October Reporting Roundup: Fall Fire Sale 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 Multiple Listing Service members reported solid gains in pending sales (up almost 21 percent from a year ago), consistent demand in many price ranges, a shortage of homes in a few categories, and some resurgence of move-up buyers.

Despite those encouraging indicators, prices were down almost 11 percent area-wide compared to a year ago and brokers say there is persistent “hesitancy” in the market.

fire sale by Flickr user zimway2k
“fire sale” by Flickr user zimway2k

“All the pieces (for a recovery) exist — low interest rates, lots of choices, increasing loan availability as well as purchasing programs, yet as a whole the housing market has stalled in many places,” said Northwest MLS director Frank Wilson.

“What is holding back the housing market has little to do with houses,” Wilson stated, pointing to uncertainty in the stock market and volatile global economies, along with a more complicated, prolonged transaction process and lack of job creation.

Pricing data should be viewed with some misgivings, said Joe Spencer, president and COO of John L. Scott Real Estate. “Headlines stating home values have fallen by double digits compared to last year don’t always reflect what is really happening,” he explained, noting factors that can influence prices.

“Not every home has dropped 15 percent in value,” Spencer insists. He attributes much of the decline to a combination of factors, including shifting demographics and the influence of distressed properties, which he said may be as high as 40 percent in some areas. More investors and first-time buyers are purchasing in the more affordable price ranges, which results in a downward shift of median prices, Spencer explained. Also, he noted, distortions caused by REO (bank- or other lender-owned) and foreclosed properties contribute to price depressions.

“When you adjust for these conditions and compare ‘standard resale homes’ the change in home values is much less drastic,” Spencer emphasizes. He believes a more accurate reflection of price declines for the Seattle area is around 6 percent, citing research by CoreLogic, Wells Fargo Securities and other analysts.

You know it’s bad when even Joe “The Perfect Buyer’s Market” Spencer‘s ultra-massaged data shows price declines of six percent.

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

Eric Pryne, Seattle Times: Puzzling plunge: 15% year-over-year drop in county home prices

King County home prices tumbled to a new post-boom low in October, and no one is sure exactly why.

As real-estate insiders offered a host of possible explanations for the drop Thursday, they also debated whether it’s a harbinger of a new, long-term decline — or a one-time statistical blip.

Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University, said he expects prices will continue to slip for another year.

“There’s little pressure on buyers to be active, especially with interest rates not expected to rise for some time,” he said. Mortgage rates have been at historic lows — even dipping below 4 percent for a 30-year term — for much of this year.

But Tim Ellis, who writes the real-estate blog Seattlebubble.com, said he’s not making too much of the October numbers.

“One month does not a trend make,” he said. “I’m inclined to take a wait-and-see approach.”

Wait, did I just read that right? Glenn Crellin and I disagree, but he’s the more bearish one? Welcome to bizarro world. Later in the article, Eric gets to what I think is really going on:

Ellis said that while Redfin’s research also shows a big year-over-year drop in the median sales price last month, the price per square foot fell much more modestly.

That suggests “for whatever reason, people bought smaller houses,” he said.

The geographic mix also shifted. Listing-service statistics show King County’s lowest-priced areas — Southwest, Southeast and North King County — saw the biggest increases in sales last month. They also experienced the biggest price drops, and that brought the countywide number down.

Aubrey Cohen, Seattle P-I: King County’s median home price dips below $300,000

The median sales price of a King County home just dipped below $300,000 for the first time since September 2005.

The median price was $287,500, including houses and condos, in October, the Northwest Multiple Listing Service reported Thursday. That’s down 7.3 percent from September, 17.9 percent from October 2010 and 32.4 percent from a peak of $425,000 in July 2007.

Crellin said the drop in the conforming loan limit was a factor, but “maybe a little overstated,” by Jacobi. He saw a bigger role for sales of distressed homes and cash purchases by investors, adding that sellers may accept a lower offer that’s cash, because they know that financing won’t be an issue.

Also, sellers of more-expensive homes are starting to cut their prices, Crellin added. “It’s the combination of all these things hitting at once.”

