Of course Monday is the last day of the 2nd Quarter and the 1st Half of 2008. Exciting stuff! But that will be next week’s news.
Tonight, since 6/29 will be kind of boring weekly stuff, I tracked of few of the top listing machines to see how their volume has changed. Can’t tell you who they are, but remember, when volume is down some of these big teams have to split with several people. So expect to see some cutting down on staff given the change in the market.
The worst was down to 9 sales in the 2nd quarter of 08, from a high of 25 quarterly sales. Another down from 28 to 12. Another down to 11 from a high of 27. Average price down from $1.7M to $1.3M. Another down from $2M to $1.5M. One is carrying 60 listings…with only a 25% turn rate. That’s a lot of marketing costs for homes not selling. Another is carrying 55 listings with a 20% sold rate. Another dependent primarily on builders for inventory is down to more than 50% fewer listings with volume sold off 50% below that.
Now for this weeks stats. The chart from last week has been updated as to 2Q08, but all the data is not yet in. Remember, last day of month can be a heavy closing day, and many won’t post those for several days. The holiday weekend could cause further posting delays next week.
Watch those condo stats…they will play a role in residential stats in coming quarters. Residential will lag as to how the condo market ultimately impacts the single family home sales. Look at the difference in volume on the condos 1Q08 vs 2Q08 compared to the spread on those two quarters in previous years. And of course the price dip is fairly dramatic there.
What will be interesting is when we get to monthly YOY volume stats come August and September, when we are comparing this year to the part of last year that was already reduced as to volume.
King Couny Condos
2004 – 1Q – 1,694 – $188, 2Q 2,636 – $199, 3Q 2,540 – $196, 4Q 2,176 – $195
2005 – 1Q – 2,066 – $198, 2Q 2,925 – $209, 3Q 2,769 – $226, 4Q 2,266 – $224
2006 – 1Q – 1,956 – $242, 2Q 2.748 – $252, 3Q 2,737 – $269, 4Q 2,217 – $278
2007 – 1Q – 2,042 – $295, 2Q 2,862 – $302, 3Q 2,676 – $311, 4Q 1,618 – $294
2008 – 1Q – 1,258 – $299, 2Q 1,384 – $288 (2Q incomplete data – postings as of 6/29/08)
Changes in condo stats for this week
Active Listings: 4,047 – DOWN 2- median price $320,000 – MPPSF asking $316 – DOM 61
In Escrow: 913 – DOWN 16 – median asking price $295,000 – MPPSF asking $294 – DOM – 51
Sold YTD : 2,645 – UP 141 – median list price $294,950 – median sold price $289,000 – median PPSF – $294 DOM 48
Residential King county
2004 – 1Q 5,650 – $152, 2Q 9,237 – $160, 3Q 8.737 – $163, 4Q 7,467 – $165
2005 – 1Q 6,402 – $173, 2Q 9,093 – $185, 3Q 9,131 – $192, 4Q 7,301 – $195
2006 – 1Q 5,596 – $201, 2Q 8,248 – $214, 3Q 7,771 – $216, 4Q 6,204 – $217
2007 – 1Q 5,304 – $222, 2Q 7,393 – $230, 3Q 7,944 – $229, 4Q 4,301 – $221
2008 – 1Q 3,640 – $219, 2Q 4,266 – $220 (2Q incomplete data – postings as of 6/29/08)
Changes in residential stats for this week
In Escrow: 2,863 – DOWN 68 – median asking price $442,400 – DOM 47 – MPPSF $211
SOLD YTD: 7,908- UP 419- median asking $449,950 – median sold price $440,000- DOM 49 – MPPSF $219
Actively for sale 12,187 – UP 192- MPPSF <$800,000 is $220- MPPSF >$800,000 is $337
Stats not compiled or published by NWMLS. (Required disclosure)
Ardell,
Love your stats and good idea talking with the big listing agents. Everyone we’ve talked to as well is saying their business is down considerably, but we are starting to see more activity now, at least in the city. On Thursday, June 26, the Seattle Times reported that existing home sales Nationally edged up slightly in May from April and in the Puget Sound area as well. They quoted the National Association of Realtors saying that the “sales of existing single-family homes and condos rose by 2 percent to 4.99 million units” Nationally in May and that sales increased by 3 percent in King County and 5.9 percent in Snohomish County compared to April 2008. But in “raw numbers” that was only 61 additional homes sales in King and 43 homes in Snohomish. Not a lot but some. Pierce County saw a 15.1 percent drop or 135 fewer homes and condos sold. Pierce County however is seeing the largest number of Foreclosures in the state as well. In our experience July and August have been traditionally our slowest months so it will interesting to see what happens over the next 60 days. Maybe we are at or at least close to the bottom here in King County.
