Sunday Night Stats – King County

Before I calculate the stats for this week, I’d like to take a minute to explain why I am being this tedious. Week to week stats calculate momentum of the market. Will new inventory grow faster than properties are going into escrow? So far only one week showed a slight decline in inventory, with more properties going into escrow than came on market.

While I fully understand that one week does not a market make, here’s the skinny. Take a look at the graphs below. It’s a long way before we can look at the first quarter of 2008, so let’s look at the three month period beginning 11/ 1 and ending 1/31.

<res 1

condo 1 2

Number of residential sales are down by 44% from the same period in 04-05. Condos are down 31% both from last year to this year and 04-05 compared to this year. Residential is down 32% compared to the same period last year.
It would appear that the condo market was picking up where the residential market was losing, in previous years. That would reflect buyers being squeezed out of the Single Family Home market and opting for condos, due to affordability.

The just over 30% decline this year appears to be more reflective of the number of buyers who are squeezed out by changes in the mortgage industry, or fear of the unknown.

This week’s stats:

King County – Residential

For sale – 9,017- UP 138

In Escrow – 2,453 – UP 152

Closed year to date – 1,285 – UP 214

King County – Condo Market

For sale – 3,178 – UP 96

In escrow – 862 – UP 34

Closed year to date – 432 – UP 70

As you can see, condos are coming on market at a higher rate than they are selling, moreso than single family residences. Since more single family home owners wait until Spring than condo owners, this is not surprising.

I’m sure we will see stories coming out that the market is “picking up”. However February being better than January doesn’t tell the story of this year’s decline of about 30% compared to last year. While it is possible that the mortgage industry changes did not squeeze out a full 30% of buyers, many are being more conservative, even if the lenders don’t require them to be.

“Statistics not compiled or published by NWMLS.

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ARDELL is a Managing Broker with Better Properties METRO King County. ARDELL was named one of the Most Influential Real Estate Bloggers in the U.S. by Inman News and has 33+ years experience in Real Estate up and down both Coasts, representing both buyers and sellers of homes in Seattle and on The Eastside. email: cell: 206-910-1000

222 thoughts on “Sunday Night Stats – King County

  1. I’d attribute the 30% more to people who think they can’t get mortgages. The press, as they do in virtually everything they cover, has done a lot to make the situation seem worse than what it actually is.

    I remember over in Zillow land the bubble bloggers got a good laugh about 3 months ago when I stated you could still get 100% financing. All they knew was what was in the press (and they read a lot of it) and their own fear mongering, and they thought it had completely disappeared at that time. It finally took a link to a Freddie or Fannie site to show them. Those types read a lot of news articles, and the news articles left them with a false impression.

    Now imagine if you’re not a bubble blogger, but instead just someone of modest means. You’ve had some trouble in the past getting financing. The articles in the press are much more likely to convince you that you cannot get financing, than if you’re someone who has always been able to get financing.

    Anyway, this is what I attribute the under $300,000 market being so soft, while the $500-$1,000k market is still pretty strong.

  2. Ardell,

    Do you have these all recorded in a spreadsheet? Have you looked at a 4 week moving average to smooth out the week to week noise?

    I’d posit that condo owners also tend to be more flexible or mobile than residence owners, with slightly less seasonality in their sales numbers.

    And agreed, the year over year numbers will tell the story.

    If you haven’t already, take a look at and for good national coverage of real estate and the impact of the CDO mess.


  3. Kary,

    So your position is “it’s all in their head” and there’s no change in the mortgage situation at all? I could see 10% of that 30% being perception and 20% being reality. But all 30% is just people who “think” they can’t get a mortgage? All of it?

  4. Ardell/Kary,

    I can report that as of this past week I have seen “stated income”/”liar’s”/”NINJA” loans on TV here in DC, for 100% LTV, and for 1.25% introductory rates. They’re still out there.

    PT Barnum would be proud of both the loaners and the consumers, I think.


  5. Mark,

    4 week averages are not as signigicant as month to month and quarter to quarter YOY. I do this for me and my clients and post it for anyone who may be interested. As to your links, “national” averages is more “noise” to me than what’s actually happening in the here and now. So I guess one person’s “noise” is another person’s silence.

    If the only person I do this for is me, that’s OK too. To me a blog is what I do while I am working. It’s a recording of things I do as a record for me. Others can peek over my shoulder and watch…or not.

  6. These statistics are great. However, I would really like to see numbers on how the ratio of mortgage types has changed since ’05 (e.g. what percent are option ARM, what percent have 10% down or more, etc). It would also be very interesting to see the percent of King County mortgage applications that are declined, and accepted offers that fall through.

    Are we seeing a higher percentage of accepted King County offers go through to actual closure than in the past? Are a higher percentage of the mortgage applications being approved than in prior years?

  7. Ardell, the raw numbers you present here are great. since as you say they show the very current activity. For averages,medians etc,etc there are plenty of other resources. What I know this is currently the only place where you can see things like in escrow and closed sales on a weekly basis.
    As for the more risky loan types you would hope that there are other reasons than just “can’t get one” that matters like that some people are getting concerms about them and choose not to get them even if they could.

  8. “The press, as they do in virtually everything they cover, has done a lot to make the situation seem worse than what it actually is.”

    Kary, you sound exactly like all the crybaby realtors in other bubble markets from the past. Classic.

    I have been in contact with RE Shill Elizabeth Rhodes for well over a year, asking her why she has never published an honest piece about the condition of RE, or what pitfalls might await those who purchase at this time.

    The media has been late and is always late. Just like the “analysts” on Wall Street.

    They are paid Shills, just like you. Why would you write a negative piece about housing when 40% of your revenues come from that sector.

    Silly Kary…

  9. Seeing as how there is lower activity in the King County markets right now, can we infer that people who bought condos in July 2007 were lucky to great deals on their property before all the gloom and doom induced many sellers to just sit on the side-lines?

    I’ll bet people who bought Seattle condos last July are just beside themselves with joy as to their good luck.

  10. Synthetik,

    So the press was covering shark attacks in 2001 when the level of attacks was at historic lows because why? Lots of sharks running ads in Florida newspapers?

    And people think Enron caused the energy crisis in California, why? (Unless the rest of their business involved shredding $100 dollar bills there’s no way they caused the losses the various utilities incurred, not to mention the $10 or $20 Billion the State of California lost).

    The press is practically universally wrong. That’s because they try to hype things however they can. I recently did say somewhere (here or the P-I Blogs) that the press was the problem on the way up. I said something to the effect that when prices elsewhere were rising they’d say: “Prices rise 15%, No End in Sight” rather than “Prices Rise 15%, Creating an Unhealthy Situation.”

    Finally, I can’t believe you mentioned Elizabeth Rhodes. I don’t think anyone has been more critical of her than I have. My favorite was her front page story on the guy who couldn’t sell his condo for 10% more than he paid for it less than six months earlier (facts she failed to mention if I recall right).

    If you expect Elizabeth Rhodes to ever write a decent article, you’ll be waiting forever.

  11. Sniglet,

    Let’s see what I can do with any of that. To look at mortgage types, I have to look at every single sale one by one. So doing it for the whole County is not possible for me.

    98034 is what I selected to peek inside every sale for the month of January.

