August Reporting Roundup: “The Market Just Totally Sucks”

We’ve got fewer articles than usual this month for our 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). With the holiday weekend, I waited an extra day to see if any new stories would be posted, but nothing new came in since Sunday.

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

Opinions vary on possibility of a housing slowdown, but numbers show solid activity

Some brokers from Northwest Multiple Listing Service detected a slowdown in housing activity during August, “but nowhere near what is typical,” according to one industry veteran. Among MLS leaders who commented on the service’s latest report, expectations for the remainder of 2015 ranged from one who predicted “we’re on the cusp of a slowdown,” to others describing activity as “torrid” and saying “sales will continue at a fast pace.”

“I don’t think any real estate market/economy can sustain steadily increasing prices like we’ve seen without a leveling or a drop-off of sorts,” cautioned Gary O’Leyar, designated broker/owner at Berkshire Hathaway HomeServices Signature Properties and a past chairman of the Northwest MLS board.
Another industry leader also commented on a possible leveling of activity.

“Given the seasonality of real estate and low inventory levels, I think we’re on the cusp of a slowdown in the housing market,” stated OB Jacobi, president of Windermere Real Estate. “The continued double digit increases in home sales simply cannot be sustained unless we see inventory growth,” he emphasized. That is unlikely, he suggested, “since we’re entering the time of year when fewer people list their homes.

“Conditions are optimal for the home buying surge in the Puget Sound Region to continue, due to job growth and historically low interest rates,” suggested J. Lennox Scott, chairman and CEO of John L. Scott. “We can also expect the severe shortage of homes for sale close to job centers, and in the more affordable and mid-price ranges in all Puget Sound markets, to persist,” he added.

You can always count on Lennox for the perpetually rosy outlook, no matter what reality suggests.

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

Seattle Times

Sanjay Bhatt: Condo prices climbing even faster than houses

While the inventory of homes for sale has ticked up steadily since March, the region continues to suffer the worst shortage in more than a decade.

But prices haven’t risen enough to jump-start new-home construction.

From January to July, building permits were issued for a total 5,103 single-family homes in King, Pierce and Snohomish counties, down 4 percent from a year ago, according to the National Association of Home Builders.

But permits were issued for 9,938 multifamily units, a 45 percent jump over a year ago, with the vast majority being apartments.

Builders are opting for apartments over condos, experts say, because they don’t face the liability of being sued under the state’s condominium act. Some condo builders still bear fresh memories of multimillion-dollar settlements with homeowner associations.

“You’re finding developers saying, ‘Why take the risk of building a condo?’ ” said Matthew Gardner, chief economist at Windermere Real Estate. “Whereas in today’s environment, you can build an apartment, get it half leased up, sell it to an institutional investor and walk away.”

There’s also the overall falling home ownership rate and general disinterest in home buying in the wake of the bursting bubble. The closer you get to the city, the less likely you’ll find affordable homes and the less likely you’ll find people who even want to buy.

KING 5

Dan Cassuto: Home prices soaring in Seattle

The market is especially hot in neighborhoods like Ballard.

A 950-square foot home with three bedrooms and one bath had an open house on Saturday. The listing price? $425,000.

“It’s considerably more difficult to find a place than it was a year ago,” said Heather Hearsey, the agent listing the home. “I’ve heard of numerous people getting 13 to 15 offers on a house with people waiving inspection and waiving financing.”

Here’s the video from KING 5:

To quote the buyer in the video: “The market just totally sucks. Everything is overpriced and super tiny.”

I feel your pain, anonymous Ballard buyer. I feel your pain.

Puget Sound Business Journal

Steven Goldsmith: For Seattle-area home shoppers, August was not enough of a good thing

The housing market showed few signs of wilting in the August heat.

…the overall market continued to be held back by a scarcity of listings. For the fifth month this year, the MLS said, pending sales in its 23-county area outpaced the number of new listings added to the inventory. The 9,921 new listings was was the lowest level since February.

We didn’t get much more than a short blurb from the PSBJ this month, unfortunately.

Tacoma News Tribune / The Olympian

Rolf Boone: Growth of South Sound home sales slowed in August

The South Sound real estate market cooled in August as sales of single-family residences in Pierce and Thurston counties failed to rise by a double-digit margin for the first time since February.

