Monthly Archives: May 2009

More North King County Stats

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There’s some griping around the web about my separating North King County from South King County.

Sold YTD the median home price  in North King County is $439,725 vs. $333,325 in South King County.

Sold YTD the median price per square foot in North King County is $217 vs. $169 in South King County.

I think a hundered grand difference, is a big deal.  I think a 25% variance is a huge deal.  Feel free to disagree.

Let me ask you this.  You come to me saying you would like to buy a house for about $350,000 near Microsoft.  I might be able to convince you to go to Green Lake or some point just to the other side (Seattle side) of the 520 bridge. Maybe Kenmore or Bothell or Juanita/Finn Hill…possibly Duvall. Maybe buy a townhome vs. a single family home. But would you agree to Federal Way or Auburn?  I don’t think so.  Pretending that what happens in Redmond influences what happens in Auburn, or vice versa,  is of no value to anyone.

Markets are moved by the decision makers, and the decision makers in this market are the buyers of homes.  Only home buyers can reset the data.  So reporting in the manner that buyers actually make decisions to buy, is important.

If there ever comes a day when the majority of people who want to buy a home give equal consideration to Auburn vs. Redmond, well then they will become one market.  Until then, separation is of more value than lumping everything together by County.

You should care about what happens in the market priced over your price range, as a cram down on those home prices will in lagging fashion affect the values in your price range. Knowing how many homes are sold there, and the buildup of unsold inventory there, will give you some predictive data with regard to the impact it will have on YOU. Will 100 houses not selling for over $1.2 million affect your purchase of a home for $350,000?  Not likely.  Will 2,000 homes not selling for between $600,00 and $800,000 affect the price of your purchase at $550,000? Very likely, yes.

Very, VERY important right now is the affect lower single family home price is having on the townhome and condo markets.  Most sellers look at like kind product, and rarely condsider “If someone can buy a single family home for this price, why would they buy my townhome for the same price?”  And that is exceptionally important right now for most condo and townhome owners.

I understand that it’s easier to understand data when everything is lumped together, and factoring in the specifics that affect YOUR decision is tedious and a lot of work.  But for years people have said that your home purchase decision is one of the most important decisions you make in a lifetime. If you believe that is true, then shouldn’t it be hard vs. easy?

North King County – Additional data (that is not posted, compiled or verified by NWMLS) I hate that required disclosure. Would make more sense to credit them if it WAS regurgitated from their published data. Having to say it isn’t, every time I post data, is annoying but a rule of membership. And it must be in bold lettering. Apologies for the redundancy of having to say that in every data post.

Property sold, including homes, townhomes and condos in North King County for more than $600,000 represents only 19% of all property sold YTD.

property-sold

Property FOR SALE and NOT sold in that same area as of today shows us that while only 19% of property sold is selling for over $600,000, 40% of what is for sale is priced at over $600,000.

for-sale-north-king

That tells you that under $600,000 is 1,555 divided by 4 or 388 sales a month and 3,604 divided by 388 equals a 9 month supply of inventory in North King county priced at $600,000 or less.

Over $600,000 is 368 divided by 4 month YTD is 92 sales per month. 2,443 for sale divided by 92 sales per month = a 26 month supply of inventory, which is almost 3X worse than the under $600,000 property.

Let’s separate the condos from the single family homes in the under $600,000 market.  While the overall absorption rate is a 9 month supply:

for condos under $600,000 the absorption rate is 13 months

for single family the absorption rate is 7 months

For “marketwatchers”, lumping everything together is easier.  But if you are looking at real estate blogs for more than party chit chat, if you are trying to get a lot of info before buying or selling real estate, Countywide stats do not tell you the story you need to hear.

If $100,000+ variance in median home price between North King County and South King County means nothing to you, then you are not likely planning to buy or sell real estate.

Sunday Night Stats – Volume UP YOY?

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It’s been a very long time since we’ve seen anything but volume down. Often we look for the low end to move early in the year, as a sign that there will be some increased activity in the higher price tiers in the 2nd and 3rd quarters. Though I wouldn’t bet on that this year, as many who are selling will not be buying a replacement home.

The best story is in the $400,000 and under price range (single family). If I move that mark up to $500,000 and under, there is no increase.nkc-yoy1 

 

Something good has to start somewhere, and that somewhere seems to be in the $400,000 or less price range. “North King County” was derived by drawing a line straight across downtown Seattle, and the stats are for anything in King County above that line. The increase is slight, but compared to the dramatic, continued decrease in the other price tiers, a little bit UP is big news.  In the condo market there is also a slight increase in volume YOY in the under $200,000 market.

The worst news is for anyone trying to sell in the $1.2 million and above price range, where there seems to be a 5 to 6 YEAR supply of inventory. Even so, surprisingly many of those that did sell in 2009, sold in less than two weeks and at prices close to the 2009 assessed values. But the odds of selling at all are so slim to none for most sellers.

nkg-sold-ytd-2009

While you might not think there are many homes that sell for under $400,000 in North King County, the chart above shows that this price range accounts for a large % of all homes sold.