    2005 – 38% zero down mostly two loans
    – 23% were 20% down
    – 12% 10% down
    – 12% 50% down
    – 5% cash
    one sale was 5% down and one sale was 70% down

    2007 – There were 50% more sales than in 2005 of which

    – 38% zero down mostly one loan (with pmi?)
    – 19% – 20% down
    – 15% – 5% down
    – 12% – 10% down
    – 6% – 50% down
    – 3% – cash purchases and 1 with 80% down

    2008 – Closings down by 57% compared to 2007

    – 26% – 20% down
    – 20% – 0% down
    – 19% – 10% down
    – 19% – 5% down
    – 10% – cash sales
    1 sale at 50% down.

    That’s the best I can do for you. Quite tedious. I think doing a South Zip Code would be helpful as well. Auburn? Kent? Someone pick it.

    Maybe Rhonda or Jillayne can tell us if there is a better way to get the info you are seeking. But looking at every single sale in the County is not possible for me personally. I can do the same small scale on sales that fail. But I can’t tell why they fail. Buyer remorse? Inspection problems? Financing issues? No way for me to determine the why. Even if it fails during the inspection, no way to tell if it was really the inspection that caused the sale to fail.

  12. I didn’t see any FHAs in that sampling. The big growth was in lenders requiring at least 5%, and most of those were one 95% loan. I saw one with 20% down, but two mortgages. One was a conforming loan at exactly the limit and the second mortgage was the jumbo loan with a downpayment of 20%. Also a pick up in the 10% down category. But 5% down is the growth portion, and I personally have heard tell of buyers saying “the lender requires 5% down” for that specific buyer. More skin in the game and more insurance protection via PMI.

  13. Sniglet,

    Your comment #10 is borderline to be trashed. Watch it. I’ll tell you the scary story of condo sales in the last 12 months is about huge special assessments in play. Don’t lump everything into some big bubble headed charge or I’ll delete it. Stay focused. Where’s E to “center” the bubbleheads? Eleua? Assist?

    Your “everyone who bought a condo in 2007” does not account for those who just wanted a place to live and can well afford to live there and have no intention of moving. Frankly most of those don’t give a RA about what’s happening in the real estate market. They are out having fun on this gorgeous sunny holiday.

    We’re looking for the realities here. Generalized wise-ass remarks will be deleted. You are just as bad as the pink ponies when you do that.

  14. Ardell, what are you referring to with special assessments? I’ve noticed that it is apparently impossible for contractors in parts of Snohomish County to put on siding correctly. I can think of 4 projects that have had, are having, or need major work done on them. I think three were built as condos within the past 10 years or so. That really has to have a chilling effect on sales in those complexes–and it lasts a good year or so after they’re done because the prices remain depressed.

  15. As to Sniglet’s point, condos are more volatile because the supply can be ramped up so fast. I’m surprised they’ve done as well as they have, which is why I don’t try to make predictions. 😉

    Oh, and Ardell, you’re right. Probably over 95% of people that bought in July are not thinking about selling, so if they think about price it’s just an academic exercise.

  16. Kary,

    The really scary ones are the ones where there are projects in the middle of the voting process. Most of the ones I am talking about are properties built prior to 1980. The newer ones, the builders pay a lot of the cost. The older ones are all the homeowners’ problem.

    I’ll have to write a separate post on that, but clearly prices dropping in those complexes, of which there are many, and the prices stagnant on the new ones covered with big construction tents, is part of the “Are prices down?” equation.

  17. Ardell,

    THank you very much for taking the time to gather the data and do some “slicing and dicing” analysis. This series (I probably should go back through all of your Sunday Night Stats here on RCG and skim data for my own use) is a great collection of data for this particular market.

    I think we’re in agreement, and we also have different interests. 🙂 You are tracking how this particular market is doing, showing the current activity. I have an interest in trending and smoothing and comparing the data with other markets, looking for correlations and sympathetic and independent movements, or a possible time delay effect.

    Question: is it possible to figure out a cancellation rate, or is that count tracked anywhere?

    I think you’re doing a great job and I thank you! 🙂


  18. Ardell –

    There is certainly a huge psychological impact for people who are paying a $500k mortgage on something worth $400k. This is why many of the big bubble areas that peaked a year or so ago are now entering the “mail in the keys” phase, which is becoming quite acceptable and will no doubt hit Washington in a year or so. Most people do not care about their home price as long as its flat/up and they are not moving. If its declining considerably, most people DO care that they are paying $3k a month for something they “should” be paying $2k a month for.

  19. Kary –

    I suggest you read some the financial newspapers available to you to get a better handle on why the bubble has popped. If you don’t believe the credit markets are totally dysfunctional and spiraling downward rapidly I don’t know what to tell you. It isn’t stories in the Seattle PI about mortgages that force banks to write down billions of dollars or go bankrupt.

  20. Mark,

    You asked: “is it possible to figure out a cancellation rate, or is that count tracked anywhere?”

    There are many types of cancellation. Cancelled is a status field for sellers who cancelled their listings, but many if not most of those just come back on market. So it’s pretty meaningless as a statistic.

    “Sale Failed Release” is a status, but rarely used when a sale fails.

    Falling out of STI has to be done on a look at each one basis, same as the mortgage data. Then there’s no way to tell why the person cancelled as cancelling based on inspection is a broad legal out clause one can use for pure buyer remorse all the way to financing is failing.

    Those that fall out of Pending status are the ones presumed to be financing for the most part. Again, I’d have to look inside ever property history to find them.

    Bottom line…tracking cancelled mortgage apps or sales is not an easy to grab statistic by any means that I know of. I don’t think it’s a big story either, or I’d go to the trouble to at least spot check it.

    The bigger story is can’t finance, won’t finance to the degree people were willing to in the past, won’t buy without having some money down, won’t buy unless they feel strongly compelled to do so, won’t buy unless they can “feel” the value in the total scenario.

  21. Ardell –

    I was not using exact numbers, the point is that people who buy and find out that their place is worth less within a few years are not happy about their decision. You said that people who bought for a place to live (which is most everyone) do not care about prices anymore. This is not true, they only “don’t care” when the price is at or above what they pay. Once it is below that, a barrier is broken and things like jingle mail become a reality.

  22. Isn’t that like buying a large purchase, like a TV and then feeling badly every time you see it on sale? Kind of fruitless self pity and self deprecation.

    I have to disagree wholeheartedly as I’ve know many people who bought at the top of the market back in the late eighties. Many still live in those homes and are very happy. They are worth more now, but were worth less for eight years after they purchased. All they were concerned about was going to the movies, getting dinner on the table and taking the kids to their swimming lesson.

  23. WRT comment #12, would someone with access to MetroScan database be able to make queries for the interested information?

    Sniglet, I’m dying to know those mortgage percentage breakdowns too, especially for the years 2004-2007.

    “Transforming complex real estate and mortgage data into relevant and actionable information.
    Highly flexible, MetroScan’s lead generating solution allows title companies to rapidly access a wide range of property information. Data is enhanced with full address correction and standardization in compliance with USPS CASS standards for bulk mail certification; zip codes and carrier routes are accurately assigned.”

    They must charge an arm and a leg for a seat to access the database. Someone in escrow/mortgage should already have access?

  24. Ardell –
    That is a poor analogy, nobody expects their TV to be worth more in a few years but everyone seems to believe their house will be. As for your friends, the difference is that in the 80’s they likely had to have some skin in the game and price declines were relatively small. Jingle mail is on the rise because nobody wants to pay an extra grand or two a month for the next 8 years for a house they got into for no money down and they stretch to make the payments in the first place.

