January Stats Preview: Vanishing Inventory Edition

Now that we’re already a full month into 2015, let’s have a look at our monthly stats preview. First up, here’s the snapshot of all the data as far back as my historical information goes, with the latest, high, and low values highlighted for each series:

King & Snhomish County Stats Preview

Listings inventory hit another new all-time low in King County in January. Listings are still falling in Snohomish County as well, but are still slightly above their early 2013 lows. Meanwhile, sales fell dramatically month-over-month in both counties, as is fairly typical for this time of year. Year-over-year sales were up just slightly in King County, but down in Snohomish. Foreclosure notices declined from 2014 in both counties.

Next, let’s look at total home sales as measured by the number of “Warranty Deeds” filed with King County:

King County Warranty Deeds

Sales in King County fell 33 percent between December and January (in 2013-2014 they fell 29 percent over the same period), and were up just 1.4 percent year-over-year.

Here’s a look at Snohomish County Deeds, but keep in mind that Snohomish County files Warranty Deeds (regular sales) and Trustee Deeds (bank foreclosure repossessions) together under the category of “Deeds (except QCDS),” so this chart is not as good a measure of plain vanilla sales as the Warranty Deed only data we have in King County.

Snohomish County Deeds

Deeds in Snohomish fell 25 percent month-over-month (vs. a 17 percent decrease in the same period last year) and were down 6 percent from January 2014.

Next, here’s Notices of Trustee Sale, which are an indication of the number of homes currently in the foreclosure process:

King County Notices of Trustee Sale

Snohomish County Notices of Trustee Sale

Foreclosures in both counties were down from a year ago yet again, and were basically flat month-over-month in both counties. King was down 31 percent from last year, and Snohomish fell 34 percent.

Here’s another measure of foreclosures for King County, looking at Trustee Deeds, which is the type of document filed with the county when the bank actually repossesses a house through the trustee auction process. Note that there are other ways for the bank to repossess a house that result in different documents being filed, such as when a borrower “turns in the keys” and files a “Deed in Lieu of Foreclosure.”

King County Trustee Deeds

Trustee Deeds were down 57 percent from a year ago, falling to their lowest point since May 2008.

Lastly, here’s an update of the inventory charts, updated with the inventory data from the NWMLS.

King County SFH Active Listings

Snohomish County SFH Active Listings

Inventory inched down from December to January in King County, falling to another new low point. Snohomish county posted its second year-over-year inventory decline in a row. King is currently down 14 percent from last year, while Snohomish is down 7 percent.

Note that most of the charts above are based on broad county-wide data that is available through a simple search of King County and Snohomish County public records. If you have additional stats you’d like to see in the preview, drop a line in the comments and I’ll see what I can do.

Stay tuned later this month a for more detailed look at each of these metrics as the “official” data is released from various sources.

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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.

47 comments:

  1. 1

    Inventory is Getting Weaker

    But the 90 lb skin and bone weakling we had for inventory last year, even makes this degradation a moot point.

  2. 2
    Deerhawke says:

    Inventory down 14% in King County. In the better Seattle neighborhoods, it seems like it is down even more. I certainly am not seeing many yard-arms in the neighborhoods I work in (705-710).

    The stock answer for why there is so little inventory these days is that people are still underwater on their mortgages and so they stay put and continue to pay their mortgage every month. Maybe that is one reason, but over time that has to be less of a factor. I think it is that people don’t feel a need to list their property when they can just wait and watch the price rise. Maybe there are a lot of reasons. Here is one.

    There are more transactions taking place than the MLS accounts for. Most of the builders I know buy teardowns and vacant land through a “dirt dog”, an agent or flipper who specializes in off-market deals. I would estimate that this accounts for about 100 transactions per month in the Seattle neighborhoods. These sales never pass through the MLS. This is not a new thing and has been happening for as long as I have been in the business.

    What is new however is that I am seeing more agents who are so desperate to find something for their buyers that they are taking the time to pull permit histories at DPD. They track down builders so they can arrange a sale of their remodels and new construction homes before they are even finished. But this is one of many reasons that the inventory numbers are down– those homes become private sales and go straight to escrow. They never even pass through the MLS and are never available to the public.

    I certainly haven’t done a systematic study, but I know of 5 transactions like that in the past 2 months. Most of the deals are done at premium prices because the builder is giving up the opportunity to have the home bid up.

    Any other theories out there on why inventory is so low?

  3. 3

    With this level of inventory, the sales volume and median price won’t mean as much when they come out, and Case-Shiller is practically irrelevant.