“…but we are starting to see more activity now…Maybe we are at or at least close to the bottom here in King County.”
Clearly we can’t be “close to the bottom” as to price, if the in escrow numbers are showing a huge drop from closed sales at $211 asking price vs. $219 closed price. Then compare that to May closings being $224.
I think we could be “close to the bottom” as to volume relationships YOY from here forward, but not compared to prior years or as to price.
While my stats show 43 more homes sold in May vs. April in 2008, I’m also showing MPPSF down $5.00 for in escrow vs. closed in May and down $13 for in escrow vs. closed in April. That $13 will be at least $15 – $17 down given the in escrow sales did not likely close at asking price.
Compare that to any year back to 2000 April vs. May and none have been down $5.00 from April to May and most have more sales. In 2000 for example, 1,820 sold in April and 2,080 sold in May vs. this year with 1,502 sold in April and 1,545 sold in May. In 2004 you had 2,904 selling in both April and May with no upswing as to volume, but prices went from $155 to $162 for that same volume vs. our current down $5.00.
So when you consider that 45 more sold along with the MPPSF down $5.00, you will see that $5.00 dip being the highest price drop between April and May for many years. I don’t think we are at bottom as to price.
I want to wait a week before using these stats in an actual post, as I want the final postings for June to be in. Still the scary number for Residential sales is that $211 showing as MPPSF as to asking prices of those in escrow. Clearly we can’t be “at bottom” as to price if the in escrow numbers are showing a huge drop from closed sales in the previous month or two.
Where we think it get tricky, is looking at overall numbers vs specific neighborhood numbers. What we’ve found over the years is that activity and prices can change during a period from neighborhood to neighborhood. We believe that the “in-city neighborhoods” like Queen Anne, Magnolia, Wallingford, Ballard, and Bryant have been stronger in sales and retaining prices than other neighborhoods father out from the city core. Granted, there has been a decline, and we think we are back to about 2006 prices and inventory levels have about doubled, but homes are selling if they are priced correctly and we are seeing more of them selling right now than we saw two months ago. We choose to look at that maybe a little more optimistically. Could we see another 12 months of falling prices in King County as a whole, most likely, but maybe we are close to the bottom in these above mentioned areas because there are so many great values right now and these areas should be the first to turn around when this whole mess is over. We also believe that the down turn in Seattle home sales and prices is “more” a matter of fear on the part of buyers from all the bad housing news nationally, rather than the actual Seattle housing market and economy.
David/Karen,
I’m curious why you think that “fear” (negative market perception) is any less a real part of the housing market than any other variable that influences prices.
Do you have a similar opinion of “hope” (positive market perceptions)?
“We also believe that the down turn in Seattle home sales and prices is “more
To counter-balance negative with false optimism is negligent. Bring the numbers from those “immune” areas…not just talk. I know what’s happening in the best of areas. It’s less down, but still down.
Patient Buyer,
Great question. We don’t think fear is any less a real part of a market condition. Fear is very real indeed, and when someone is in a “fearful state” they look at and do things differently than if they are in a “confident state” about what they are dealing with. Why I said what I said, is that economically, Seattle is in very good shape and it will most likely stay that way for a long time. Seattle will continue to grow. This is one of the best cities in the country to live. In fact it’s estimated that by 2020 there will be another million people living in the Seattle area. We have bad traffic problems and no good way to fix them. Gas, won’t ever be cheap again. So, the good neighborhoods, that are close-in to the city, we believe will become even more appealing and consequently more expensive over the next several years. We think that there are some really great values to be had in some of these neighborhoods right now however. And when you wait for the bottom of a market, you never really know you hit it until you are well past it. We think we are close.
