or so. She left $15,000 to $25,000 on the table. The children were correct…just “a day late and a dollar short”. It’s a mess now…and nobody is happy. A complete train wreck.

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