Before I get to tonight’s stats, let’s talk a little bit about some myths out there. Many are saying that the volume of sales is down by 30% this year because the low end can’t finance, as if only the lowest of price ranges is reacting to the mortgage markets. Not so. In fact the results are pretty startling across the board in that they are virtually identical in every price range!
Number of sales is down 30% equally in every price segment.
In Jan & Feb of 2007 when there were 4,226 properties sold, 46% of them were priced between $200,000 and $400,000
In Jan & Feb of 2008 the number of sales dropped from 4,226 to 2,919, but still 46% of them were priced between $200,000 and $400,000.
Virtually the same for all price segments. $400,000 to $600,000 represents 28.5% of sales in both years. To see all price segments and compare the percentages to 2005 and 2006 and to see all of the underlying data too boring to post on RCG 🙂 go here.
Up to this point more people were buying at higher prices each year. This “flatlining” of percentage of purchases in each price category is another way of saying that prices are flat.
When will we know that prices are down? When more people can and do buy more houses at lower prices and those percentages start increasing on the low side and decreasing on the high side, you will know that prices have been affected by more than just a little. Conversely if these percentages stay the same or start moving up again, then volume is down and prices are not affected. Personally I don’t see how volume can continue to reduce by 30% YOY without that affecting prices more than it has to date.
I will be waiting a week or so before reporting for the full first quarter in a like comparison. It takes a good week or even two weeks for agents to post their March month end sales. But as soon as we’re pretty sure all of the sales are posted, the all telling 1st Quarter 2008 numbers will be very interesting. Generally the 1st quarter accounts for 20% to 22% of the year’s sales. So we should be able to make some assumptions about how we expect the year to play out once we have all of the 1st quarter data.
OK…on to Sunday Night Stats and our regular programming.
King County Residential Sales
Active/For Sale -10,064 – UP 285 – median price $528,000- up $3,000
In Escrow – 2,664 – DOWN 48 – median price $447,725 – UP $3,725
Closed YTD – 3,273- UP 390 – median price $435,000 – DOWN $2,500
King Conty Condo Sales
Active/For Sale – 3,518 – UP 83 – median price $324,950 – no change
In Escrow – 863 – DOWN 39 – median price $299,900 – DOWN $50 (asking prices)
Closed YTD – 1,097 – UP 139 – median price $285,000 – no change
“Statistics not compiled or published by NWMLS.
Wow. The trend over the last two weeks has been pretty startling. This week had the largest increase in Active/For Sale so far this year (not super surprising as we hit Spring) AND last week had the smallest increase in In Escrow so far this year OTHER THAN this week, which actually posted the first In Escrow DECLINE of the year (which SHOULD be super surprising as we hit Spring). Have you guys seen a slow down over the last few weeks?
The week of Easter seemed very slow, but this last week was busier, although a couple of clients were out of town due to spring breaks.
Today I showed 2 houses that happened to be open houses, and the agents were busy with buyers – both in Ballard area. Each house had several sets of buyers in, and more milling on the sidewalk. Just curious neighbors, or actual buyers? We’ll have to wait and see.
I take part of that back – one of my clients left this weekend for spring break, which is this coming week, the other just had a different spring break schedule.
Ardell says: “When will we know that prices are down? When more people can and do buy more houses at lower prices and those percentages start increasing on the low side and decreasing on the high side, you will know that prices have been affected by more than just a little.”
Maybe, maybe not. It could be that buyers will choose to buy more house if prices fall, or it could be that changing financing requirements, most probably higher down payments, force them to buy less than their income might allow while prices remain stable. There are too many variables to claim that a higher percentage of purchases in one category or another are only the result of price changes.
However, I am struck by the continuing strength of purchases in the lower tier, since most had assumed those homes/buyers would be the hardest hit by tighter credit standards and the collapse of the secondary market for mortgages.
Being “out in the country” by Preston/Fall City, I can say that absolutely NOTHING is selling. The same homes have been on the market since last summer, many have reduced prices, and yet there is no movement at all. I’d say the price range here runs from the high $400’s to $1.5M, and it’s all dead. In my opinion, the second quarter will be most telling.
Conrad-
“However, I am struck by the continuing strength of purchases in the lower tier, since most had assumed those homes/buyers would be the hardest hit by tighter credit standards and the collapse of the secondary market for mortgages.”
How much of this can be explained by people downsizing or choosing to live a more conservative lifestye?
Q-Diddy, I don’t know how we can measure downsizing or choosing to live a more conservative lifestyle, other than by anecdotes …
I have 4 sets of move-up buyers, all with young children, who want to move into a larger home. All have been in their homes for 5+ years, so their urge to move into larger is pretty typical at this timeframe in their lives.
I have a few retired folks planning to sell big homes this year and downsize, again, typical for that stage of life.
Anon wrote: ” Have you guys seen a slow down over the last few weeks? ”
Except by looking at the NWMLS data, agents can’t really get a feel for the market by their own activity. We see too little of the market. My wife and I were extremely busy in December, so much so I didn’t have time to check the stats for the month. The low volume for December took me totally by surprise.