If you look at the other markets around the country that have really been hit hard they don’t resemble Seattle’s economic makeup. Areas that had huge building booms and new home that went up really fast without a sustainable buyers market that was supported by job growth and business diversity. They went up and know have come down. Areas like Arizona where the 2nd home market has been devastated or Las Vegas where the market was growing up so fast that the people that got in late were left holding the bag.
So, with all that being said, consumer confidence is driven many times by perception and what we believe. What we believe is based on family values, education, peers groups, and on what we hear, read, and blog about. And our perception is that there are many places where the housing market is really bad. But places like Seattle it maybe shouldn’t be as bad or “perceived” as bad as it is. So if you are less confident about the Seattle market because of all the bad news about other markets, is that the best way to evaluate things and base a decision on about Seattle? Fear is different from caution, or making well informed decisions with a a little risk involved (but it shouldn’t be foolish risk) . Fear, it’s very real, and we guess we are just a little more positive about where Seattle is right now and is where it’s heading. If our daughter was in the home buying process today, we would advise her to move ahead if she got the right loan program, and a very “good deal” on a “good home” in a “good location”. You see today, you have many more choices to get the above, than in the past 10 years. Maybe out of 20 new listings there were only 2 or 3 “good homes to buy.” Now there are a bunch.
Ardell,
Yup, financing is difficult, and you actually have to qualify now for loan 😉
Patient buyer, prices are down because volume is down. To figure out what a property is worth today, get your agent to show you comparables from last year, and see how much lower it is today than then. However, keep in mind that some stellar properties are still selling for the same or a tad more than last year, not many, but some.
And, in my opinion, avoiding the stellar properties so you don’t have to pay full price or a bit more isn’t necessarily “good”.
Even in the 1980’s before we ever heard of “multiple” offers, the best properties sold really quickly, more often at ask price. It was nearly unheard of in Seattle to offer more than an asking price, but not unheard of for a seller to sell in a day. Rarely, and only for the best properties.
“Yup, financing is difficult, and you actually have to qualify now for loan”
Financing as in fewer buyers regardless of the economics of the area. To only note what is staying good, and not accounting for what is not, is really not a responsible position to take.
I also don’t appreciate the “cheerleading” being done on my post. But, oh well. People can decide for themselves whether to look at the facts or the rhetoric.
Clearly if someone needs a bigger house, or to buy a house, and plans to stay for 7 years or more, than yes…buy a house. But if someone’s saying should I sell this year or next year, what do you say to them David? Do you tell someone who is selling that next year will be up from this year? Down from this year? Who knows? Best educated guess?
How would you advise a seller as to sell now or next year at this time?
Leanne,
Can you define “best properties”?
Reading David & Karens explanations for why we are almost at the bottom reminds me of the reasons provided in 2007 why Seattle’s house priced wouldn’t drop.
Clearly all you real estate agents who couldn’t see the formation of the greatest financial bubble in generations, if not history, are unqualified to comment on when this will be over. Why not just say, “who knows?” Any credibility your industry has left is further eroded by the constant bottom calling.
“all you real estate agents”
It clearly ticks me off when agents come over here and cheerlead on my post, because this is what happens, and frankly, I don’t deserve to be lumped into that pile. But what can I do?
We work like crazy to be a credible source, only to lose our credibility because of crap like this.
I’m totally frustrated.
Cheerleading??…hum, maybe not a bad thing right now, come to think of it. You know you can have all the numbers you want and be very factual, very professional, yet slightly spin it negative, neutral, or positive. You can be one of those “bubble” persons, one of those who have been predicting the great real estate collapse now for the past 15 years. Or you can choose to look for positives in where we are. And Ardell…why even bother with anyone saying “all you real estate agents” and “Any credibility your industry has left is further eroded by the constant bottom calling.” So let me ask…All us Real Estate Agents shouldn’t look at what’s happening in our markets and when we see good opportunities we shouldn’t tell anyone about them…and that’s because… Shane, we are just stupid, maybe just trying to get a deal, or maybe we know what we are talking about and for someone that bought a good home, at the correct price, in a good location in 2000 have increased their equity by at least 60% today? Yeah, not to much creditability there!