  25. <p>”everyone seems to believe their house will be (worth more).”</p>
    <p>I honestly never knew that people thought that way here until recently. Where I am from that is not the case. But I do hear that a lot here in the Seattle area, and I’m not sure why that is. Where are they getting this idea? Clearly on the East Coast we’ve seen big ups and downs, and most do not fool themselves into thinking there’s no place to go but up. Is it pure stupidity? I don’t get it. Honestly I don’t. It’s like they’re begging to be lied to. Does anything only and always go up? That’s just silliness.</p>
    <p>”As for your friends”</p>
    <p>They are not “my friends”. I am a RE Professional. I don’t base my opinions on “my friends”.

  26. yinyang,

    I have access, but mortgage data is not a search field, so have to view the detail on each to get the info. Plus I am limited to no more than 500 properties per search. I can’t see info re option arms or type of mortgage behone Private, Conventional and FHA, etc. I can’t tell it it interest only or fully amortized.

  27. b,

    It’s not a poor analogy. People who second guess themselves using hindsight and saying “oh, if I had only waited” are not the majority,whether it’s a house or a TV. Most people find ways to be happy about their decisions. Those who don’t are never happy about much of anything.

  28. Thanks Ardell for taking the time,

    You are by far my favorite realtor.

    Kary, could you elaborate how to get 0% today? I want a 0% down loan to buy a big house, after living a few years, if it goes up I make money, if I goes down, I walk away.

    Please tell what are the qualifications for 0% down these days, I will get it!

  29. b–why would I read the financial press when articles in the WSJ can’t even get facts right that are in financial statements? Your reliance on them is probably why you think that there’s a bubble that popped! Some bubble may pop someday, but it hasn’t popped yet.

    Ardell, we’ll just have to agree to disagree regarding the need to make predictions for clients. Personally I think it’s a huge disservice to a client for agents to make predictions as to the future. Predicting which properties might do better in a given market–that would be okay–but predicting where the overall market is headed–no.

  30. I think I have to agree with ‘b’ on this one. Buying a TV is a lot different than buying a house. If I buy a TV for $2K, and 6 months later it is $1K, then I am out $1000. Annoying, but such is life. If I buy a house for $500K, and 6 months later it is $475K, it stings a lot more.

    In 20 years from now, I’m not going to care. But short-term? Yeah — I think so.

  31. KLK –

    So there was no bubble, and nothing popped? Why is every investment bank in the world writing down huge sums of money on their mortgage securities? Because they continue to rise in value? Ignore the obvious at your own peril, I hope you are saving some of your commissions for a rainy day.

  32. George –

    Its not just the sum of money involved, which is enough to make an enormous difference between losing money on a TV and losing money on a house. The real difference is that the vast majority of take out a huge loan to buy said house. Losing some money on a TV is not a big deal, but being underwater on a mortgage obligation is a VERY big deal. Maybe Ardell has had a pretty sweet life, but I would not want to be in a position where I am underwater for 8+ years on a enormous loan. That is much too long for some sort of life event to occur that would force me to sell and bring a (possibly large) sum of money to the table. Buying at the peak puts you in a very precarious financial position for a long time and its not just as easy as buying and forgetting the price you paid.

  33. Hi George,

    Why would you care now rather than 20 years from now? Unless you are having to sell 6 months after you bought the house it does not make sense. In 20 years of course you would want the house to sell for more than you paid and history tells us that it will.

    What matters is if the price you SELL the house for is less than what you bought the house for, not what it is “worth” today. “Worth” is just an imaginary number (unless you are re-financing for a better rate, or home improvement) that has no real basis. Bill Gates is worth X billlion one day, and worth less than X billion the next…. Worth is a moving target that only has real value if cashed out at that time.

  34. Ardell:

    You are a brave and tenacious woman!

    Keep at it!

    Re mortgage stats, personally, I find it next to impossible to get meaningful real time stats on anything but a national level.

    This is most likely a result of there being no state/county/city level aggregators, like we have at the federal level (Fannie Mae, Freddie Mac). They are willing to post and share a surprising amount of data.

    Anecdotally, I can report that no one wants to hear about option arms anymore, and darn few want to hear about any ARMS at all, despite them being a relative bargain today. Too scared by the media, I suppose.

    100% financing is available for purchases, but everything in your file has to be very clean and documentable.

  35. Hi Deborah,

    Guess I’ll have to disagree with you on this one — If I pay $500K for a house rather than $475K, I’ll end up paying $1500 – $2000 more for my mortgage every year. I would rather use that $$ for other stuff!

    I’ll still be a happy person paying an extra $2K per year. It won’t ruin my life by any means. But… it will sting a little, especially knowing that if I had waited 6 months, I could have had that extra $$ in my pocket.

    Seems like a no-brainer to me!

  36. Sorry, I just can’t resist the sarcasm at times. I feel like I’ve been in the wilderness for so long (sold my Bellevue home in 2003, to rent, because I was afraid the real-estate market was getting out of control) that it is difficult to just sit back and say nothing as all those people who ridiculed me over start to wonder if I might not have been onto something.

    Not that all my colleagues and associates think I was right to sell my home just yet. Still, I know several colleagues who bought condos in 2007 who are telling me they wished they’d waited. They aren’t panicking, but are telling me about how they see other units in the East Side complexes going for tens of thousands less now.

    Anyway, I will work on behaving nicer. 🙂

  37. I’m serious. If taxpayers will give me the chance to buy house at 0% down, essentially a call option on real estate for a nominal cost, who am I to refuse it?

    Except I’m a taxpayer too and eventually going to pay higher taxes to bail out fannie and freddie. oops.

    thanks Kary for pimping them now.

  38. Hi George,

    I understand your point and if I was buying a house or condo for the sake of buying then I agree with your scenario.

    But if I was buying a particular house or condo that hits most or all of my criteria, and it is unlikely that I would be able to buy that particular house or condo later when prices might go lower, that particular property would have unique value to me, and it would be worth it to buy now when it is availble.

    This is the reason that good view homes (one example) in good locations tend to hold value better because there would be buyers for the property in almost all market conditions.

    Of course if I am looking at areas with lots of similar homes, or condos then it might make sense to wait and see, and take a chance on getting a lower price. You are right for that scenario.

    Although even in areas with similar houses there will almost always be a few that are superior and may be bought by someone else while I am waiting for prices to go lower.

  39. Sniglet,

    Just be honest with yourself Sniglet. You sold a little too early. A lot actually. Don’t wish harm on others to “make up” for it. That’s just sadder than selling in 2003, isn’t it?

    I appreciate you telling us your side of it, I really do. I try to be objective, moreso than most agents. Let’s try to keep the train on the track and not derail it.

  40. George,

    I clearly don’t blame anyone for not being happy if their home is worth less than they paid, anymore than I blame someone for losing sleep if their stock goes down.

    What I do blame them for is thinking that any market always goes up.

  41. ARDELL – I’m not aware of any mortgage data tuned down to zip code (nor would I seek that info out personally). I’ve considered doing a follow up post to one I did in March of last year that broke down my business for the previous year except that it would not really be an apples to apples comparison since my business has shifted from being primarily south King County to more Seattle/Bellevue. Your down payment data is very interesting.

  42. Ardell said: “Just be honest with yourself Sniglet. You sold a little too early”

    Sure I sold too early, but I don’t regret it. It’s always hard to pick the absolute top. Lots of people knew that tech-stocks were over-heated back in 1997, but $50 stocks kept going on to $100 and then $200. In the end, however, most of those hot $200+ stocks came below $20, and some were even worth nothing.