I think Crellin is spot on here, actually. I seriously doubt that the lower conforming limits were the primary explanation for this one-month drop. The mix of sales is just shifting toward the cheaper homes. It’s so odd—when something is less expensive, more people want it. Who could have guessed.

Mike Benbow, Everett Herald: Home sales increase by 43 percent

Home sales in Snohomish County were solid in October, but prices continued to drop significantly from a year ago, the Northwest Multiple Listing Service reported Thursday.

There were 828 homes sold in the county last month, a 43 percent increase from the same time last year. The county’s percentage increase in sales was the highest for the listing service territory, which covers most of Western Washington.

The strong sales and strong pending sales, which rose 29 percent last month, were a good sign for the housing market. But other indicators showed the local market is anything but healthy.

Median home prices in the county, for example, dropped nearly 15 percent in comparison to October 2010. That sent the combined median home price for single-family homes and condominiums to $221,142, a drop from $260,000 a year ago.

Not much meat in this month’s article from the Herald.

Rolf Boone, Tacoma News Tribune: Pierce County home prices continue decline

The median price of a Pierce County home continued its runaway descent in October, falling more than 16 percent in the year-over-year period, according to Northwest Multiple Listing Service data released Thursday.

October’s price decline was the sixth consecutive month in which median prices have fallen by at least double digits on a year-over-year basis.

Tacoma-Pierce County Association of Realtors President Mike Larson said one reason prices continue to fall is the large number of homes still for sale in the county. More than 5,000 homes were for sale last month, which means a prospective buyer can make a low offer for one house, and if it isn’t accepted, that buyer can just move on to the next house, he said.

Wait, he’s saying that inventory is high? I haven’t looked closely at Pierce County recently, but I highly doubt that inventory there is all that high compared to historic levels.

Rolf Boone, The Olympian: Thurston home sales rise 7 percent in October

Thurston County home sales finally broke out of an extended rut in October, rising 7 percent last month after several months in which sales were flat, according to Northwest Multiple Listing Service data released today.

Home sales rose 6.99 percent to 245 units from 229 units in October 2010, the combined single-family residence and condominium data show.

Super-short blurb in the Olympian online this month, with a tease to “see Friday’s Olympian” for the real story. Looks like this is all we get online.

(Eric Pryne, Seattle Times, 11.03.2011)
(Aubrey Cohen, Seattle P-I, 11.03.2011)
(Mike Benbow, Everett Herald, 11.03.2011)
(Rolf Boone, Tacoma News Tribune, 11.04.2011)
(Rolf Boone, The Olympian, 11.03.2011)

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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.

20 comments:

  1. 1

    How Many Times have We Heard That Wry Allegation From Pink Pony Home Owner Enthusiasts, “My Neighborhood is Special”

    If you own your home out-right you just mailed in the last half of your property tax owed last month….mine went up about 19% from the year before….my assessment was flat from the year before….gee….that means my home is worth the same YOY????

    Hades no, it just means you got dinged to death by a bunch of last minute levies and the King County assessor is terribly near sighted massaging data YOY.

    The only way any of us home owners will find out what our home is worth is sell and close the papers….the allegations as to what’s it worth now are all fairy tales.

  2. 2
    Chris says:

    Joe Spencer just needs to put on a beret to nudge out Lawrence Yun for the 2011 Bagdad Bob Award.

    http://www.welovetheiraqiinformationminister.com/

  3. 3
    Scotsman says:

    Seattle- still special, sorta special, not too special, or special needs? We report, you decide.

  4. 4

    Hey Tim

    I wonder if that “fire sale” lot owner had a permit for the blazing inferno?

    I see illegal plastic and toxic garbage around the flames….looks like a slamdunk “hefty fire department fine” to help ease the state’s deficit….

  5. 5
    Macro Investor says:

    By softwarengineer @ 1:

    How Many Times have We Heard That Wry Allegation From Pink Pony Home Owner Enthusiasts, “My Neighborhood is Special”

    If you own your home out-right you just mailed in the last half of your property tax owed last month….mine went up about 19% from the year before….my assessment was flat from the year before….gee….that means my home is worth the same YOY????

    Hades no, it just means you got dinged to death by a bunch of last minute levies and the King County assessor is terribly near sighted massaging data YOY.