“Cheerleading??…hum, maybe not a bad thing right now, come to think of it.”
Sigh…
The Davkar Bell-borg seems to be losing it’s composure.
I think Cheerleading was accepted and expected are RE blogs for so long that you appear to have shocked- SHOCKED them with your reprimand, Ardell.
I like you and your refreshing honesty, so I won’t dig around for any Rats-Ass quotes from yesteryear. 😉
Keep refusing to be assimilated, Ardell.
Eastside Absorption Rates: (How long (many weeks) to sell through inventory at the current rate of sale.)
7 Week Averages. / Weeks of inventory:
2-Jan 30-May 18-Jun
500 62.5 45.9 40.9
510 24.2 25.8 38.1
520 70.6 57.5 65.9
530 31.4 24.7 33.1
540 44 30.4 35.9
550 37.9 36.7 27.2
560 56.2 57.3 43.3
600 53.6 36.7 44.4
Absorption rates are calculated using the ratio of Active listings vs. Pending listings. Actives and Pendings are broken out by NWMLS Area and by Price range. 7 Weeks of activity are averaged.
Almost all Eastside area absorption rates have improved from the first of the year. (This is normal and should happen every year) 3 Areas absorbed inventory in the last 7 weeks, 5 areas built inventory during this period . Overall area 550 Redmond showed the greatest improvement. In the month of May, Pendings in 550 were up over last year (97 to 93). In the large Eastside areas of 500, 550, 600, the majority of sales are being made in the Western (closer in) portions. Overall the high end (over $900,000 in all Eastside areas is very slow and building inventory.
So keep in mind, even through inventory may be building in an area, some price ranges within the same area may in fact be absorbing inventory.
0-12 Weeks = Seller’s advantaged Market
12-24 Weeks = Balanced Market
24 Weeks plus = Buyer’s advantaged Market
(based on NWMLS stats not published or verified by NWMLS)
I don’t see anything wrong with David and Karen’s Bell’s comment #8…they’re right. People do have to qualify for a mortgage now when before, you just had to lie (oops…I mean state) your income on a loan application. Heck…you could lie about your assets too.
Those loans are long gone and for good reason. I’m glad my business was never based on that type of model–I probably could count the stated income loans I did on one hand and the borrowers made the income at that time (not future projected income of what someone might make).
People actually need a down payment or be prepared to go FHA and be scrutinzed to make sure that you actually can afford the payment.
But where does comment #8 meet the others? Where is the predicted impact that fewer buyers able to finance will have on the market fit into the equation? I agree, the economics continue to be good for many, but to suggest there won’t be a long term impact from current to offset the financing issues, is an error of omission.
Ardell, I need to re-read everything again (lots of long comments). I know this isn’t my post, but I do welcome as much participation from various people w/different opinions/viewpoints.
Comment 8 appears to be in response to your comment 5.
Well, if: Yeah, so what? is a satisfactory response to you…oh well.
Part of the fear that buyers and sellers have is that the people they rely on most for guidance want to cherry pick the good information and hide the negative. That serves no one and feeds fear more than truth does.
Half truths or even 80% truths are less than satisfactory, and what drives fear.
12 paraghraphs on good and one half sentence on the negative factor is insufficient, IMNSHO.
Hi Ardell, there really isn’t a generic ‘best properties’ definition … but depending on who my client is, what their needs are, and what geographic area they are looking to buy in, I can definitely help them learn what criteria ‘best properties’ would be for their needs, and for that area relating to the specific price range. Even down to the fine point of ‘will their financing allow them to actually buy that house’ … in terms not of actually closing, but in terms of counselling them to understand how the competition from other buyers might intensify how the seller and sellers agent choose an offer as defined by the buyers financing. It all matters.
I think you do it with your buyers as well. You counsel them to hold back and not make offers on properties that you know are not the best-of-show, and part of that skill comes from years of experience, and learning first hand what works, what doesn’t. I don’t necessarily mean negotiations here, simply finding that rare and wonderful property. They are not a dime-a-dozen. Rare means rare.