    I may have been able to make 50% more if I had kept the house a few more years, but I strongly suspect that when all is said and done I’ll be able to buy a similar house (in a similar neighbourhood) for considerably less than what I sold for. The fact the home I sold may have doubled in value since 2003 doesn’t mean it wasn’t over-priced in 2003 (which I know it was), and that it won’t revert to a more reasonable price.

    In any event, I had white knuckles having a mortgage that was worth more than three times my salary, and I have been sleeping easier ever since. I just can’t psychologically handle having that amount of debt around my neck.

    Still, despite the fact I have no regrets for selling, I do get a little annoyed at how judgemental other people have been of my actions. I have had both friends, family, and acquaintances tell me (and my wife) we are idiots, and are just dooming ourselves to be slum dwellers because we refuse to get on the ever appreciating property escalator.

    When one of our Bellevue friends (who had been telling us for years how much their house was gaining in value) lamented about having to start delivering pizzas as a second job to handle their debt, I couldn’t help but feel a little vidication. I further feel a ting of shadenfreude when our friends in Snoqualmie ridge informed us they can’t take an out-of-state job they want because they can’t sell their home for what they owe now, and our friends in Newcastle were saddled with two mortgages for nearly a year while trying to sell their old home when they moved into their fancy (and super-expensive) custom upgrade (they eventually had to sell the Newcastle place at a loss).

    I don’t wish ill on any of my friends, but I won’t deny that it makes life a little better not to have people continue to go on about how rich they are from their homes at social gatherings, or make snide comments about how my wife and I are somehow sub-human to decide to rent. I can assure you that I do NOT make snide comments about my friend’s problems. I only do that on these message boards. 🙂

  43. Thank you Sniglet. It really is nice to know where people are coming from. Bottom line is you have to be comfortable with your life, and if a big mortgage looming over your head makes you sweat, then it just isn’t for you. Tell them all to kiss your butt.

    I have a brother and a sister who are quite happy renting vs. buying. They are older than me and have never owned a home, well almost never. My brother tried it twice, very short term. It just wasn’t for him.

    I have never once chided them or even insinuated that they are “incorrect” in the life they choose. They are remarkable people. Exceptionally talented at what they do. No one should be ridiculed for renting vs. owning property anymore than they should feel badly if they decide to not have children. People should do what they want and not be made to feel guilty about it.

    Thank you again for telling us your story.

  44. b wrote–“So there was no bubble, and nothing popped? Why is every investment bank in the world writing down huge sums of money on their mortgage securities? Because they continue to rise in value? Ignore the obvious at your own peril, I hope you are saving some of your commissions for a rainy day. ”

    I’m talking in the real estate market, not the credit market. Four states are in trouble. Many areas are hardly affected. Not a bubble–yet. I listed a house in January that sold in February. There wasn’t an adjustment based on the market having declined. People who think there has been a real estate bubble locally simply don’t know what they’re talking about. Some areas are hurting locally, and some aren’t. Hardly a bubble–yet.

    As to the credit market, I really have to laugh at some of the news reporting. I want to know who these big time investors are that bought into sub-prime loans without knowing they were risky! And I want to know who these big time investors are that could buy any type of second mortgage product, and not know that they were risky. It makes no sense to me. Seems more likely they took a risk, and now it’s coming out at the lower end of their estimated results. And now they want someone else to blame for their own decisions. Either that, or they had no business investing in the first place (or were duped by investment advisers)

  45. anna wrote: “I’m serious. If taxpayers will give me the chance to buy house at 0% down, essentially a call option on real estate for a nominal cost, who am I to refuse it?”

    I’d suggest you research the effects of bankruptcy and foreclosure on people before you conclude that buying at 0 down is no risk.

  46. Sniglet,
    I used to live in So. King County (North Lake) and before I was in mortgage, I was in the title/escrow industry for 14 years as a manager and title rep. My base of business in mortgage began from the real estate agents I had called on for many years in SW King County.

    Many of the offices that I once had a very strong relationship with have ABAs and where they were once just providing mortgage, title and escrow “as a convenience”, it seems over the years major real estate companies are really pushing the mortgage, title/escrow that they have a financial interest in.

    I also don’t really call on offices like I used to. Many are now “closed” to outside vendors. I still have a few “south end” agents that I work with but it’s faded out a bit which would of course, impact how much business I do in the south end.

    My business has always been strongly referral based and from clients who return to me.

    The good news is that since I’ve been “blogging”, I am working with more clients who are from the Seattle, Bellevue area (actually all over Washington). So even though I’ve lost some of my south end agents, my mortgage practice is still strong.

    The mortgage company I work for is actually in South King County and has been for 30 some years. (I wish it was in Seattle!)

  47. Sniglet, you’re right about not being able to hit absolute tops and absolute bottoms. And I too like to compare the real estate market to the stock market. Someone buying today and regretting it is like someone buying a stock and then looking at it immediately after because it fell in price, even though they planned on keeping it long term. Doing that will drive you nuts (or give you false satisfaction if it’s going up short term)!

    But your story is why I don’t think agents should make predictions. What if rather than selling your house in 2003 because you thought the market was being overheated, you’d done so because an agent told you the market was overheated. The agent could have done a great job selling your house, getting you top dollar at the time, but you’d still be upset about it. And rightfully so, IMHO, because agents don’t have the ability or training to predict the market.

    But you might say, what’s the chance of an agent telling me the market is going to go down? They’re going to say it’s going to go up! Chances are that might be right. Which makes the process of agents predicting even more absurd. It would be like a weather person who always predicted warm and sunny weather. Why would you listen to them?

  48. Kary said: “Four states are in trouble”

    Only four states? I’ve heard of deep problems in Michigan, Ohio, Massachusetts, Arizona, Nevada, California, Georgia, Virginia, D.C., Colorado and Florida, as well as significant storm clouds in many other states. That’s far more than just “four” troubled states, and the fact that so many other states are facing significant head-winds (slight depreciation, skyrocketing foreclosures, and expanding inventory) would seem to indicate that this current real-estate downturn is just a local (and contained) phenomena.

    I would love to see any articles, or data, you have that counters my contention that any of the states I listed are starting to face significant real-estate downturns.

    As far as the investors who bought mortgage securities goes, just ask King County why they had invested in over $200 million of asset backed securities that are now of dubioous value. Many other municipalities (and mutual funds) around the globe made similar mistakes. I think that a lot of investors just looked for the best performing AAA securities they could find, and didn’t really much care if it was based on mortgages or anything else, just because it was rated highly.

    Returns have been so lousy in recent years that investors have pushed themselves into increasingly riskier asset classes. Moreover, the ratings agencies obliged this desire for better performing assets by lowering their standards, allowing far more products to get the covetted AAA designation than could possibly merit them.

  49. I really can’t see how a second mortgage based product would ever get AAA protection. If it did, there’s something seriously wrong with the rating system.

    The four states I was referring to were CA, AZ, FL and MI. I’m not saying the other states are going up, but that those are the states with serious issues.

    But I will say, I’m likely to be wrong, because if it’s not local I have to rely on the news media, so I don’t have a decent source of information. In that regard I have excluded NV from the list because although I’d read about serious declines there, when I went to look for stats it wasn’t that bad. That was a few months ago, however, but it’s just to make the point that what you read and reality are two different things when it comes to reading things in the press.

  50. Sniglet,

    How much of a price decline would we have to see for you to get back in at 2003 prices or lower where you lived? Have prices doubled since the time you sold there? If you sold at $200,000, have they sold at or near $400,000 in 2007?

