Low end inventory observations for Seattle

mike2

I was browsing homes priced under $375K expecting to see quite a few short sales and foreclosures in that price range. Instead I see that the majority of these cheaper homes have been held since before the bubble started - and few appear to be distress sales.

This is a sharp contrast with Fairfax county, where about 50% of the properties under $400K are distress sales. Fairfax county hit 0% appreciation about 15 months before Seattle, sometime in the fall of 2006.

This leads me to believe that Seattle's current inventory bump (er... mountain) is mainly due to slow sales, and Seattle is yet to see a meaningful increase due to financial distress. However since distress sales only pick up once prices start to decline, it is probably reasonable to expect a substantial change in the mix over the next 12 months.

Alan

Go here: http://www.metrokc.gov/recelec/records/
Click "Records Search", Accept, Search.
Select Document Type: "Notice of Trustee Sale"
Enter Date File from 12/1/2007 to 12/31/2007.
Press Search.
Click "here" to display full record count of 322.
Go back twice.
Repeat the dates for 2006 and get a full record count of 247.

Notice of Trustee Sales mostly occur due to foreclosure. This is how I get an estimate of the number of properties in KC in default. In December 2007 saw 30% more foreclosures than December the previous year.

Let's see how January is doing:
1/1/2008 - 1/16/2008: 231
1/1/2007 - 1/16/2007: 139
for a 66% increase over the same time period last year.

I would say that distressed properties are on the rise here.

mike2

Agreed - but it takes some time before distressed properties end up as distressed for sale offerings. Seattle has a way to go before the distress sale propeties start making up a significant portion of the inventory or having a meaninful effect on prices.

Alan

Yep. There is a three month delay between the notice and the sale at auction. A lot can happen to the property status in that time. KC records have only been posting 250-300 foreclosure sale notices each month. That means at any one time there is a maxium of 750-900 foreclosures active. That is less than 8% of the current inventory.

If January, February and March average 500 each then there will only be around 700 more properties on the market. Instead of inventory growing 40% YOY, we get a figure closer to 50% YOY. Still not that strong.

mike2

For some odd reason, there also seems to be a substantial lag time between the auction and the property going up for sale on the MLS. I don't quite understand why properties that went to auction sit empty for months before showing up for sale, but it happens. Perhaps it's just a symptom of banks inability to deal with the volume.

In Seattle, I still see auction sale prices that are lower than the eventual listing price - however I can say in the Fairfax market that the auction prices from 6 months back are substantially higher on average than the eventual listing price.

femto

mike2 wrote:

I don't quite understand why properties that went to auction sit empty for months before showing up for sale, but it happens.

You'll generally find them listed on the bank's own web site. Houses don't go into the MLS automagically, you have to hire a listing agent pay a fee. In many cases the banks don't want to pay for that, e.g. if the property isn't in very good condition the only potential buyer may be an investor who already knows how to find foreclosures, and they don't want to deal with inquiries from average consumers. The ones you do see in the MLS tend to be the rare unit that's still in great shape.

Perhaps it's just a symptom of banks inability to deal with the volume.

The conspiracy theory is that banks don't (or didn't) want to sell, because actual losses (difference between amount owed by borrower and amount cleared from sale) aren't recorded until the sale happens.

In Seattle, I still see auction sale prices that are lower than the eventual listing price - however I can say in the Fairfax market that the auction prices from 6 months back are substantially higher on average than the eventual listing price.

Reported auction "sale" prices are often just the bank's reserve price for the property, and typically will be the balance of the loan. Around here it's quite common nowadays to have a first lien for 80% of the original price and a second lien of 20%. When the first lien forecloses, the second lien gets wiped out, and the bank puts the property for sale at a price that covers their cost, a bit above 80% of the original price. It may be that in Fairfax there were more single 100% loans.

Scuba Steve

I have information for 98178 which is south of Lake Washington and kind of a mix of high, middle and low-end housing, if that's of any use to this thread. There are a number of places that may be distressed, and more that have been reduced in price. Read into it what you will. Bold items are for sale for less than they were bought for.

Under $250K (which is just some random number I chose) there are:

• $174950 (reduced 5K) 11218 Beacon Ave, 79 DOM, last sold 10/26/07 - 94,300
• $195,500 (reduced 7K) 7315 S 115 St, 35 DOM, last sold 6/6/05 - $210,000
• $199,950 (reduced 20K) 5609 S Avon St, 43 DOM, last sold 4/17/03 - 129950
• $207,900 7470 S 118th St, 6 DOM, last sold 2/12/01 - 48999
• $219,999 5713 S Wallace St, 8 DOM, last sold 10/23/97 - 63500
• $225,000 12205 47th Ave S, 33 DOM, last sold 2/5/07 - 237000
• $228,000 (reduced 21K) 11806 44 Ave S, 27 DOM, unknown last sale
• $229,950 (reduced 15K) 12034 62nd Ave S, 132 DOM, unknown last sale
• $230,000, 5500 S Leo St, 69 DOM, unknown last sale
• $239,950, 12233 77 Ave S, 65 DOM, last sold 7/8/05 - 216000
• $239,950 (reduced 20K) 7211 S 127 St, 124 DOM, last sold 10/17/06, 257500
• $244,000, 7012 S 116 St, 132 DOM, unknown last sale
• $244,500, (reduced 25.5K) 7020 S 120 St, 75 DOM, last sold 7/9/07, 309177
• $248,000, 11159 Luther Ave S, 37 DOM, unknown last sale
• $249,900 11201 Lake Ridge Dr S, 11 DOM, last sold 10/4/07 - 279000