A little joke I make with my buyer clients is that I’m LAZY! They usually look at me like I am goofy, because by that time, we’ve likely been in the car together for several weeks. But, my point is, that there are only a few rare, great properties, and if we take our time to find them now, someday when they call me up and say:
“Leanne, it’s time to move, come sell our house”,
then I’ve earned the LAZY standard, because I know that if we do it right the first time in, my job going out (selling) will be far easier than if we were sloppy, too fast, or just plain lazy in the beginning. Multiple offer houses are sometimes good examples of rare, great houses – but not always. Remember that you do not win just because you got the house. If you paid too much, you lose.
It really is just like anything in life. The good ones are worth waiting for, and if you don’t do your homework, you’re not prepared.
I’m just a cornball sometimes.
Ardell,
We’re not the enemy here, we are just looking at things from a slightly different perspective. You say a lot of good things, and we think we do as well. It seems like we really push your buttons for some reason. We just have a little different take on things and we are not that far apart really. A little micro economics vs macro economics we guess. If you would like we won’t comment on your posts anymore.
Al 😉
Hmmm. I also don’t see anything wrong with comment # 8.
What I am seeing, and maybe I’m just in a segment of my current business that is lucky, is that the people out there buying and selling are very well qualified. I’ve not had anyone marginal, in fact quite the opposite.
So, the buyers who feel solid about their finances and financing options, are moving forward, in fact, quite steadily. Many of the sellers I’ve had this year have been in their homes for 5 or more years, and moved not because the market was hot or anything like that — they moved because their old place no longer worked and they wanted a new place. A life decision, not a frenzy decision.
What we found is that their homes sold, easily in fact, since we priced them well, and that they were able to find several new places to consider, and without undue pressure from other buyers.
I think there is a variety of needs out there, but that some of those needs simply cannot be filled. We can’t sell an overpriced home out in the sticks today, nor can we sell the fixer-to-flip that is skillfully done, but horribly ugly and on a bad lot, or a busy road …
Nor can we sell a home bought at the peak of the market 2 or 3 years later with a break-even price. I don’t think anyone should ever have thought they should be able to do that anyway.
“Part of the fear that buyers and sellers have is that the people they rely on most for guidance want to cherry pick the good information and hide the negative. That serves no one and feeds fear more than truth does.
Half truths or even 80% truths are less than satisfactory, and what drives fear.”
Yes, and don’t we all see our “truth” from our individual filters and perspectives?
If commenters are chased for a differing opinion, there won’t be discussion.
Ardell, love ya, but you’ve had a hair trigger lately.
Leanne,
You know we are so tired of hearing all the bad news about everything we think we need to stop, look around and understand that we live in a pretty great country, and a pretty great city and it’s not all gloom and doom out there. In fact, here is what all this today has lead us to: An interesting perspective; if we think the market is so bad and getting worse then how could we represent a buyer in buying a home right now? If it’s so awful then nobody should buy anything! Is that the right thing to do? Things aren’t like there were two years ago and we glad they aren’t, that had to stop at some point, but we honestly don’t think it’s all gloom and doom either, and we aren’t just saying that to justify this business. It’s all about perspective, it’s all about looking for the good things as well as the things to be concerned about, and making people make well informed good decisions…and we appreciate and agree with yours!!
Greg,
Have I taken aim at you with me “hair trigger”?
Ardell – remember we are in the PNW. Smiling passive-aggression is the preferred mode of derision and put-down. That goes double for Realtors.
I think I like your posts over other Realtors. Mack is a close second, he might be surprised to know. It’s the New Yorker in me, I guess.
I met a woman recently who hates her house. She said the agent told her to buy it even though she hated it because she could come back in two years and sell it for more than she paid.
The house next door to her is on the market and not selling at less than what she paid.
I myself have told people I could come back and sell a place for more than they were paying, back in 2004 and 2005 and did so. I did not say that last year or this year. Maybe people don’t expect that kind of honesty from agents. Maybe they beg to be lied to.