    I’d like a benchmark % if you don’t mind my asking.

  51. Kary Wrote:

    “And I want to know who these big time investors are that could buy any type of second mortgage product, and not know that they were risky.”

    The truth is a lot of them didn’t understand these investment vehicles. Put it this way, the Extendible ABCP market had NEVER extended before prior to 2007. In other words Investors assumed they would get their money back when the CP matured, but when defaults rose, these vehicles had to “extend” the maturity date up to a max of 240 days. Liquid Funds that purchased CP for the short term suddenly did not get their money back on time and were forced to stop buying them completely – freezing the securitization market.

    It’s not all the Investors fault though, they over-relied on the Rating Agencies and the perception of diversification from different cites/states. The Rating Agencies placed too much faith in the underwriting and the Government didn’t know/do enough to regulate. All these things added to the blow-up and the ultimate writedown of assets.

  52. Back when I started practicing law, one of the first big cases I worked on was of the owner of one of the largest commercial real estate firms in Seattle at the time (Capretto & Clark). They borrowed money from people “secured” by real estate, but most the investors were small time people that didn’t understand that having a junior deed of trust wasn’t really secure. As I recall, some of these people invested upwards of $1,000,000.00 or more.

    Anyway, from that experience I could see how some small time investors wouldn’t understand the risk. I just can’t see how it would happen to institutional investors (investing without understanding the risk–I can see them investing). But also that experience caused me to not have any belief that a loan wasn’t risky simply because it was secured by real estate.

  53. Kary-

    You need to work for a Money Fund or a bank that issues CP to understand the lackadaisical nature of the business. It’s “flow” business meaning that it’s automatic, simple and predictable. Obviously, we know now that things can change very quickly.

    CP is traded very early in the morning and only for a couple of hours. When you have billions of $ to move around everyday you don’t go looking to dissect every Issuer. You rely on your experience and the historical performance of the Issuers you’re familiar/comfortable with and your credit department that tells you what you can/cannot buy. Remember, it had NEVER extended before prior to 2007. This is not an excuse, but you can see why this is one reason the blow-up happened.

  54. Kary said: “I really can’t see how a second mortgage based product would ever get AAA protection. If it did, there’s something seriously wrong with the rating system.”

    Yes, many second mortgages were bundled into securities with first mortgages that wound up getting AAA ratings. You are absolutely right that something is seriously wrong with the ratings system. In the last six months there have been numerous instances where ratings firms have downgraded dozens of AAA securities all the way to junk in the same day. Such actions certainly don’t give investors a lot of confidence. In fact, this is largely why the entire credit market has been melting down recently: no one knows what ratings to trust anymore, so iinvestors are steering away from anything that could possibly have risk, whether it has a AAA rating or not.

    Kary said: “The four states I was referring to were CA, AZ, FL and MI. I’m not saying the other states are going up, but that those are the states with serious issues.”

    Here are articles about the dire problems facing other states. Notice how even states like Rhode Island and Indiana are showing up as having major real-estate issues.
    “Georgia banks reported the highest number of problem loans, with 4.74 percent of banks’ loans either past due or foreclosed, the highest level of any state in the Southeast, according to data prepared by FIG Partners LLC.”
    “Nevada, Florida, Michigan and California posted the highest foreclosure rates, the company said”
    “Nevada leads the nation in foreclosures, with a average of 44 homes a day being foreclosed in Clark County.”
    “Michigan third in foreclosures”
    “In Nevada, 4.41 percent of residential mortgages were past due as of June 30. That’s an additional 0.82 of a percentage point more than at the end of March, according to association.”
    “Nevada is among five states with new foreclosures representing more than 0.78 percent of the total. In Nevada, 0.89 percent of all mortgage loans are going into foreclosure. Other states with large increases in new foreclosure starts were Ohio, Michigan, Indiana and Rhode Island”

  55. Kary said: “I really can’t see how a second mortgage based product would ever get AAA protection. If it did, there’s something seriously wrong with the rating system.”

    Yes, there is something seriously wrong with the rating system. Many second mortgages were bundled into securities including first mortgages, and the whole lot was rated as AAA. In the past six months we have seen ratings agencies downgrade hundreds of securities from AAA all the way to junk within a single day. More than anything it is this sudden mistrust of ratings that has caused the credit markets to melt up. Investors don’t know what to trust anymore and are steering away from anything that has even the slightest whiff of risk.

    Kary said: “The four states I was referring to were CA, AZ, FL and MI. I’m not saying the other states are going up, but that those are the states with serious issues.”

    Here is a smattering of articles highlighting the severe real-estate downturn being seeing in many states other than CA, AZ, FL, or MI. Heck, even places like Indiana, Rhode Island, and Tennessee are seeing massive increases in foreclosures.
    “In Nevada, some 3.4 percent of households received foreclosure filings. That was more than three times the national average”
    “Michigan third in home foreclosures”
    “states hit hard include Nevada, Colorado, Tennessee and Michigan, while the problem is evident in Ohio, Georgia, Florida and Arizona. In Nevada, for example, 17.5% of home sales were from foreclosures, more than quadruple the number in 2006.”
    “Other states in the 2007 foreclusure top 10 were Colorado, Ohio, Georgia, Arizona, Illinois and Indiana”
    “The National Association of Realtors reports that year-over-year sales declined in Q4 in 46 states (including D.C.). Sales increased in 1 state (South Dakota from 36K to 39K) and sales in North Dakota were unchanged. Seven states saw sales declines greater than 30%: Nevada (44.2%), Wyoming, New Mexico, Oregon, Arizona, Utah and Maryland. Another seven saw sales declines greater than 20%: California, Florida, Georgia, Lousiana, Connecticut, Illinois, and Virginia.”
    “Georgia Loan Problems Outpace Florida”

  56. Ardell said: “How much of a price decline would we have to see for you to get back in at 2003 prices or lower where you lived?”

    I bought my house for $500K in 2000, sold it for $600K in 2003. I figure it could likely have gotten $900K to $1 million in 2006. I will go back into the market and buy when I can get the same type of a house (in the same neighbourhood) for $300K to $350K.

    I figure that the market will really start to correct when Microsoft announces it’s first hiring freeze, once the global recession kicks in and the US economy contracts 5% or 10%.

    By the way, I am NOT one of those gloomers. I just believe that economic cycles are a healthy part of existence, and that we are in dire need of a deep downturn to work out all the mal-investment that has built up in the last 20 years. The last time we had a REAL recession was the early ’80s.

  57. Sniglet,

    When it has a lot of links, it sometimes gets trapped in the spam filter. Just email me if that happens again and I’ll fish it out for you.

    You want it to go from $900,000 or $1M to $300,000 to $350,000. hmmmm. Thats $.30 to $.35 on the dollar. It might be easier to move out of State 🙂

  58. Kary, a tip is to be a bit more careful with words and definitions. You say that there is no bubble-yet. I think that what you really mean is that no bubble has popped yet in Seattle. If you blow a bubble it exists before it pops not after.

  59. tj, fair enough. It’s just some bubble bloggers think they’ve been proven right because we had a YOY decline for one month of 1%, or that we’re not at a historical high. It would be like someone claiming they made a good investment when they shorted a stock that had gone up 100% since they shorted it, and then it dropped 1% in a day.

    So, to be more careful: “Without making any representations as to whether a bubble exists within the real estate market for King County, Washington, said bubble has not popped–yet.” 😉

    Sniglet, you might want to look at what happened to real estate prices locally in the early 80s. Condos were pretty bad, but SFR held up very well–I’m not even sure they had a YOY decline.