  4. 4
    Deerhawke says:

    Why do you say that Kary? Is it because with a much lower level of inventory, statistically you get small sample problems?

  5. 5
    David B. says:

    @Deerhawke – With respect to sales volume, I would wager a guess it’s because volume no longer says much about the strength of the market with such a low inventory.

  6. 6
    Shoeguy says:

    Housing is in a massive catch-22 logjam.

    Home owners can’t sell and recover enough equity to put down on an upgrade. Yet affordability is already strained, so prices aren’t going to be returning to the levels where they could sell any time soon.

    Horray for 20 years of stagnating wages and Fed intervention in the housing market.

  7. 7

    RE: David B. @ RE: Deerhawke @ – David B has it right as to my reasoning on volume. Volume easily could have been much higher if there had been more inventory.

    As to price and “price index” data, the low inventory is also affecting that, and that type of data is only useful, IMHO to show the relative health of the market. With the market being so restricted, I’m not so sure it says much, if anything.

  8. 8
    Eastsider says:

    I will take a crack at current low inventory. I believe nowadays more people are staying put because their mortgages are underwater and there are far fewer relocations due to move-up job changes. You can see that in persistent weak job data (e.g. % working population, change in hourly wages.)

    In a low inventory situation, prices tend to be more volatile and less relevant. For example, if a stock used to trade 10,000 shares a day and is now only trading 1,000 shares a day, the share price is irrelevant if you try to unload 10,000 shares a day.

  9. 9

    RE: Shoeguy @

    “Home owners can’t sell and recover enough equity to put down on an upgrade.

    I know many homeowners who can sell and have enough equity to put down on an upgrade, but there is no upgrade to be had due to low inventory. Most are happy where they are and so would like a specific upgrade or none, and are not willing to sell and rent in between waiting for that perfect upgrade to become available. So the move up market is stagnant due to lack of move up inventory, except for those who are truly very unhappy with the home they currently own.

  10. 10
    TLCC says:

    16% underwater in kc metro as of dec 2014 — may sound high, but not when you consider it’s down from 39% in 2012. Houses are going into very aggressive multiple offer situations. If anything, this is the perfect time for a formerly-underwater owner to cash out. I don’t believe the currently-underwaters are impacting the inventory that much.

  11. 11

    RE: TLCC @ RE: Ardell DellaLoggia @ – The numbers TLCC cites to are estimates at best. No one really knows how many people are underwater because there is no way to accurately automate valuations and it’s also difficult to determine amounts owed.

    But connecting up what Ardell said (which I basically agree with) to what TLCC said, the move up houses are probably the least likely to be underwater, but even still there’s a lack of sufficient inventory.

  12. 12

    RE: TLCC @

    I Agree With Kary

    Its one thing to cite a few too few examples and another to show trends with a batch of evidence.

  13. 13
    GoHawks says:

    RE: Eastsider @ – The irony is, the more prices bounce and the fewer underwater homeowners there are, the lower inventory gets.

    I think low rates are playing a significant factor. Many folks that are trading up are not putting their homes on the market, but are renting them out instead since they can breakeven or even make a little per month. In the past they most often sold as they moved up. One less home available……one less option for someone else to trade up to. The food chain is off.

  14. 14
    ronp says:

    I would like some statistics on multifamily King County housing construction. I get the feeling a lot of younger people are renting in higher density locations near workplaces. According to http://www.downtownseattle.com/resources/development-and-construction-projects/ 9500 housing units are under construction in the Seattle CBD. Bellevue CBD too – an example http://www.equityapartments.com/washington/seattle-apartments/downtown-bellevue/city-square-bellevue-apartments.aspx

    On the other hand the house across the alley from me (NE Seattle) was bought for $490K and torn down immediately. Some sort of monster house is currently under construction that could sell for $1.2m.

  15. 15

    RE: GoHawks @ – I don’t know whether that’s the case or not, but having less of a tax gain would be another reason to rent the property. Giving up the $250/$500k exclusion for selling your home is foolish if you have any significant gain, but now to have significant is less common.

  16. 16
    Jay says:

    Well, there are properties that have been on the market for a while in Bellevue and Redmond. But buyers don’t see them as the perfect homes. They are not willing to put up the new fence, or fix the windows. I would not enter a bidding war. Instead of over paying $50,000 or $100,000 to win that perfect house, I can spend that money for renovation!

  17. 17
    Jay says:

    RE: Jay @ – I think bidding wars are ridiculous. I don’t know why people would fall for the perfect house and pay anything to get it. It is stressful and emotional. Instead of paying thousands of dollars more for a slightly nicer house, you can renovate a dated house with less money.

