The final amount of the $8000 tax credit was pretty disappointing after all of the anticipation for $15,0000, but surprisingly it seems to be generating interest among first time home buyers around the Seattle area. There were about thirty people through my Green Lake open house this last weekend, and while this area is known for its great traffic at open houses, the visitor count was still about twice of what was expected.Nine out of ten were first time home buyers and they were all asking about the tax credit for 2009.
In fact, most of the activity around Seattle last week was in the $500,000 and under price range.
A quick look at Seattle sales for the last week in the NWMLS (residential only) shows 50 closed sales in the city of Seattle. All but 13 of these were under $500,000. A look to lower priced suburbs just North of Seattle shows that all 20 of the closed residential sales in the last week for Lynnwood, Mountlake Terrace, and Shoreline combined were under $500,000 with a large majority hovering around the $300,000 mark. A look to the Eastside in Bellevue, Redmond, and Kirkland for the same period shows 27 closed residential sales with 18 of those in the $500,000 and under range.
Clearly, the $500,000 and under market is dominating the sales figures this last week, and if my last few open houses are any indication, first time home buyers are playing a major part or could be soon.
Is this really so different than last year with no $8000 tax credit?
Looking at a year ago for the same period there were three times as many sales in the city of Seattle: 150 closed sales in Seattle with 97 of them being under the $500,000 umbrella (44 of those sales were built in 2007 or after… a.k.a. new construction). In Lynnwood, Mountlake Terrace, and Shoreline combined there were a total of 24 closed sales and only 4 were over that amount. The real change is on the Eastside where out of 45 closed sales only 13 of them were driven by that lower market. The other 32 closings were over $500,000.
Except for the larger quantity of sales in Seattle and the Eastside and the flip flop of ratio of lower priced closed homes to higher priced closed homes for the Eastside, the data is strikingly similar as far as what price range dominates.
So will the $8000 tax credit stimulate first time home buyers in Seattle and drive our economy?
(Full Disclosure: The numbers gathered here were compiled by Courtney Cooper from data on residential sales only – including townhomes but not condos in the NWMLS)
I think it is already starting to help in Portland. There are a lot more interested buyers than there were before. Though, most people are just hanging onto their money and their house and their car and not selling or buying. Thanks Mr. Bush, you really bungled things up for us. Hopefully this Obama credit will undo some of the damage.
The following press release was distributed by John L. Scott today; it completely supports everything you say in your posting:
Stimulus Plan Beginning to Take Hold in Puget Sound
Seattle—J. Lennox Scott, chairman and CEO of John L. Scott Real Estate, reports that housing activity in the “more affordable
The following press release was distributed by John L. Scott today; it completely supports everything you say in your posting:
Stimulus Plan Beginning to Take Hold in Puget Sound
Seattle—J. Lennox Scott, chairman and CEO of John L. Scott Real Estate, reports that housing activity in the “more affordable
Hi Shelley – Interesting PR piece from them.
I think JLScott might be jumping the gun a little bit on it because I honestly believe that we aren’t really seeing the effects of the $8000 credit yet based on the closed sales numbers I pulled from this year and last year. They don’t show a clear spike, but looking at pendings since the credit was signed into effect might.
The $8000 could really help drive first time home buyers into the market, but I think we might only really start to see the numbers from that trickle down in the next couple of months and especially over the summer.
Hi Shelley – Interesting PR piece from them.
I think JLScott might be jumping the gun a little bit on it because I honestly believe that we aren’t really seeing the effects of the $8000 credit yet based on the closed sales numbers I pulled from this year and last year. They don’t show a clear spike, but looking at pendings since the credit was signed into effect might.
The $8000 could really help drive first time home buyers into the market, but I think we might only really start to see the numbers from that trickle down in the next couple of months and especially over the summer.
Courtney – you are absolutely right and that’s exactly what Lennox and JLS are saying. We’re seeing an uptick in activity online, at open houses, and at our mortgage company. Who knows exactly when those numbers will translate into sales, but it’s definitely a strong indicator! BTW: KIRO News is doing a story on this very subject tonight…..
Sorry….the news coverage on this topic is running on Q13, not KIRO as I previously stated. Let’s keep our fingers crossed that it comes off positive for our industry.
You said: “Looking at a year ago for the same period there were three times as many sales in the city of Seattle”
Wow so does it mean that the sales are off 67% as compared to last year??? and you are saying that the 8000 stimulus has had a positive effect this year??? Really? How did Mr. Scott manage to put a positive spin on this?