  60. Ardell said: “You want it to go from $900,000 or $1M to $300,000 to $350,000. hmmmm. Thats $.30 to $.35 on the dollar. It might be easier to move out of State”

    Actually, I am pretty optimistic I will hit my price points. If we can have swift run-ups in prices, we can likewise have significant declines. I believe the market is much more fragile than people believe, based on easy availability of financing and the health of one or two major local employers. If these pillars show weakness, I thinkt he real-estate market can correct very substantially.

    In any event, things are JUST getting started in our current downturn. Places like Orance County and San Diego haven’t even hit 20% median declines yet, and they will likely get to well over 80% drops before all is said and done. It will take us even longer to bottom out up here since we always lag the rest of the nation (and California in particular).

    The next shoe to drop will likely be the failure of one or more significant lender (Countrywide, or WaMu, for example), so we likely won’t see significant stress in the RE market until then.

    We sure live in fun times! I can’t wait to wake up every morning to read the latest news. Last week it was the failure of the “auction rate” markets (e.g. some states had to stop issuing student loans because they couldn’t sell the loans to investors). Who knows what this week will bring!

  61. Kary said: “Sniglet, you might want to look at what happened to real estate prices locally in the early 80s. Condos were pretty bad, but SFR held up very well–I’m not even sure they had a YOY decline.”

    I agree that condos are looking very scary in the Puget Sound right now. The supply has just been mushrooming out of control, with cranes across the skyline as far as you can see.

    Unfortunately, I doubt very much that SFHs are going to be immune from the fall-out coming around the corner. Our current downturn doesn’t really have any precedent since all previous real-estate declines had a far more stable mix of mortgages and home-owners. In the early ’80s option ARMs were virtually unheard of, and very few buyers ever got 100% financing. By contrast, we have a prevalence of risky mortgage products today (many of which aren’t even available anymore) that has never been seen before in the Puget Sound. The end result is to have a greater percentage of home-owners with little or no skin in the game (i.e. with little equity), and affordibility problems (i.e. people who can’t really make full mortgage payments and are counting on appreciation and re-financing to bail them out).

    Just look at the percent of Puget Sound home-owners with adjustable rate or option ARM mortgages or 100% financing in 1980 compared to 2008. This leaves us far more vulnerable to greater fall-out in the RE market when economic stresses jolt the economy (as they occasionally do).

    In other words, Puget Sound home-owners were in much better shape to withstand economic headwinds in 1980 than they are now.

  62. I don’t really buy the “skin in the game” argument. Losing a house to foreclosure is not something anyone wants to have happen. In my bankruptcy practice I saw people that were upside down in both cars and homes, and they didn’t want to lose them.

    Comparing adjustable rates then and now would be interesting. Quite frankly I’m not sure how that comparison would come out. There weren’t teaser rates back then (to the best of my knowledge), but the rates went up so much there might has well been.

  63. Well down payment percentage is probably correlated with overall financial condition, so that defaults would be too wouldn’t be a big surprise. Some people don’t put money down because they have better things to do with their money, while most do that because they don’t have the money.

    And if your financial condition is not that strong, then there’s a greater likelihood that you can’t pay, and if you can’t pay, you can’t stay.

    But the skin in the game argument I don’t buy is that they choose to leave because they don’t have the skin in the game. I’m sure there are some, just not a significant number.

  64. Sniglet Said:

    “The next shoe to drop will likely be the failure of one or more significant lender (Countrywide, or WaMu, for example), so we likely won’t see significant stress in the RE market until then.”

    WaMu won’t be sold for the same reason as Countrywide. You can’t lump these 2 together. Countrywide was a monoline mortgage business that relied heavily on securitization for funding. WaMu has a retail deposit franchise and a credit card business, but also has a large exposure to mortgages. WaMu has already made it public that it has sufficient liquidity until 2010 even if it was completely shut off from the capital markets. WaMu will be sold for its retail franchise value not because of liquidity.

    It’s unlikely that another “shoe will drop” IMHO.

  65. Q said: “WaMu has already made it public that it has sufficient liquidity until 2010”

    True, they might have adequate liquidity provided the current assumptions about liabilities from foreclosures hold true. However, if further write-offs in their mortgage portfolio are necessary due to greater loss rates than currently expected, that would eat away their liquidity pretty swiftly. It only takes a few $1 billion dollar plus write-offs to cause real pain.

    WaMu has more than proven they are behind the curve in properly accounting for default rates so far (i.e. with several downward revisions on expected losses), and I don’t see why we should trust them now when they say there won’t be any further write-offs. So many of the assumptions lenders have relied on to judge default rates have already proven to be spurious that it’s clear we are in a brave new world altogether, and I am not sure anyone really knows where it will end.

    Just what will WaMu do if the credit agencies make even more large downgrades on mortgage securities (and the credit agencies have already announced they have literally thousands of mortgage securities under watch for additional downgrade)? WaMu can’t just keep assigning the same values to mortgages they hold in their portfolios if Moody’s and Standard and Poor downgrades mortgage securities of the same general type.

    I am not saying that WaMu will definitely go bust, but I do believe that one or two major lenders will before this credit crunch is over.

    I agree that the chances of WaMu being sold are slim. Who would want to buy them with the unknown liabilities of their mortgage portfolio? No buyer would offer what WaMu currently says their mortgage portfolio is worth. Frankly, I doubt very much the BofA Countrywide buy out will actually conclude successfully. if Countrywide is forced to make even more write-downs, BofA may balk at taking on an increasingly questionable liability.

  66. I’m not sure why you’re referring to write downs being liabilities. It’s reduction of net assets (and/or early recognition of losses). Has WAMU guaranteed loans they’ve sold?

    But I did like the comment that $1 billion write downs can cause pain. I know I always hate it when that happens! 😉

    BTW, I’ve mentioned this before, but perhaps a good time to mention it again. Perhaps the current relatively low rates are merely the result of slower activity in the real estate market. If things picked up, maybe the rates wouldn’t be so nice.

  67. Kary said: “I’m not sure why you’re referring to write downs being liabilities.”

    The possibility of future write-downs is a liability if that would eat into existing reserves and require re-capitalization. Let’s say, for example, that WaMu has to take another $4 billion dollar charge due to downgrades of mortgage securities in it’s portfolio. This might require that WaMu raise more capital to simply maintain the reserve rations required by the Fed. Any possible WaMu buyer would want to be sure that the needs for additional capital were finite. However, if write-downs keep happening every quarter it becomes difficult to know if all the bad news is over.

    Wouldn’t this uncertainty over future recapitalization needs qualify as a “liability”?

    Just to illustrate the possible headwinds lenders like WaMu are facing:
    “If trouble in the so-called monoline business gets even worse, banks may have to set aside $20 billion to $30 billion to boost reserves covering counterparty risks, the agency added”

    Unfortunately, I think it is just a matter of time before the monolines are downgraded. Frankly, the only reason the downgrades haven’t already happened is the simple fact that they would be so grievous to the over-all economy. This is why the ratings agencies have been telegraphing their concerns, and possible repurcussions, for months now, trying to prepare everyone for what is coming. The ratings agencies are giving the insurers, banks, and regulators every last chance to try and come up with a bail-out before they pull the trigger on a downgrade.

    This way, Moody’s and Standard and Poor can wash their hands of the fall-out and say that it’s not their fault the industry and government couldn’t put humpty back together.