  18. 18
    Mike says:

    Sign of the times – there’s a crappy little house on NW 85th st that was pending short sale for 2 years at $345K. It went into foreclosure then came back on as Bank Owned at $425K. I doubt they’ll get that, but if they come anywhere close they’ll likely earn a premium over the short sale offer.

    Short sales have all but disappeared from these neighborhoods. The gain from outright foreclosure now eclipses any savings from allowing a short sale.

    The only houses that are underwater at this point are ones that were REALLY left to deteriorate over the past 8 years and/or the owner piled up several years of back payments and penalties.

  19. 19
    Jonness says:

    By Mike @ :

    The only houses that are underwater at this point are ones that were REALLY left to deteriorate over the past 8 years and/or the owner piled up several years of back payments and penalties.

    Also houses south of Seattle bought in 2007.

  20. 20
    The Tim says:

    RE: Kary L. Krismer @ – I know that if I were to be in a financial position to buy a better house, I wouldn’t sell my current home. I like this home and intend to own it for life, whether I live here or not. I won’t be buying another home until I can do it while holding on to this one as a rental, regardless of what pricing or interest rates are doing.

    I wonder how many other home owners have similar plans.

  21. 21

    RE: The Tim @ – You might feel differently if you had $100,000 or more of gain that you could take tax free. The government doesn’t offer deals like in many other areas.

    But interesting you are more bullish on real estate than me. When we bought our current house one of the main reason we sold the old house was the tax free treatment, particularly since basis was tied up in a remodel. The thought of having to prove what we spent on the remodel many years down the road wasn’t too attractive. But the second reason was the simple fact that real estate can go up or down, and for that property it did in fact go down significantly. Finally, I’m aware that being a landlord isn’t all it’s cracked up to be. Those were probably the top three reasons we sold, in order.

  22. 22
    Weasel says:

    A few tech news sites have been reporting Seattle as the #1 or #2 place for tech jobs, anyone aware of that will probably want to sit tight knowing this has the potential to push prices / rental incomes up next summer.

  23. 23
    The Tim says:

    By ronp @ :

    I would like some statistics on multifamily King County housing construction. I get the feeling a lot of younger people are renting in higher density locations near workplaces.

    I’ll see if I can find any good data sources on this. That kind of thing has been difficult to compile data on in the past.

  24. 24
    The Tim says:

    By Kary L. Krismer @ :

    RE: The Tim @ – You might feel differently if you had $100,000 or more of gain that you could take tax free. The government doesn’t offer deals like in many other areas.

    But interesting you are more bullish on real estate than me.

    I don’t really see it as being bullish on real estate. I just like the idea of perpetual rental income (and passing real estate assets on to my descendants) more than I like the idea of a one-time payout from a home sale.

  25. 25

    RE: The Tim @ – Well, with stepped up basis on death, dying is pretty good tax-wise too! ;-)

  26. 26
    Jay says:

    RE: The Tim @ – Good luck for being a landlord! Real Estate is not predictable, even you said it before, that the price of Real Estate doesn’t just go up and up.

    I have to agree with Kary. Any home owners who are not selling right now and are still hoping for the price to go up are quite greedy. How often does it happen in history that inventory is at such a low level? The kind of bidding wars that we see are abnormal!

  27. 27
    Marc says:

    By Jay @ :

    RE: The Tim @ How often does it happen in history that inventory is at such a low level? The kind of bidding wars that we see are abnormal!

    Well, we had it in 2012, 2013, and 2014. 2015 has shaped up to be as bad, if not slightly worse, than any of those. Prices have nowhere to go but up in the short term. At some point they will rise to a level where greater supply comes out to cash in but it hasn’t happened yet.

    That said, I am cautiously optimistic that the double digit price gains we saw in the recent past won’t continue this year but I also doubt that we’ll get back to a historical rate in line with inflation this year either.

    My economics degree tells me the US will eventually see very significant inflation due to all the liquidity pumped into the economy by the fed. But, the near absence of inflation for the past several years is now making me think we (and Europe) may be the new Japan. If that’s the case, what’s the optimal long term play in real estate?

  28. 28

    RE: ronp @

    Yes We Have Larger 2000+ SF New Homes Being Built in SE King County Too

    We also have many empty bank owned units rotting for years too. What does this data mean? Lord only knows, but it sure isn’t trend analysis.

  29. 29

    RE: Marc @
    Shooting from the Hip Like Cramer?