But I heard plenty of agents telling people that they would make money and those same agents are now saying “who knows?”. Not fair.
biliruben,
I have been very lucky to meet many people in the PNW who are not phonies or passive aggressive. I met many in L.A., but very few here.
Hi David and Karen,
If a homebuyer is comfortable with the risk that home prices could further decline, if the homebuyer plans to stay in their home for quite a long time with no plans of selling, then maybe it is the right time for some homebuyers.
Homebuyers should receive financial counseling from either their Realtor OR their mortgage loan originator on such things as how to plan for a potential job loss or other event; accumulating several months of reserves in the bank, the thought of being able to rent out their home for enough to cover the payment in the event that they can no longer make the payment and cannot sell for the purchase price.
Homebuyers didn’t receive much of that during the bubble run-up. Buyers now look to us in the industry to help them sort through the tough financial decision to become a homebuyer because….they might be feeling just a bit scared. Maybe intimidated or concerned are better words.
Fear can be a good thing. Likewise, being joyful at the wrong time can be…not so good.
Clearly not everyone is capable of managing homeownership. Clearly too many people from this group are in the process of losing their homes.
We are darn lucky we live in Seattle. However, our prices are going to go down, just not as dramatically as in the bubble cities. Home sellers and homebuyers need us to be honest with them about facts and probabilities, based on what we DO know. That’s one of the reasons they pay us: to be honest.
If homebuyers and home sellers can go out and find what they need elsewhere, such as cold hard facts, data analysis, and analytical minds jumping up, taking the risk to make predictions as to what’s ahead…then these same folks might also be wondering about the value of their real estate agent.
The greatest value that agents can bring to the table today, from my perspective, is the ability to deliver the honest reality about the marketplace. Perhaps a little fear can be good for that homebuyer.
When the median house is three times the median income, and rental properties cash flow with 20% down and 30 year fixed loans, we’ll be closer to the bottom. We haven’t really even started down yet, but some are calling for the bottom in a year? There’s no way. To do so requires complete ignorance of the economic foundations of both the U.S. and world economies, their structural weaknesses, and the huge challenges they face.
It’s a good time to face the fact that real estate will probably be a poor investment for the next ten years, and an expensive luxury for the few who remain able to afford it.
I’m amused by watching the home I rent- for less than half of what it would cost me to “buy” it, drop $8,000 to $10,000 a month on Zillow. And it’s a pretty nice house. But it’s not worth that kind of monthly expense.
It’s a good time to sell a house. But morally, I could never tell someone that buying was a good idea, and still live with myself. Good luck guys.
Ardell,
“Have I taken aim at you with me “hair trigger
They aren’t new to blogging. They have their own blog. They should understand the medium. I don’t know how much experience they have in a down-market, however, as evidenced by their blog entry a couple weeks ago: “Stop Reading the newspaper and go buy Seattle Real Estate!”, or something like that.
Anybody who is an unabashedly one-sided better assume someone is going to try and let them know about the other side, either gentle or less-so.
I do hope they come back, however. There are few out there who are willing to defend that position anymore without reservations, at least in public. It’s nice to hear a defense, particularly if they deviate from NAR talking-points and use credible evidence.
Jillayne,
Exactly! That’s exactly how we run our business. We spend hours with our buyers making sure they know all the possible scenarios that could happen. We spend hours talking about the history of our market, where it’s been and where it may be going and what the possible downsides are as well as the possible upside. We have never allowed a client to get a sub prim adjustable rate loan even.
Realtors need to know what they are doing and know how to give good honest advise and we do. We have refused to write offers in our white hot markets on homes a buyer has wanted because they were such bad homes or in bad locations. We have told them if they want to buy that home they need to get a different Realtor to write it up. Realtors need to be more responsible for what their clients do, as so many of them are just facilitators and don’t give good advise.