  68. Sniglet-

    Here are some numbers for you to chew on:

    1. WaMu has increased reserves to ~$2BN per quarter for 2008, double what it was for 2007 (Citi conference in Jan)

    2. WaMu has ~50BN in EXCESS, UNUSED borrowing capacity from the FHLB, CDs and the Discount Window (based on balance sheet assets and liabilities)

    WaMu is already shrinking their balance sheet, they’re not growing so they’re not taking on more risk. In order for them to go belly up they would have to see reserves exceeding 5X current levels or greater than ~$10BN per quarter. Of course, there’s always the bank run concern, but I haven’t heard of that happening to them yet. Plus, how can they fail when they have such funny ads – Woo Hoo!

  69. Q,

    Do you know how big WaMu’s mortgage portfolio is? How much would a 5% or 10% write down in the value of their mortgage portfolio be? I also wonder what WaMu’s run-rate is for monthly borrowing. If they lend $10 billion a month, it doesn’t take long to burn through a $50 billion credit line. I know that Countrwide was lending something like $25 billion a month back in 2006.

    Of course, WaMu could definitely conserve their capital by severely curtailing their lending (something that Countrywide has done, for example), but that doesn’t leave much of a business left, and certainly not a profitable one. Countrywide has really scaled back the sub-prime loans and is focussing primarily on GSE products, but there are almost no margins on those offerings making it hard to justify their cost structure, size, and business model.

  70. Sniglet-

    They have approx $233BN in assets excluding commercial, some consumers and credit cards. You can figure out the math from here.

    Even though Countrywide curtailed their lending they overextended themselves because they relied primarily on the securitization market via ABCP (Asset Backed Commercial Paper) vehicles for their lending. When that dried up they didn’t have enough capital reserves to survive because they had commited funding but no cash.

    Lending does not neccessarily eat up your liquidity. When you make a loan you can pledge that loan to the FHLB to get financing, securitize it, or sell it to Fannie or others. WaMu is basically selling loans it made, so it’s not having to eat into liquidity and hence no growth. Of course it’s not making as much profit as before and it’s stock price and dividend reflects this, but its profit margin is being cushioned with every rate cut. WaMu makes an additional ~$150MM for every 25bps decrease in Fed Funds Rate.

  71. I know that Countrywide has been heavily using FHLB recently too, and congress has been raising concerns about the massive increase in over-all FHLB lending. I wonder what will happen if the government tightens requirements on FHLB?

    Also, I notice that Fannie and Freddie have been running into capital issues themselves, due to losses, and have had to go out with cup in hand for more cash. Re-selling loans to the GSEs doesn’t exactly seem to be a slam dunk these days. Haven’t the GSEs actively been REDUCING their portfolios? If so, that doesn’t bode well for an industry that increasingly looks to them to pick up slack from the private securitized scene.

    Of course, being reduced to selling loans to the GSEs and FHLB rather limits you pool of customers. It is much harder to find people to qualify for GSE loans than for the private securitized varieties. I don’t even think there is such a thing as a negative amortization GSE loan.

  72. Sniglet-

    FHLBs have already tighten their standards by another 7-10% haircut.

    Selling to GSEs or pledging to FHLBS is not a slam dunk like it used to be, but it is reliable so long as your loans qualify. It won’t be enough to support the type of growth we’ve seen in the past, but then again we prob won’t see that kind of growth anyways.

    I believe mortgage quality will improve and the securitization market will come back in a significant way. Like I said before, we haven’t seen the bottom, but we are definitely not at the top.

  73. Cuzin Ardell:

    me likey dem mountins u ussha draw buter dan me likey dem grane sugar bars! Me migha drunk me a drop too meeny but dem candy bars look likely dey got sum jail bars hind em.

  74. Ardell:

    I sent you an email and it got returned. I got a question about a definition you wrote on a different blog that I need some clarification with (or at least how you define the term). Shoot me a message back so I can respond as my emails are not getting through.


  75. I was just looking at stats for area 330 (parts of Kent) and it was sort of interesting.

    Going from June, 2007 to January, 2008 (a period that includes the local peak and the mortgage crisis periods) the following occurred:

    The mean started at $384,222, and ended at $378,249, a reduction of only about $6,000. In-between it got as high as $391,506, and as low as $357,284. The low months were October and November.

    The median started at $361,000 and ended at $349,000, a reduction of $12,000. In-between it got as high as $369,000, and as low as $340,644. The worst month was December (one month later than the mean lows), and October, November and January were all between $348,000 and $350,000.

    The volume numbers declined during virtually the entire period (as is normal based on the prior year), and was lower than the prior year, except for November, which was the third highest month for this year and higher than the prior November.

    The days on market increased fairly steadily, from 66 to 93. The prior year it increased from 42 to 69. Remember, these are the ones that sold, the actives would be a different DOM number.

    This is the south end, and generally the south end hasn’t been performing as well as the north end. If I did the same exercise for an area further south the mean and median numbers would probably be worse.

    The biggest concern I see in all these numbers is the volume. I’ve said that with respect to the county-wide numbers too. In this area there are approximately 145 pending properties (not including STIs), about a third of which are from 2/1/08 or later, so presumably the number of sales for February should be around 100 or so. The prior two years were 106 and 112, so if it does end up in that range, the volumes in that area would have almost completely recovered.

  76. Kary,

    It does appear from your comment that you are stretching to find the silver lining, or downplaying the facts as to “only down a little” and nothing to be concerned about. It’s one thing to not like to predict, but sometimes it appears that predictions of UP are more welcome than predictions of DOWN, industry-wide. That’s were credibility suffers.

    Too many agents, not you in particular, are more than happy to stand on top of a mountain and scream “There’s never been a better time to buy!”, but when things get a bit shakey as they are now, want to so “Oh, I really couldn’t say…I’m not a forecaster.”

    Better to say the median price is down by $6,000 and leave out the “only”.

  77. Well part of it appearing like a “silver lining” post is that I was expecting the numbers to be worse because of the south end location. $6,000 is almost 2%, so it’s not a great number, but when you’re looking at monthly variations I’m not sure it’s significant either. Also, the dip and recovery in mean prices after August is very interesting. But of course, that the mean was recovering doesn’t mean it will continue to recover. It just shows where we’ve been, not where we’re headed.

    The only prediction I made was that volume might be up in that area for February. That’s based on the current pendings. It’s dangerous to read too much into the numbers you get from the NWMLS current data, however. For example, I know there’s one house there that has been STI since October. Most likely it either sold or flipped. I didn’t include STIs in the numbers above, but that sort of thing probably exists in the pendings too, and double listings can also throw the numbers off.

    The main point of the post wasn’t to show that things are great now. Far from it. It was just to show what’s happened in a particular area with regard to prices, DOM and volume. And again, it’s that last number that has been concerning me since the December numbers came out.

  78. BTW, I did some other calculations for the area that showed prices in the lower end hadn’t really declined at all since August, or had actually increased, but I didn’t post those. So I wasn’t cherry-picking the data the way say someone in the media would do (e.g. report combined condo and residential because it was down due to the a higher percentage of condos, even though both SFR and condo standing alone were up). I picked and reported the worst numbers I found.

  79. “that the mean was recovering doesn’t mean it will continue to recover…”

    I don’t think mean means crap, which is why I never use them. It’s just a mean of the properties that happened to sell and is no reflection of price up or down.