Not really a strong buyers market in the $400,000 or less range.   To see the chart for the break down of properties for sale, vs. sold, I have all three graphs posted HERE. To get the absorption rate for current inventory, divide the amount sold by 4 and then divide total for sale by that amount.

I believe this is the first time we are seeing volume up YOY for pretty much anything, since the market turned in July of 2007.

An added sign that things are moving toward where more people can buy them.  If I look at single family and condo sales combined, under $400,000 accounts for 52% of all solds vs. last year when that same price range accounted for only 40% of all solds.

Next week I’ll break that $400,000 to $800,000 down a bit, and see if the higher end of the tier is affecting overall performance.  But at this point I do not see an increase YOY, even in the lowest price segment of that tier.

(required disclosure) Statistics are not compiled, posted or verified by NWMLS.

Why are Banks Setting the Opening Auction Bid Below The Principal Balance?

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I attended a foreclosure auction in Bellevue, WA last week to discover if the rumor was true that banks are opening their bids below the amount owed.  I received confirmation from three professional investors that yes, the banks have been doing that, it’s no secret, and there seems to be no discernable pattern.  It’s not one particular bank or lender, it’s not particular types of property or in any specific area. It appears to be random.

In addition to the 92 active trustee sales scheduled for that day in Bellevue (auctions were also going on in other King County locations,) there were 81 postponements.  Only a few of the trustee sales attracted bidders, and the rest were deeded back to the bank.  Out of the 92 active sales, 25 had opening bids below the amount owed to the bank.

Why would a bank or lender set their opening bid below the amount owed?

Banks and lenders have duties to their shareholders and investors to maximize profits and miminize losses (well, at least they use to.) If opening bids are set LOWER than what’s owed, perhaps the banks have already tallied their losses, realized that if they had to take back the house, get it cleaned out and cleaned up for resale, pay a real estate agent their commission to sell it, pay for title, escrow, excise tax, utilities, and any other carrying costs,  they might as well sell it at a discount at auction.  But maybe there are other reasons.  I wondered if the banks were trying to keep more REO inventory off the market in an attempt to prop up home values for their existing REO inventory.  Maybe appraisers can ignore trustee sale prices in their reports.  Not knowing the answer, I emailed three appraisers for help and here’s what I learned:  Appraisers need to mention trustee sales in the neighborhood if these trustee sales make up a significant percentage of available comps because they are legitimate sales even though title is transferred using a trustee deed instead of a warranty deed.  If an appraiser choses to ignore these, he/she will run the risk of having the appraisal run through an “enhanced review” process in order to catch trustee sale market activity.  If a trustee sale is a significant comparable sale, it can be used. The requirement to use closely comparable trustee sales as comps can also vary based on the requirement of the lender and investor.  It may not be absolutely required but it may be in the appraisers best interest to mention trustee sales. Thanks to Jonathan Miller, Shane Leady and Richard Hagar for teaching me something new today.

That still doesn’t explain the phenomenon of banks undercutting their own principal balances at the auction.  My theory is that banks are relying on third party information such as a mini appraisal or Broker Price Opinion (BPO) prior to auction.  If the BPO suggests that the outstanding principal balance is so high and out of range as to likely attract no bidders at auction, then the banks have nothing to lose by setting the opening bid closer to or significantly lower than the principal balance owed.  If no one bids at auction, they’re still only out the money they would have been out anyways and on the upside, if the low opening bid attracts investors, then perhaps the bidding will rise closer to the payoff.  If not, they have an immediate loss that could be significantly LESS than losses that would add up over time, having to carry the REO on its books for months of marketing time in addition to the other costs mentioned above.

If banks are undercutting their own payoffs, then why isn’t this phenomenon more widely publicized?  Okay, so we know that bidding on a home at a trustee sale is too frightening for most first time homebuyers but still, if more people know about this, then maybe there would be more folks showing up at the trustee sales and bidding those homes UP, thereby reducing the banks losses.  There certainly is NO shortage of tall, well-groomed, good looking, muscular investor gurus in shorts showing off tanned legs, even though it was only 63 degrees outside hanging out at foreclosure auctions with all kinds of downpayment solutions to offer newby real estate investors:  “We have zero down financing available for the right investor!” and “We have private hard money financing available for your purchase and you can refinance out of that loan in 30 days….My mortgage broker is right here, let me introduce you to her.”

Maybe the banks aren’t publicizing their low bids because they don’t want to bring buyer attention away from purchasing their REOs or short sales, knowing that investors are the ones who typically show up at the auction anyways.  The banks also have a vested interest in keeping traditional buyers focused on MLS listings. 

If I owned stock in a bank or lender that was undercutting their own payoff at auction, I’d want to be darn sure that this practice was saving the bank money and not hiding something else such as higher losses to be pushed on into the next earnings report…or the next stress test.


Foreclosure Auction Video Part 1
April 24, 2009
Bellevue, WA
Here is the rest of the auction.
Special thanks to Phil Leng for introducing me to all the investor bidders.