But let’s not get greedy, because sales still rose more than 7 percent in both counties from the same period a year ago, according to data released Thursday by the Northwest Multiple Listing Service.

Median prices, too, continued to rise in both counties last month, as did the number of pending sales, the data show.

“August continued a very busy spring/summer market,” said Ken Anderson, president and owner of Coldwell Banker Evergreen Olympic Realty of Olympia, in an email.

Even though this month’s Tribune / Olympian story is short, I appreciate that Mr. Boone at least got an independent quote from a local agent. Better than just copying the canned agent quotes in the NWMLS press release.

(Sanjay Bhatt, Seattle Times, 2015-09-03)
(Dan Cassuto, KING 5, 2015-09-06)
(Steven Goldsmith, Puget Sound Business Journal, 2015-09-04)
(Rolf Boone, Tacoma News Tribune, 2015-09-03)

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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.

16 comments:

  1. 1
    PhilW says:

    If we have a crash in apartment rents, or even a stall, you’ll see condo prices do they same. Home buyers and single unit investors use apartment rents for comparison. It may even encourage a few conversions to condos when the institutional investors see no chance of an easy payback by renting.

  2. 2

    RE: PhilW @ 1
    Condo Homeowner Fees, Parking and Property Taxes

    Makes the mortgage payments on downtown condos seem dinky in comparison. Calculate a bottom line before you plunge into the pool.

  3. 3
    David B. says:

    RE: softwarengineer @ 2 – I doubt that. Sure, they can be significant costs, but “[make] the mortgage payments seem dinky in comparison”? Unlikely, unless you made a large down payment to keep your mortgage small. That’s the only time I’ve had a condo where the monthly HOD+TAX costs rivaled the mortgage payment.

    Even then, the costs were close. I.e. the non-mortgage costs by no means were as described in your quote. And I’ve shopped around for condos a fair bit, keeping an eye on costs other than financing the loan, so I have a fairly good sampling to go on.

  4. 4
    Jay says:

    When it is time for major renovation, Condo HOA board will charge you thousands of dollar, $100,000 to $120,000 is normal for roof, mold and siding issues. When they do that, you can’t even sell your condo, because who wants to throw away another $100,000 for repairs, then it will be short sale. The new townhomes in Seattle are better than the old ones. Most of them don’t have HOA, and you don’t spend $400 monthly on stupid HOA fees.

  5. 5

    RE: David B. @ 3

    Good Point

    What I meant was the add-ons [$300K Renton Condos] are reported as $600/mo. HOA fees currently reported by my hairdresser, and you add-in the property tax….maybe dinky is exaggerating it a bit [not bidding on Seattle monthly parking spots]. So you pay off your condo principle….now these fees keep going up as years go by and quicker than inflation too, ask any HOA Board. If you’re a landlord this eats into your bottom line too…especially when you throw in the maintenance rattler snake.

  6. 6
    redmondjp says:

    By Jay @ 4:

    When it is time for major renovation, Condo HOA board will charge you thousands of dollar, $100,000 to $120,000 is normal for roof, mold and siding issues. When they do that, you can’t even sell your condo, because who wants to throw away another $100,000 for repairs, then it will be short sale. The new townhomes in Seattle are better than the old ones. Most of them don’t have HOA, and you don’t spend $400 monthly on stupid HOA fees.

    Google “Riverwalk Condos Redmond mold” and have fun reading! Textbook case, and unfortunately this seems to be more of the rule rather than the exception for condos in our area.

  7. 7
    sleepless says:

    I may sound like a broken record, but I see rental signs all over Bellevue DT as well as dark windows in the new apartment communities. The prices are still sky high, but who is renting those units? I see no people moving in? How long can the prices be elevated and how long does it take for, say, 260+ units apartments to go 90% occupation rate? It is been 3 months for Main St Flats, but they are still mostly empty… Besides, we have many more apartments coming to the market in the next couple of years. Bellevue looks like a construction site now, new apartments popping up everywhere. I guess, more affordable rents will also weigh on the home buyers demand. If rents become more affordable, fewer people will be looking to buy

  8. 8

    RE: sleepless @ 7

    I am seeing rents rising and vacancies rising at the same time. Landlords with mega units are reporting losing tenants who are buying vs renting somewhere else. We could see a shift in the highest of rents, not necessarily $ amount but those that are charging the limit or beyond what the market can bear…long term. They seem to be getting a tenant to agree to the high amount…but then losing them as soon as the tenant can find a lower cost place to live.