Hey Shelley – I will miss that unfortunately, but it is because I will be out showing a new home buyer:)
WaileaKid – I probbaly should have broadened my solds search a bit on the time lines for a more accurate picture – They could not have possibly have been looking at the same time frame as me. Seems like that particular week was really busy for newer construction last year. I am very definitely seeing increased interest in home buying from first time buyers – more so than I remember in the past. I can only attribute it to the tax credit and lower interest rates. Only time will tell if that translates to increased closed sales.
Courtney,
Most of the current CLOSED sales went under contract 4-5 weeks ago. I think if you looked at PENDINGS for the same period this year vs. last year you would get a better read on the effect of the stimulus.
I think a first time buyer would be pretty stupid to rush out for the $8k credit. Thats like 2% off on a starter house that is likely to fall that much in the next month, and much more by the year end.
Quick stat check for Sold Pending Inspection:
King Co:
3/1/09 – 3/7/09 = 48
3/8/09 – 3/14/09 = 88
3/15/09 – 3/21/09 = 188
Snohomish Co.:
3/1/09 – 3/7/09 =36
3/8/09- 3/14/09 = 52
3/15/09 – 3/21/09 = 71
I’ve noticed more first time home buyers recently…but I’m not sure how much of it is due to the tax credit. I’m thinking that it’s more about home prices being lower. The tax credit has income limits which begins phase out at $75,000 for single people and $150,000 for a married couple (based on adjusted gross income).
b
You say its likely that homes will fall more than 2% in the next month. What area / neighborhood are you talking about? What price range? ……and what happens to affordability if interest rates go up 1 or 2 points from the historical ALL TIME LOW rates being offered?
Thanks for the PENDINGS, Julie. Interesting weekly trend
b
You say its likely that homes will fall more than 2% in the next month. What area / neighborhood are you talking about? What price range? ……and what happens to affordability if interest rates go up 1 or 2 points from the historical ALL TIME LOW rates being offered?
Thanks for the PENDINGS, Julie. Interesting weekly trend
greg –
first time homebuyers in seattle metro. prices will decline even further if there is pressure on interest rates, why do you think ben is pushing so hard to lower them?
b
As the rate of sale (supply/demand) falls, prices will soften. As the rate of sale tightens, prices will stabilize. If they further tighten, prices will rise.
You stated that prices WILL fall more than 2% in the next month and called first time buyers in this market stupid.
Are you tracking demand/supply ratios. Different areas and price ranges have radically different sales ratios. The fact is, in city sales ratios for homes under $500,000 are tightening.
When we look at equity rates rise and fall we’re looking at the broad market. The top end may fall 10%. Under $400k may be stable or even rising…..depending on the neighborhood/area.
You are correct in that interest rates do have effect the supply demand ratios. One of the reasons that homes are starting to move and supply is tightening is mortgage interest rates are incredibly attractive. In fact, they are at all time historical lows, which creates increased affordability.
That being said, the general rule is when interest rates go up one point, it affects affordability 10 percent. In other words you can buy a $300,000 for the same payment as a $270,00.
So, now for first time buyers, that $8,000 tax credit should look very enticing.
Prices have already considerably moved off the high water marks of 2 years ago. Currently buyers can shop. Sellers know that buyers have the advantage and have more motivation to negotiate and concede price and terms. Buyers have the opportunity to lock into a 30 year mortgage with 5% or less interest rate.
I wouldn’t exactly call that a stupid.
b
As the rate of sale (supply/demand) falls, prices will soften. As the rate of sale tightens, prices will stabilize. If they further tighten, prices will rise.
You stated that prices WILL fall more than 2% in the next month and called first time buyers in this market stupid.
Are you tracking demand/supply ratios. Different areas and price ranges have radically different sales ratios. The fact is, in city sales ratios for homes under $500,000 are tightening.
When we look at equity rates rise and fall we’re looking at the broad market. The top end may fall 10%. Under $400k may be stable or even rising…..depending on the neighborhood/area.
You are correct in that interest rates do have effect the supply demand ratios. One of the reasons that homes are starting to move and supply is tightening is mortgage interest rates are incredibly attractive. In fact, they are at all time historical lows, which creates increased affordability.
That being said, the general rule is when interest rates go up one point, it affects affordability 10 percent. In other words you can buy a $300,000 for the same payment as a $270,00.
So, now for first time buyers, that $8,000 tax credit should look very enticing.