Ardell, I’d tend to agree with you that low volume should eventually translate into lower prices, but that assumes people have to sell. As is often mentioned, prices are sticky downward. Also, it assumes nothing changes.
Q-Diddy,
I believe the conservative factor is part of the 30% down in volume . ALL all of that is not about financing. Maybe even half and half.
I said: “When more people can and do BUY more houses at lower prices and those percentages start increasing on the low side…”
Here’s what I mean by that.
In Jan. + Feb. of 2005, 17% of buyers purchased under $200,000. In 2006 that percentage dropped to 10.45%. 2007, 5.7% and so far this year 5.1%. That is a function of prices increasing each year, not fewer buyers.
Many want to look at price reductions as a sign that the prices are coming down. Not so. While 5.1% of property SOLD YTD is $200,000 or less, only 3.8% of those remaining on market are $200,000 or less.
If everyone priced up to $220,000 dropped their price to $200,000, the % would increase from 3.8% to 5.45% and bring it down to reality and basically flat as to price. So price reductions more often reflect coming down to where we ARE vs. prices droppping for real.
For Case Schiller to be correct in this price tier, that being prices down to August 2006 levels, we would have to see the number of people able to buy in that price tier doubling from 5.1% to 10.2%.
I’ll do the next tier in a new comment, since the next tier involves 45% of all King County buyers and 35% of all King County Sellers.
Oh Jeez, I see Craig just challenged me to a “Death Match”. I’ll get this comment out and then go see what he’s up to.
The $200,000 to $400,000 price tier involved 55% of all King County buyers in 2005 and 2006 and 46% of all King County Buyers in 2007 and YTD in 2008.
BUT, current sellers are not in line with those numbers given that 35% of all homes for sale are priced in that tier.
For kicks, lets add the first two tiers and say “up to $400,000. You have 5.1% plus 46% of all property sold in that range or 51.1%. Yet only 39.6% of all home sellers are priced at $400,000 or less (this includes condos of course)
For the % of For Sale property to be equal to the % of sold property, all people priced up to $475,000 would have to be at $400,000 or less. So price reductions often are simply a reduction to flat pricing vs. real price decreases.
OK, my curiosity is killing me. Over to Craig’s post.
$475k to $400k is nearly a 20% drop. Are you predicting that prices are going to drop 20% from what is listed today?
Alan,
The first step of a flat to down market is for sellers who are used to upping the price from the comps, to get equal to or closer to the comps. Early in the year you have two things going on:
1) You have a lot of overpriced listings left over from last year. Even if 30% are “new on market” in 2008, at least 20% of those that came back in January and February were really last year’s leftovers. Some that didn’t sell in 2007 even increased their price above the price at which it did not sell, because they added an extra year of appreciation when they came back on market in 2008. In the ever increasing market of year’s past, that worked. Builders removed their incentives and raised their prices and still sold the houses. Owners increased their price in “the new year” and still sold their houses. Not likely that will work, at least not to the same degree, in 2008. So yes, this group is likely as much as 20% overpriced at present.
2) The $209,950 people and $215,000 people and $219,950 people may all find themselves either at $199,950 asking prices or $200,000 sold prices or $210,000 sold prices but paying all of the buyer’s closing costs. So that’s an easy 10% to 20% change out you can expect to see happening just for the sold property to MAINTAIN the % of 5.1% of all property sold selling at $200,000 or less.
#2 involves 226 of the 741 properties on market in that range. A full third of all property for sale up to $220,000 is between $200,000 and $220,000. So as to this price tier, yes. For prices to be flat to down you would have to see a 20% drop on those asking prices.
Again I’ll do the larger increment in a separate comment since it involves almost half of all King County buyers.
35.9% of sellers have asking prices between $200,000 and $400,000 while 46% of buyers are buying in that price range. With 30% fewer buyers buying this year, more of those sellers need to cut out that portion of price that represents overpricing. Again, that is not because prices are down, that is simply to keep the homes at current price levels and establish a balance between what homes are selling for and what sellers are asking for them. Even if prices increase a tad, say 3% to 5%, asking prices have to reflect reality better than they are at present.
Let’s look at the obvious first.
803 properties are priced at 200,000 to $250,000. 216 of those are priced at $200,000 to $219,950 with an average days on market of 84 and a median days on market of 59. So let’s say at least half of those should not be priced as they are and should be priced at $199,950
Then you have an additional 196 priced between $250 and $259,950 with average days on market of 72 days. Most if not all of them should likely be no more than $250,000 for obvious reasons. The people looking at property up to $250,000 on the internet are missing them entirely. They are invisible. The people looking from $250,000 to $300,000 or likely spending a lot more than $259,950. So basically 196 people are pricing in an “invisible” price range.
473 properties are priced between $300,000 and $320,000. Likely a lot of those belong at $299,950.
So it’s not necessarily a 20% drop across the board. Some prices like $400,000 to $415,000 and the 232 people priced there a more likely out of range than those at $450,000 or $400,000. Not because of the amount they are overpriced, but because most buyers view property on the internet and do so with price caps.
In other words…Friends don’t let friends price at $403,000 🙂