I’ve often thought realtors were the first to feel trend changes and now I’m going to step out of my comfort zone and say that I feel a change in the air. I tried to make a low offer today for a client on an Edmonds condo for $599,000 and it sold on Monday for full price. Another, a home in NewCastle with several showings today that looks like it will also go for full price with multiple offers for $550,000. I’m thinking the bottom feeders are full and that we’re soon going to get back to our normally uptrending market. I’ve heard that most homeowners decide to sell during the Holiday season when they are disatisfied with their homes while entertaining, and then they start looking to upgrade in January. Anyone know any facts to support this?
I also got a cold call from a Baltimore developer this week looking for hot projects in the Puget Sound area since it’s supposed to be the hottest in the nation over the next 10 years. We may work together on 3 projects we have ready to build. I have another appointment with an investor that buys first phase new construction, a plat at a time and we’re meeting in December.
Nothing I can quantify, just the feelings of a trend change.
Here are MLS statistics for October.
* Existing home transactions sold increased 3% in October 2006 from September 2006.
* 49.8 acreage parcels sold monthly, up 13%; average price: $297,031, up 50% from last year.
* New single family homes units sold in October 2006 off 18% from September 2006.
* Condominium unit sales off 8% in September 2006 from August 2006.
Projection:
䀃 Relative inventory decreased to 2.8 months. Prices will increase.
䀃 Expect some seasonal slowing through the start of 2007.
Eileen, just had an opporunity tonight to read many of your posts on the RCG tonight–wow!!! You must have a trail of folks trying to keep up with you!
In regards to the Puget Sound area real estate market it would seem that up to this point we clearly are not like most of the other coastal U.S. markets–i.e. inventories are still short of a neutral or buyers market and price increases have stayed positive.
I note that several of the recent examples you cite are for I believe, re-sales, if that is correct is it not possible that you might be commenting on the niche of the market that will be the last one to show a crack in pricing?
I don’t follow the local market in great detail these days, but I believe the first crack in the market would show in the new construction market and then be followed by a break in the investor/2nd home market and finally show up in the owner occupied resale market–at least that appears to be the case around the country for this cycle.
As you know price decreases in the new construction market are often hidden intitially as they are in the form of “free” upgrades, seller paid closing costs, etc., in an attempt to not show a lower sales price.
Can you tell me what the big local builders are seeing for inventory builds for single family and condos? Even a “gut” sense would be interesting. I have been hearing anncedotal evidence that around the Puget Sound area builders are experiencing an unexpected increase in unsold inventory and are starting to cut back on starts.
I suspect this will show in the lower to mid market niches where buyers (especially investors/pre-completion buyers) will be the most effected by tightened lending standards and a slowing market. The upper half of the market will slow later as those buyers are much stronger financially and more likely to be buying for non-speculation purposes.
I have been watching the 2nd home market in the NW pretty closely the last couple of years and without a doubt many of them have gone from a fevered pitch during the last 24-36 months to a 15-30% reduction in volume and I see many houses languishing on the market at prices which would have moved them last year. In this area the 2nd home market reacts a great deal to buyers out of California who found an opportunity to buy their piece of heaven a few years early and/or speculate in hot markets at much lower prices than their local markets. I would be pretty confident in stating that the big slowdown in Calif. and Ariz. markets is behind the slow downs in places like Bend, McCall, Coeur d’ Alene, Methow Valley, etc. that have showed in the last 3-6 months.
I have no feeling for how Puget Sound area residential real estate investors are behaving, are they net buyers or sellers this fall? Do you have a “feel” for that? I see your firm is involved with IRA and 1031 practices and assume you are speaking with these investors and would have sense of what they are thinking.
So, things seem to be okay here still, right?
I am usually early in my sense of things economically but I have had the same feeling I have now as I did before about the Japanese RE market in 1990 (I did business there for 4 years), the U.S. stock markets in 1999-2000 (I managed to get many of my family and friends out with their portfolios intact in Jan. 2000), the San Diego RE market last spring (we sold a small house in an average area we bought for $110k in 1999 for $700k in April 2005) and now I would strongly suggest the top is in here in the Puget Sound region and by the 2nd quarter of 2007 it will be very apparent–and yes I know I am pretty isolated in that prediction :)–probably what gives me comfort as I usually am early.
This post already got way too long, and I apologize for that, but I feel this is a critical issue and merits a bit more than “feelings”. Just because we have been the exception from the other coastal regions of the U.S. does not mean that we are going to avoid at least a portion of what they have.
Inverted interest rates can be an excellent indicator of a coming recession–they have been inverted consistently for a number of months–they are a leading indicator of what is happening Vs. employment statistics which are following indicators and often are positive even after a recession has begun.
Affordability is another excellent indicator and as everyone knows housing has become much less affordable in this region and with the already beginning “crackdown” on the most aggressive lending standards in history there are going to be a lot of people who will not be able to qualify to either buy a new home or even refinance the one they already own.
A friend at a FHLSB who deals in recourse tells me from the files she is reviewing (non-performing loans) she anticipates that beginning in 2007 (3 years after they were used by so many buyers to qualify) we are going to see the real impact of the use of ARMS in minimum down purchases as they reset their interest rates and put a lot of pressure on investors particularly whose homes are not cash flowing and slowing in appreciation.
I have to say that this recent article on John Mauldin’s web site which was written by Gary Shilling would seem to quite exhaustive in providing the details behind the U.S. Housing market and where it might be headed.
http://www.2000wave.com/article.asp?id=mwo111706
Shilling doesn’t rely on a lot of “feelings”
(and that is not to diminish intuitiveness) but rather provides some very insightful facts/statistics/ratios/trends and historical perspective to the U.S. Housing market. He may also be a bit early or a bit extreme in his predictions, but for my money he is studying the market place a lot more objectively than David Lerah or the former head of NAR who apparently is having a slow go of selling their home.
As a local I hope we weather the storm better than a lot of the other coastal markets seem to be doing, but I have sold my house this year am selling a diceased relative’s house this month and recently put off construction of a new 2nd home in the region–as the saying goes, “I made my last fortune by selling early”.