We do absorption rates for several in-city neighborhoods. We have done that for years. We look at all the trends and study the history of our market. We even track other market outside the state that Seattle tends to follow over the years. We tell people the truth as we see it. Pricing in the city is more of an art than a science however. You just can’t look at county wide stats and prices per Sq Ft and have an accurate picture of what the right price should be in specific neighborhoods. Fortunately we have never sold a home that couldn’t be sold two years later for more that they paid for it, until now perhaps. We just helped a young couple getting married next month and they had been working with two other real estate agents for 5 months. They tried to by a short sale (for too much money and luckily the bank didn’t respond so they pulled out after 3 months). They were referred to us and had found three homes that they liked and maybe wanted to buy. The one they really liked the best was priced at $358,000 and the seller bought it last year for $385,000 and the re-lo company was going to buy it from them if they couldn’t sell it in the next 2 weeks. They really loved the house yet we convinced them to only buy a home that they could afford on one income and that would mean under $300,000. We know we could find them a really good home for that price and we found them a new construction home that was listed for $318,000, built by an excellent builder. We got it for them for under $300,000 with all their closed cost paid and a 2% point by-down in interest paid all by the seller. They also know that if the worst case happened for them they may not be able to break even on it if they had to sell in tow years and most likely the “break-even” point on it in this market may be as many as 3 to 5 years for them. But it the perfect home for them and they got a great deal.
Implying it here or not, all Realtors that see positive things in our current market are not dishonest or misleading the clients. But people that think the market is going down and down are possibly adding to its decline along with not being accurate about various parts of the market. They may also be overlooking really good deals. You have to look at all the negatives but you also have to evaluate if there are any positives and we believe very strongly that there are positives in this market today and smart buyers are taking advantage of them. Always looking at this from the half empty side of things we believe doesn’t give a client the total picture of the market. And think about what we said earlier, if an agent really thinks that everything in the Seattle area market will go down over the next year, then why are they selling homes to their clients at all unless they are getting really good deals?
The greatest value an agent can bring to the table today is a proven tract record, a complete knowledge of the market and all it’s subtleties, and understanding of the total market. The ability to understand and identify good properties and good values. They need to understand their clients want’s and needs and be able to help them make proper compromises. They need to be able to move them through a very complicated and potentially dangerous market place into a good home at the correct price. They need to make sure the client is buying with one foot firmly planted in reality. They need to make sure the mortgage program is correct for them and they need to understand what the future downsides may be and what the potential upsides are. In other words they need to know how to help their clients make good decisions.
We are really disappointed with this discussion and all the negatives and innuendo. We thought this was an open forum for intelligent discussion and exchange of ideas and thoughts. A platform for learning, different ideas that may be valid, instead it feels right now as a place that if you take a slightly different course it’s not acceptable or your considered wrong or dishonest. Other agents have made similar comments to ours today and they are criticized as well over trivial words, but maybe it’s that their perceptions are not in keeping with all the negatives.
Greg,
I notice you call the person speaking: “David /Karen” Perhaps it would be easier to talk TO someone, if I knew who that someone was. I respectfully and privately requested, for conversational purposes many days ago, that the person speaking identify themselves singularly. I was given a flippant repsonse and a no.
David or Karen,
“They also know that if the worst case happened for them they may not be able to break even on it if they had to sell in tow years and most likely the “break-even
Ardell, how would it matter if you’re talking to David vs. Karen?
My guess is that it’s David, although not because I know them, I don’t It just sounds like a guy talking! 🙂
Ardell,
We do think it’s our responsibility to give accurate information and using broad strokes when painting the real estate picture isn’t giving accurate information on the marketplace. We’ve been trying to get that point across for a couple of weeks. Another example would be looking at the weather here in Western Washington. We get a lot of rain in Western Washington, but Sequim doesn’t. So most people, not from here, would believe that all of Western Washington gets a lot of rain and in fact Seattle averages about 36 inches year and Sequim averages about 16 inches a year. So again we are going to repeat ourselves: There are markets in the city that shouldn’t be lumped in with the overall market statistics of King County, it can be very misleading, yet when the news reports all the numbers they lump it all together. We had a call yesterday from a Dr. looking to buy a condo in Belltown who is not from Seattle. He said to us “from what I’ve been reading I should be able to buy a condo here for at least $100,000 under the asking price, right?” In our opinion, it’s that very thing that can cause a further softening in a market that may not be warranted, but that can cause additional harm to the market. When that happens we again believe that fear is driving the market more than actual market conditions. We never said that the market is great, we never said that the strong, what we have been saying is that there are some great opportunities out there today for buyers in areas that will most likely be the first to turn around and appreciate the most over the next several years.