    What is meaningful to me is the three bedroom condo sitting on market for $275,000 directly across the street from Microsoft, and the one for $300,000 as well, when the last sales were over $300,000. The $275,000 one is not in the same condition as the solds, for sure…but still, it could be a reflection that investors are scarce to non-existent if it’s not a foreclosure or short sale.

    If you can’t see your flavoring of the data, then so be it. I’m not my brother’s keeper for sure. I try to keep stats and commentary separate, but even the news channels don’t do that anymore. So you’re in “good” company on that one.

    2% down is big news in the Seattle Area, Kary. Really big news. But I don’t like the method, so I’ll keep posting as I do. We are going out to see all the Broker’s Opens and calculating where they should sell and if they should sell if the market has not changed. We’re doing that in 3 Bellevue Zipcodes and parts of Redmond. We’re about ready for a roundup of what is and isn’t selling and how close we were on our guesstimates. I’m giving them 30 days to offer. If the market has shifted to it taking 60 vs. 30, which is my best guess, everyone needs to know that.

    But I’m getting ahead of myself here. Broker’s Opens are tomorrow. I have in inspection before that. I hope to have that post up by Monday at the latest…but it takes a lot of research and backtracking and I think I said that last week 🙂

  80. Ardell wrote: “I don’t think mean means crap, which is why I never use them.”

    And Ardell wrote: “2% down is big news in the Seattle Area, Kary. Really big news.”

    Which is it? It doesn’t mean crap, or it’s big news? It can’t be both ways.

    When you’re talking about month to month figures, (which is what these are) 2% is really not that significant. They jump around a lot.

    Mean % Change Month to Month (roughly calculated in my head)
    July–Down 1%
    August–Up 2%
    September–Down 6%
    October–Down 3%
    November–Down 1%
    December–Up 4%
    January–Up 2%

    Also, I really don’t see that much commentary in my original post. Yes, I used the word “only” before 2%. And I did say that the volume numbers are the ones that concern me. Even if I did a lot of commentary on volume, what’s it matter? I started the post staying I found the stats interesting. Was I not supposed to explain why I found them interesting?

  81. If the market were in fact down 2% it would be big news, the median down by 2% doesn’t equate to the market being down by 2%. Sorry if I confused you.

    Let’s not split hairs…just watch the “only”s 🙂

  82. Well, I do find the volume thing both interesting and worrisome. The danger sign I saw in the NWMLS data for King County for December and January was volume, not prices. And perhaps what I’m seeing in area 330 could be seen better if I could set out some tabular data, but this data from that area for the period since June (just prior to our local peak) is consistent with that concern. Except for November it shows a constant downward trend in volume.

    The data I’m pulling for February (area 330 only) looks like that might be reversing. We’ll see in a few weeks when the formal data comes out.

  83. <p>I can already tell you that February is likely going to be “better” than January, because it should be. Every year Feb sales should be up from Jan sales and so on until July or August. What we will be doing is comparing February to last February and see if the downward trend YOY is staying constant. February being “better” than January is hopefully a given, but will February still be down 30% to 32% YOY…more? or less? We won’t know until all the data is posted around March 7th to 10th.

  84. Go back to my original post where I indicated that volume for February looked like it could be around 100 or so. That’s compared to 106 and 112 for the prior two Februaries.

    If that happens, it will be a lot better than the YOY comparisons of area 330 for December and January, which were 73% and 61% of the prior year respectively.

    The volume for December was the lowest for any month in 6 years as I recall (that may have been for the entire NWMLS area, not just King County). I don’t think you can necessarily rely on what normally happens after you have something abnormal happen.

  85. Based on what I am seeing, I would expect February to be up from Jan and down about the same % Countyside YOY from Jan. I’m hoping the jump in interest rates will not continue, as I think the reduction helped in the last few weeks.

  86. Jan 07 was 1,558 SFR sales, and Feb 07 was 1,572, so there wasn’t that much of an increase last year. But I’d agree we’ll probably due better than Jan 08 (1,037), but county-wide not have the same percentage recovery I’m seeing in area 330.

    One thing I’ve noticed looking at these things is that a number of properties have sold, but weren’t updated by the agents (they show as pending still). I don’t think that’s such a high number that it’s significantly depressing the stats, but it does make predicting the next month a bit more difficult. I found 3 of those in area 330 alone from October to November. Maybe starting at 45 days from going pending the NWMLS should start sending out emails to the agent asking if it is still pending, and then repeat every 10 days.

  87. I treat all aberrations as equal. There should be roughly the same number of double postings this Jan as last Jan, or at least the same percentage of double postings to account for proportion of the whole.

  88. That’s because you’re primarily looking at changes. I was trying to guestimate the total number of closings. If you have 10 pendings out there which are already closed, you’ll guess 10 high each month on the closings.

    I went back and looked at the pendings in area 330 closer, and I identified at least 10 that either have already closed, or likely already closed. Some of these date back to 2004! Anyway, upon closer examination of the pendings I don’t thing this area has a chance of meeting last year, but they could do about 75-80% of last year, which is an improvement from the 61% in January.

    If what I’m seeing is correct, the NWMLS really needs to so something about cleaning this up. If you’re doing an absorption rate analysis, having 10 extra pendings in a area would significantly affect your results!

  89. Kary,

    But if you compare YOY and only clean up this year, assuming all years have aberrations, then you are stacking the deck in favor of making the numbers look better.

  90. It’s absorption rates and trying to guess current month closing that are mainly affected. Of the 10 in 330 I’m not sure any are in the same month, so the YOY figures would not be greatly affected for any given month.

    And it doesn’t stack the numbers in favor of looking better. If there was one closing in a prior year that was not recorded in the system, the YOY would look better than it should (in an insignificant way though). Correcting the problem would make it look worse (except that I doubt the archived data gets updated).

    Look at it this way. Over in the P-I blog Greg was pointing out that looking at pendings, area 710 is approaching having only a three month supply of inventory. When I looked, my numbers were something like 75 pending and 245 active. So if you’re comparing pendings to actives, having 10 off would affect the ratio greatly. Rather than approaching 3 months it would be approaching 4 months. But 710 only had one erroneous pending, which has been sitting there from 2004. Not a big deal in that instance.

  91. As to absorption rate, you have to use a projection of the appropriate months. Jan. and March or April, are never the same. I’ll try to post the color wheel of that below in an edit. I’m thinking if we increase each month by the same % that the sales normally expand from January, we will have more accurate predictions and a better absorption rate statistic.

    The first quarter is usually 20% of the year. So when we have the 1st quarter of 2008 numbers in, we will be able to project volume for 2008.


  92. From the graph above you can see that projecting 4 months as an absorption rate, when three of those forward months are March, April and May, and basing that on January Sales would not be remotely accurate.

    Likewise, the same would happen if posting in July or August and not accounting for the diminished expected activity for October, November and December.

  93. Casual–it’s Sunday NIGHT stats! 😀

    Ardell, you can do absorbtion rates many ways, but your point is a good one that sales volumes do have a seasonal variation in most areas. But I think the point is more to show how long it would take at existing sales levels (or existing pendings) to get an idea of the current market, not to project how long it will actually take for the inventory to sell.

    Stated differently, ARs are more to show the strength of the current market, rather than to show anything about the future.

  94. Absorption Rate = how many months will it take to absorb the current inventory. If the answer is 3 months, then which three months is VERY important. If the answer is 12 months…then not.

  95. casual observer,

    I try to keep the time that I get the info fairly consistent to be a true reflection of “7 days later” and not 6.3 days later. I will calculate them and post them tonight.

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