Prices have already considerably moved off the high water marks of 2 years ago. Currently buyers can shop. Sellers know that buyers have the advantage and have more motivation to negotiate and concede price and terms. Buyers have the opportunity to lock into a 30 year mortgage with 5% or less interest rate.
I wouldn’t exactly call that a stupid.
Buying a depreciating asset because the lending is cheap is very shortsighted. Your buyer in 5-10 years (which is avg move timespan) is going to be borrowing at much higher rates and will have less to pay you, making it much less likely you will recover your purchase or make any return on it.
b.
Another thing to think about. Once new construction absorbs, and it is starting to absorb rapidly in areas, the only homes left will be the resales. It will be 2-3 YEARS before the next decent wave of NC homes are available as builders have by and large stopped buying dirt.
Again, it comes down to absorption and sales ratios. Prices in the different areas/neighborhoods and price ranges all respond differently. We’ll see in a couple of months, but I like the trend I’m seeing in post 10, and I watch sales ratios carefully by area/neighborhood/price for all of KC. I am already seeing sellers advantaged markets emerging in the core area, lower price points.
I’ve heard the “uptick in interest” and “traffic in open houses” line so many times over the last year that I discount it completely.
Interest rates seem like a much bigger story than the tax credit, though lending requirements have tightened so that the universe of people eligible is a little smaller than it used to be.
The moment to look for an uptick in tax-credit-driven sales would be when/if the credit expires on December 1 2009 — is there a rush to close in November that stands out in the data (if that’s what “purchased before December 1” means). But if, as I expect, real estate has not come roaring back by then, there will be a lot of political pressure to extend it.
One more point: basic economic theory suggests that the effect of the tax credit will be divided between buyers and sellers, that is that sellers will “capture” part of it in the form of slightly higher negotiated prices. (It’s the “tax incidence” argument, just flipped around.) That’s fine with me, but it further reduces the likelihood that the tax credit will push me over the edge from not buying to buying.
I’ve heard the “uptick in interest” and “traffic in open houses” line so many times over the last year that I discount it completely.
Interest rates seem like a much bigger story than the tax credit, though lending requirements have tightened so that the universe of people eligible is a little smaller than it used to be.
The moment to look for an uptick in tax-credit-driven sales would be when/if the credit expires on December 1 2009 — is there a rush to close in November that stands out in the data (if that’s what “purchased before December 1” means). But if, as I expect, real estate has not come roaring back by then, there will be a lot of political pressure to extend it.
One more point: basic economic theory suggests that the effect of the tax credit will be divided between buyers and sellers, that is that sellers will “capture” part of it in the form of slightly higher negotiated prices. (It’s the “tax incidence” argument, just flipped around.) That’s fine with me, but it further reduces the likelihood that the tax credit will push me over the edge from not buying to buying.
Julie, what were the stats for pending last year for the same time period? Comparing things this week to past week does not make any sense as the trends are seasonal and March is supposed to be the month where the biggest just in pendings happens any ways.
All this talk about “increase activity” is meaningless if it does not translate into more sales
Waileakid,
Sorry, that info is not retained by the MLS for prior years. The stats posted were only to show that sales had picked up from the prior week.
Actually it would make less sense to compare this years’s dismal numbers to last years numbers anyway…sales are down from last year…that is not new news.
We are in a new economic era and it will be many years before we see the numbers from past again. I like to look forward and I will continue to look for signs of recovery in the market.
“Statistics not compiled or published by NWMLS.
Waileakid,
Sorry, that info is not retained by the MLS for prior years. The stats posted were only to show that sales had picked up from the prior week.
Actually it would make less sense to compare this years’s dismal numbers to last years numbers anyway…sales are down from last year…that is not new news.
We are in a new economic era and it will be many years before we see the numbers from past again. I like to look forward and I will continue to look for signs of recovery in the market.
“Statistics not compiled or published by NWMLS.
you gotta feel kinda sorry for some of these people rushing out to buy before the bulk of the arms even begin to reset and start flooding their brand new neighborhood with foreclosures. i guess im still on the sidelines, because there wont be any real recovery before the end of 2010.
From an actual first-time homebuyer and not a real estate professional, I have to say that once the $8000 tax credit was finalized and 30-year fixed FHA rates fell below 5%, my casual searching turned into serious pursuit. Given the Feb 17 date, I would check pending sales instead of closed. I’m realistic about home value dropping further, but our purchase will book as closed for the month of April and I’m looking forward to applying the $8k towards an updated kitchen. One would be well advised to consider the psychological effects of this as well.
This goes with my weekly report