    However, as to comment #1 “If we have a crash in apartment rents, or even a stall, you’ll see condo prices do they same. ” The condo prices go up when the starter home prices get out of reach. So there is a dual cause. More people buying vs renting but also more people buying condos (or townhouses) because the single family starter home market got higher.

    When starter homes get too high, the condo market can increase out of proportion to the rest of the market.

  9. 9
    Jay says:

    RE: redmondjp @ 6 – Yeah, I read about those condos. They were super cheap a few years ago, especially the short sales and bank-owned ones. The new renovation looks great, but I hope they actually fixed the problems!

  10. 10
    jon says:

    Just when we thought we were safe from the Chinese, now the Californians are heading our way again:

    http://www.oregonlive.com/front-porch/index.ssf/2015/09/no_californians_stickers_being.html#incart_2box

    “Portlanders apparently upset with the direction of the local housing market are slapping “no Californians” stickers on For Sale signs in the city, real estate agents say.”

  11. 11
    Jay says:

    RE: Ardell DellaLoggia @ 8 – According to the latest data from Redfin, the price gain in August on the Eastside is double digit comparing to last year August. Landlords are also charging super expensive rent for single family house, like around $3000 for a crappy 60’s house. It is just crazy.

  12. 12
    ess says:

    By jon @ 10:

    Just when we thought we were safe from the Chinese, now the Californians are heading our way again:

    http://www.oregonlive.com/front-porch/index.ssf/2015/09/no_californians_stickers_being.html#incart_2box

    “Portlanders apparently upset with the direction of the local housing market are slapping “no Californians” stickers on For Sale signs in the city, real estate agents say.”

    Having experienced both rising and lowering real estate markets, I prefer the rising ones. As far as I am concerned, Californians are welcomed to relocate and buy property in Seattle. If they sell their houses in areas such as LA, SF, and Silicon Valley, they will have plenty of money to purchase nice houses in our trendier markets.

  13. 13
    David B. says:

    RE: softwarengineer @ 5 – Well, sure. Part of due diligence on the part of the buyer is to understand what the total costs of a property are likely to be and budget for them. And those costs are always part of the picture. Budget just for loan payments and you’re budgeting for trouble.

    Condos have significant HOA fees and single-family homes generally don’t. Condos also have the HOA handling exterior and common-area maintenance issues the analogues of which in a SFH are borne by the homeowner. The costs exist in both cases.

    The rub is that for a condo, the HOA decides when and how to perform such maintenance, and all owners are never on the same page. (Some are between jobs, retired, or otherwise short of cash and would prefer to defer the maintenance, but odds say some owners are always in such situations, and the maintenance has to be done sometime.) Homeowners can also choose to do the work themselves and trade time for money, generally not an option with an HOA.

    That, and not the mere existence of maintenance costs, is the big financial difference between owning a condo and owning a SFH.

  14. 14
    sleepless says:

    By ess @ 12:

    By jon @ 10:Having experienced both rising and lowering real estate markets, I prefer the rising ones.

    Housing is a shelter, a necessity, just like food or closing. It is a utility. How exactly is more expensive and less affordable housing beneficial? Unless, of course, you believe the FED and main stream propaganda that inflation is good and diminishing your purchasing power is great for the economy… We need more inflation because people “postponing” their purchases, right? Just like a pair of new pants, if it cost now $50 and it will be $45 next year, i will wear no pants and wait another year to buy a new pair and save$5?

  15. 15
    Jay says:

    RE: sleepless @ 14 – The difference is supply. Housing has limited supply, whereas food and clothing are being made constantly.

    By the way, if you are willing to commute, there are still lots of good deals in South King County. Federal Way, Kent, Auburn and Renton have pretty cheap housing, and they are still cheaper than 2007 and 2006.

  16. 16
    Erik says:

    RE: jon @ 10
    I would take the Chinese over the Californians anyday. The freeloving Californians ruined their state and now they are coming to ours.

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