    The only way any of us home owners will find out what our home is worth is sell and close the papers….the allegations as to what’s it worth now are all fairy tales.

    It’s time for some voter initiatives to tackle these ridiculous tax authorities. How about 1% of value as an absolute maximum. Ratcheting down to 0.5% after you’ve paid it for 15 years. This nonsense HAS TO END.

  6. 6
    Hugh Dominic says:

    I’m going to invent my own theory. I say that the median has gone lower because the “move up buyer” is dead. The move-up often requires some equity to tap. So the midrange owner stays put. Fewer transactions in that range, and more in the starter and investor range will dive down median.

  7. 7
    whatsmyname says:

    By Hugh Dominic @ 6:

    I’m going to invent my own theory. I say that the median has gone lower because the “move up buyer” is dead. The move-up often requires some equity to tap. So the midrange owner stays put. Fewer transactions in that range, and more in the starter and investor range will dive down median.

    That’s basically my theory as well. One modification: I think that there are a lot of existing owners who do have the equity, but don’t like the look of the economy. ….And you thought we were all silly spendthrifts.

  8. 8
    Jonness says:

    By softwarengineer @ 1:

    The only way any of us home owners will find out what our home is worth is sell and close the papers….the allegations as to what’s it worth now are all fairy tales.

    I’m currently looking at a home tax assessed at $750K that’s listed at $450K (was a million at the bubble peak). I take it, if I buy it, I have to pay yearly taxes on the $750K price even though it sat for a year before a sucker like me finally bit at $450K? It’s not an REO, and the owner is not underwater. I don’t see any similar comps that have sold over the last year nearby (it’s on the water, so similar sales are limited). It’s a nice 3000+ sq ft custom home in very good condition, so it’s not like it’s priced low due to being trashed or anything. It’s just that we are in a really tough market.

    Who knows, I might bite if the taxes were lower, but I’m not comfortable paying fantasy taxes on a house I paid a lot less for. There’s not a lot of these types of good deals that come up, so I’m pretty sure the county would just say I stole the house and make me pay the higher tax. I guess I have to wait another year and save a bunch more money while house prices come down even further.

  9. 9

    By Macro Investor @ 5:

    It’s time for some voter initiatives to tackle these ridiculous tax authorities. How about 1% of value as an absolute maximum. Ratcheting down to 0.5% after you’ve paid it for 15 years. This nonsense HAS TO END.

    Read Article VII, Section 2 of the Washington state constitution.

    http://search.leg.wa.gov/pub/textsearch/ViewRoot.asp?Action=Html&Item=0&X=1105075007&p=1

    BTW, I hope you realize that for most matters the assessor assessing property consistently 20% high doesn’t affect revenue. So how quickly the assessor reacts to different price changes isn’t much of an issue.

  10. 10

    RE: Jonness @ 8 – You can contest the assessment within the allowed time limits once you own the house.

  11. 11
    Jonness says:

    By Hugh Dominic @ 6:

    I’m going to invent my own theory. I say that the median has gone lower because the “move up buyer” is dead. The move-up often requires some equity to tap. So the midrange owner stays put. Fewer transactions in that range, and more in the starter and investor range will dive down median.

    I like the theory. I believe it’s definitely having an effect. But what strikes me as odd is, this drop occurred in a single month at a time of year when you would expect home prices to start taking a hit. So any theory that explains the drop, has to account for why it wasn’t a factor last month as well. For instance, if it’s due to foreclosures occurring and investors jumping in, then there should be a noticeable increase in this activity this month compared to last month.

    I think all of the things people are postulating are having an effect on the housing market. I’m just not sure there has been a radical MOM change in these types of activities. As a prospective buyer patiently checking out the market, I’ve noticed a surprising amount of sales. But it seems to me, a lot of homeowners lowered prices in October knowing they would either sell now or face the wrath of winter. Buyers snapped up these good deals.

    Maybe I’m way off base, but prices simply going lower explains a MOM drop, which I’m not seeing proposed in most of the other suggestions. For some reason, hardly anybody can believe Seattle area house prices dropped in October, and they suggest the lower price is nearly 100% due to changes in the mix. I’m guessing it’s a combination of lower prices and a changing mix, with lower prices being the primary factor.