    All the years you mentioned were 90 lb weakling inventory years, its like saying a few snapshots in time that indicate bullishness erase the equivalent bearish bank-owned sitting around and rotting. I’m for opinions, but I’m also for logic with enough data too.

  30. 30
    GoHawks says:

    RE: softwarengineer @ – a few snapshots in time…….they did mention three entire years in that post, with this year being a potential fourth. Hardly a snapshot.

  31. 31

    RE: GoHawks @ – It’s closer to 2.5 years, but see for yourself: https://seattlebubble.com/blog/wp-content/uploads/2015/01/KingCoSFHInventory2014-12.png

    I think part of the problem may be the press focusing on the median price so much in their reporting. Go up and ask the average person where interest rates are and chances are they know they are low. Go and ask the same person what the inventory level is, and they’ll probably just stare at you blankly.

  32. 32
    boater says:

    By Kary L. Krismer @ :

    RE: The Tim @ – You might feel differently if you had $100,000 or more of gain that you could take tax free. The government doesn’t offer deals like in many other areas.

    But then you have to invest that money somewhere else assuming you aren’t using it immediately. The way I looked at it with the current appreciation and with rents at the rates they are it takes maybe a year or two of renting to be ahead even with the taxes taken into consideration. Right now I look at the rents I am earning as an inflation adjusted income. I don’t think it’s going to grow as fast as it has but I expect rents to keep up with inflation over time. As part of my overall portfolio it’s a nice little area to have some money in.

  33. 33
    boater says:

    RE: Kary L. Krismer @ – average man on the street or average home buyer? I think the answer will differ based on which of those two you ask.

  34. 34

    By boater @ :

    RE: Kary L. Krismer @ – average man on the street or average home buyer? I think the answer will differ based on which of those two you ask.

    It would be man on the street, since the question is why aren’t people selling. I think there would be more sellers if more homeowners knew the market conditions.

    On your prior answer, the tax issue can be complicated. As I mentioned my situation was complicated by prior improvements to the house which I didn’t want to have to document in the future. But you also obviously need to account for costs of sale. You should also consider the possibility of higher tax rates in the future (either because of higher rates in general or higher individual income) and capital gains rates possibly going away. Conversely you might have lower rate in the future if you retire, or if you have a spouse die you might have a step up in basis resulting in no gain on sale.

  35. 35
    Jay says:

    Having “perpetual rental income” also means perpetual work. It is like a second job. If you are lucky to find decent tenants, then it is pretty easy. But good tenants have good jobs, they will eventually move and buy their own properties. I hope wannabe landlords understand this before they get themselves into troubles. Look at the apartment rentals in Bellevue, they have huge price drop because the supply of new rental units is increasing significantly!

    Remember David Losh, he said that children actually don’t want to inherit houses because of property taxes and maintenance issues. If the parents die at the bottom of the housing cycle, then the children can’t sell the houses at super high price anyway. At worst, they can’t sell the houses at all, like a few years ago, and then they have to spend lots of money on maintaining it, or the value of the property goes down even more.

  36. 36

    RE: Kary L. Krismer @

    Yes Kary

    If I traded real estate I’d rid myself of the old home too. Renting out is full of legal bear traps, bad tennants destroying the place, rent not paid and even chain migration [or animals] into the unit completely destroying it.

  37. 37

    RE: Jay @

    Yes Jay

    Its like winning a $25,000 trip to Australia, now you owe about $8-12K in income taxes as the lucky?) winner.

  38. 38
    ongsomwang says:

    By Mike @ :

    The only houses that are underwater at this point are ones that were REALLY left to deteriorate over the past 8 years and/or the owner piled up several years of back payments and penalties.

    That might be true the closer you get into Seattle. But plenty of homes outside of I-90 corridor are still underwater.

  39. 39
    GoHawks says:

    RE: Kary L. Krismer @ – Thanks Kary.

    I do think the average person is pretty aware of current market conditions. Everyone thinks real estate is hot again and is reluctant to sell. People sell when prices go down…….ironically, and not when they go up.

    The big issue regarding inventory is there is a lot of people that they would like to sell, if they knew with a level of certainty that they could find a new home to buy/rent in a reasonable period of time with a minimum amount of stress and headache. Current market conditions do not offer that, so they sit on the sidelines and wait.

  40. 40
    boater says:

    All I can say is the last five years I’ve been renting out homes have been great and extremely easy. There are lot of people looking to rent so it’s easy to find great renters. I work maybe five days out of the year on the rentals. Other than that I take checks to the bank.

