We have a couple of months to go before we have a full 12 months past Mortgage Meltdown to guide us into the future of the real estate market. But volume has really been pretty stable. As you can see from the above chart, September of 2007 is when the market dropped as to volume. Compare this to some graphs I did at the end of last year showing the relationship of volume month to month back in 2005. Then add my predictions as to volume back in mid April of this year.
When I predicted that total single family home sales in King County would be 16,500 by the end of 2008, I was basing that on the second chart in the first link above. Let me bring that chart forward so you can follow what I’m saying better.
June 2008 sales were 1,557. June in 2005 represented 10.3% of the total year sales. 1,557 is 10.3% of 15,116. If you use April sales from the top wheel of 1,505 that would be 9% of 16,722 (which is where my prediction of 16,500 came from). While volume is clearly drastically reduced, it is not dropping out from under us. It basically dropped once and then stabilized. That’s good news, though we do see some minor slippage in the relationship between April of 2008 and June of 2008, so we will continue to track that as the year progresses.
Where prices will go in response to the change in volume is another story and where Absorption Rates become a weak indicator. Absorption Rates only work when you can expect all inventory to be “absorbed” . that is not the case. In a market like this you have to throw absorption rates out the window and try to find the point at which a property will not sell at all. The worst I have seen is a market where only 3 of 10 houses will sell PERIOD!. To say current inventory will be absorbed in eight months is not true. At the end of eight months, some of those homes will still be on market and other properties that came on market after them will be the cream of the crop that sells.
When you see prices fluctuating upward, while volume is stablilizing and absorption rate is high, that is because the small percentage of homes that sell quickly and at higher prices, are influencing and increasing the price stats. We saw that more in February, March and April than we did in May and June. That is why the April prediction of 16,500 may turn out to be 15,500, since June did not expand much beyond April levels as it usually does.
Single Family Homes in May and June look like they sold at higher prices, as does the condo market, but that is because people are opting to get more for their money. As price per square foot drops, people are opting for bigger houses and lower prices. Instead of buying an 850 square foot condo for $250,000, they are buying an 1,100 square foot condo for $300,000. So they are paying a higher price, but a lower price per square foot. Same is true for single family homes. In March the median price was $435,000 and the median price per square foot was $221. In June the median price is up to $451,000 but people are opting for the higher price AND the larger house, as they trade in the lower price per square foot of $216 for more house. (Note, homes in escrow are at $207 MPPSF – see weekly stats)
It’s really a smart move. People who are unsure of the market over the next several years are making sure they buy a condo or house that is large enough so that they can stay put, and not have to trade up as to size. Those who are buying, and there are clearly fewer of them, are not buying with the idea that they will REFI or sell in a couple of years. They are buying for the long term. They are paying a higher price, but a lower price per square foot. That is why it may appear that prices are going up, when they are really going down.
Before I do this week’s stats, note that earlier this week I did the 1st half and 1st quarter to 2nd quarter comparison. May and June did not do as well as expected, so the 2nd quarter did drop more as to volume YOY than the 1st quarter. But if the market can sustain at this level for another 45 days, I think by year end it will still be in the 16,500 total sales for the year range.
Sorry this post is so long tonight. There are no easy answers this year.
Changes in condo stats for this week
Active Listings: 4,014 – UP 56- median price $320,000 – MPPSF asking $313 – DOM 66
In Escrow: 847 – DOWN 23 – median asking price $297,000 – MPPSF asking $302 – DOM – 48
Sold YTD : 2,875 – UP 98 – median list price $290,500 – median sold price $285,500 – median PPSF – $289 DOM 48 Note: 35% selling in 30 days or less.
In Escrow: 2,771 – UP 11 – median asking price $434,000 – DOM 49 – MPPSF $207
SOLD YTD: 8,612- UP 297- median asking $449,950 – median sold price $440,000- DOM 49 – MPPSF $218 Note: 36% selling in 30 days or less.
Actively for sale 12,184 – UP 281- MPPSF <$800,000 is $220- MPPSF >$800,000 is $337
Note that the MPPSF Asking prices of homes not sold is virtually unchanged week to week while those going into escrow are the ones asking less and less each week.
(above info and graphs not compiled, published or verified by NWMLS – required disclosure)