  12. 12
    Jonness says:

    By Kary L. Krismer @ 10:

    RE: Jonness @ 8 – You can contest the assessment within the allowed time limits once you own the house.

    Thanks Kary. Does the fact you bought the house on the market for a specific price weigh in, or does the county only look at comps when considering the value of your home?

  13. 13

    By Jonness @ 11:

    For instance, if it’s due to foreclosures occurring and investors jumping in, then there should be a noticeable increase in this activity this month compared to last month.

    Which is why I first looked at the number of short sales and REOs. Neither was out of line.

    I do like the theory it could be flippers dumping before the holiday season. I’ve seen some pretty aggressive price cuts on some flips.

  14. 14
    Macro Investor says:

    By Kary L. Krismer @ 10:

    RE: Jonness @ 8 – You can contest the assessment within the allowed time limits once you own the house.

    You’re being obtuse again. I’m complaining about high taxes, not high assessments. Jonness doesn’t want to buy a house then have to beg someone to be reasonable… and probably be denied.

  15. 15

    By Jonness @ 12:

    By Kary L. Krismer @ 10:

    RE: Jonness @ 8 – You can contest the assessment within the allowed time limits once you own the house.

    Thanks Kary. Does the fact you bought the house on the market for a specific price weigh in, or does the county only look at comps when considering the value of your home?

    I’m not certain, but my concern would be your sale could have some extraneous factors that affected the price. The big one could simply be someone selling a house too cheap. Just as it’s possible to price too high, it is possible to price too low. I think the bank did that on the Covington/Maple Valley one I mentioned the other day.

    I faced that exact same thing when I bought in that I bought in October and the county assessment for January was over 10% higher than my sales price. When I did the math it wasn’t worth the effort to contest it, except to gain the experience of having done so. In subsequent years the assessment came more in line without any intervention on my part.

    BTW, there is valueappeal.com to assist. I’ve never tried using them.

  16. 16

    By Macro Investor @ 14:

    By Kary L. Krismer @ 10:

    RE: Jonness @ 8 – You can contest the assessment within the allowed time limits once you own the house.

    You’re being obtuse again. I’m complaining about high taxes, not high assessments. Jonness doesn’t want to buy a house then have to beg someone to be reasonable… and probably be denied.

    I wasn’t responding to you, but if you think real property taxes are high in Washington state, I’d suggest not moving from here because you won’t like things elsewhere.

    When I did respond to you I directed you to the Washington state constitution.

  17. 17

    On the topic of taxes, in my area 35% of the tax paid goes directly to the school district. Only about 15% goes to the state and 9% to the county. The biggest others are roads, fire, hospital and library.

    Those things have to be paid for somehow (although at this point I suspect my area is big enough that the hospital thing could go away).

  18. 18

    By Macro Investor @ 5:

    By softwarengineer @ 1:

    How Many Times have We Heard That Wry Allegation From Pink Pony Home Owner Enthusiasts, “My Neighborhood is Special”

    If you own your home out-right you just mailed in the last half of your property tax owed last month….mine went up about 19% from the year before….my assessment was flat from the year before….gee….that means my home is worth the same YOY????

    Hades no, it just means you got dinged to death by a bunch of last minute levies and the King County assessor is terribly near sighted massaging data YOY.

    The only way any of us home owners will find out what our home is worth is sell and close the papers….the allegations as to what’s it worth now are all fairy tales.

    It’s time for some voter initiatives to tackle these ridiculous tax authorities. How about 1% of value as an absolute maximum. Ratcheting down to 0.5% after you’ve paid it for 15 years. This nonsense HAS TO END.

    If an initiative like this were to pass, you could expect road maintenance to end, libraries and parks to close, student/teacher ratios to increase in schools, and police and fire department layoffs..

  19. 19

    RE: Ira Sacharoff @ 18 – California has been suffering as a result of its poorly thought out initiative regarding real estate taxes. They’ve converted their real estate tax into a sales that which recurs annually, which has created both revenue problems and problems of equality.

  20. 20
    memento mori says:

    RE: Jonness @ 8

    good question, but if you paid less, cant you dispute the tax bill and ask that it reflects the new value of the house?

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