  41. 41

    Kary said”I think there would be more sellers if more homeowners knew the market conditions.’
    So maybe real estate agents ought to be bothering homeowners with the good news ” Now is a great time to sell!”
    I think it’s more of a vicious cycle. First, a lot of people did buy houses in 2007, and, apart from some Seattle and eastside neighborhoods, many parts of the Seattle area are still short of a full recovery. My son’s house near Kubota gardens( upper Rainier Beach) is in great shape, and is rented out for a profit, but they’d still get 15% less than what they paid in the summer of ’07( That’ll teach him to not listen to his father.)Even if sellers didn’t need to bring money to the closing table, they’d still end up losing, especially with transaction costs.
    Second, I think what people hear and see on the news are the stories of fifteen offers coming in on houses for sale. So that’s great if you’re selling a house and moving to Kansas. But people aren’t THAT stupid( well…pretty stupid.) They realize that if they sell their home and want to buy another one, they’ll be one of those suckers trying to outbid many others for that 50’s crapbox in Wedgwood.
    At some point, something’s got to give. They’ve been building apartment buildings like crazy in Seattle. A few years ago, people were shunning home buying and preferring to rent an apartment. A lot of people still do. But tastes change, and many of these apartment dwellers may want to buy again soon, or if a major local employer experiences financial problems, these apartment dwellers will move on to other areas.I can’t imagine that all these apartment buildings are going to be able to have very high occupancy rates forever. What’ll happen? Turn them into condos? Tear them down and turn the land into organic kale farms?

  42. 42
    wreckingbull says:

    RE: softwarengineer @ – Another option is to consider low-cost REIT funds. I am making far more money this way than I could as a landlord in Seattle.

  43. 43
    ongsomwang says:

    By Ira Sacharoff @ :

    I think it’s more of a vicious cycle. First, a lot of people did buy houses in 2007, and, apart from some Seattle and eastside neighborhoods, many parts of the Seattle area are still short of a full recovery. My son’s house near Kubota gardens( upper Rainier Beach) is in great shape, and is rented out for a profit, but they’d still get 15% less than what they paid in the summer of ’07( That’ll teach him to not listen to his father.)Even if sellers didn’t need to bring money to the closing table, they’d still end up losing, especially with transaction costs.?

    You make a really good point here. Even if your home did recover from the 2008 crash, you still might not be able to sale once you consider the transaction costs that sellers have to bare.

    This is why younger Generation X and Millinieals are going to end up using RedFin and other non traditional routes for selling a home. Paying 6% commission is a hefty price to pay.

  44. 44
    ronp says:

    RE: The Tim @ – I guess my comment is along the lines of “Are Seattle area/King County residents becoming long term/lifetime renters due to high single family home costs and lifestyle goals?” Maybe better transit infrastructure will play a role too.

  45. 45
    The Tim says:

    By ronp @ :

    Maybe better transit infrastructure will play a role too.

    Hah! Good one! As if that’s ever going to happen in the Seattle area.

    Example of why I’m not optimistic about transit around here: The light rail they’re allegedly building from Seattle to Everett won’t be done until 2033 (at the earliest) and will take an hour and fifteen minutes to go just 28 miles.

    For comparison, the Sounder North that runs along the less-than-ideal (to put it lightly) coastal route is 35 miles of track and takes “just” 55 minutes to make it all the way to the south end of town.

    Transit in Seattle is an unfunny joke.

  46. 46

    RE: The Tim @ – That’s not fair. Seattle made progress on transportation just last year–when they tore down the Arboretum’s ramps to nowhere. ;-)

  47. 47
    Shoeguy says:

    By GoHawks @ :

    RE: Kary L. Krismer @ – Thanks Kary.

    I do think the average person is pretty aware of current market conditions. Everyone thinks real estate is hot again and is reluctant to sell. People sell when prices go down…….ironically, and not when they go up.

    The big issue regarding inventory is there is a lot of people that they would like to sell, if they knew with a level of certainty that they could find a new home to buy/rent in a reasonable period of time with a minimum amount of stress and headache. Current market conditions do not offer that, so they sit on the sidelines and wait.

    This is why I said earlier that housing is in a catch-22 logjam. Inventory is garbage so people aren’t selling because there is nothing to move up to so inventory remains garbage so people aren’t selling.

    Unfortunately we need some sort of catalyst to encourage home owners to put their houses on the market and get our inventory back to historic averages, and those catalysts will be negative, which is another catch-22 in and of itself.

    Fed intervention in the housing market has been a real disaster.

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