David,
Going back to the beginning where you said: “Maybe we are at or at least close to the bottom here in King County.”
I just don’t get where you see that, referring to the data in the post:
2007 – 1Q – 2,042 – $295, 2Q 2,862 – $302, 3Q 2,676 – $311, 4Q 1,618 – $294
2008 – 1Q – 1,258 – $299, 2Q 1,384 – $288 (2Q incomplete data – postings as of 6/29/08)
Changes in condo stats for this week
Active Listings: 4,047 – DOWN 2- median price $320,000 – MPPSF asking $316 – DOM 61
In Escrow: 913 – DOWN 16 – median asking price $295,000 – MPPSF asking $294 – DOM – 51
Sold YTD : 2,645 – UP 141 – median list price $294,950 – median sold price $289,000 – median PPSF – $294 DOM 48
For you to suggest we are at or near bottom as you did, I would have to disagree strongly in that the data reveals that the trend is just beginning to turn down, and I see no signal via “in escrow” that we are “at or near bottom” in the Residential side of things shown above, or in the condo side of things shown below:
2007 – 1Q 5,304 – $222, 2Q 7,393 – $230, 3Q 7,944 – $229, 4Q 4,301 – $221
2008 – 1Q 3,640 – $219, 2Q 4,266 – $220 (2Q incomplete data – postings as of 6/29/08)
Changes in residential stats for this week
In Escrow: 2,863 – DOWN 68 – median asking price $442,400 – DOM 47 – MPPSF $211
SOLD YTD: 7,908- UP 419- median asking $449,950 – median sold price $440,000- DOM 49 – MPPSF $219
Actively for sale 12,187 – UP 192- MPPSF $800,000 is $337
For median price per square foot in the condos to be showing $211 as to asking price, and knowing that the trend has not been at or greater than asking price as to closed prices, how can the largest drop we have seen to date signal a turn around?
Perhaps you are not simply saying that here in hopes that your “positive news” that we are at or near bottom is your hope to influence otherwise. Perhaps you have some data suggesting some signal that the market is turning flat or up that I am not seeing. If so, feel free to post that data here.
I called your statement “rhetoric” Because it lacked data to support it. True, if people believe we are “at bottom” that could help to turn the market around. But to say it so as to cause that effect is not a responsible way to approach it, in my opinion.
In your most recent comment, you say:
“…what we have been saying is that there are some great opportunities out there today for buyers in areas that will most likely be the first to turn around and appreciate the most over the next several years.”
1) Buying something at 7% less than last year is not a “great opportunity” unless the bottom is near 7%. I don’t think anyone can predict that at present. Not me; nor you; nor Forbes…not anyone. I don’t see the problem as having been alleviated, that being the huge amount of buyers withdrawing from the marketplace due to insufficent downpayments or credit scores to satisfy today’s lending standards.
2) The markets that go down the least are generally those that appreciate the most in the upswing. So I do not see how those that have gone down to the lowest to date, will be the highest to appreciate in the future…in fact, quite the contrary. Those that appreciated the most in the upswing are down the lowest at this time.
Finally, as to specific neighborhoods, I have yet to find one that is untouched and reacting well as if it is “business as usual”. If you find, one, please let us know. I see some going down at a less rapid pace. I see some where volume is substantially down, but not as substantially as others. But I see none that are bucking the trend.
That said, I myself was once where you are. To some extent that is grasping at straws to find the one saving grace, that being a neighborhood that is continuing to do as well as it always has. I have not foud it. If you find it…bring us the data. We’d love to see it.
Greg,
I too have seen this description:
0-12 Weeks = Seller’s advantaged Market
12-24 Weeks = Balanced Market
24 Weeks plus = Buyer’s advantaged Market
But I have yet to see a market where 24 weeks, six months on market, felt “balanced”.
I wonder who determined that a seller on market for three months time had “the advantage”.
Ardell,
Here’s my take on AR’s and who has the advantage.
In a Seller’s market (<12 weeks), we have to remember that this number is for ALL ACTIVE AND PENDING inventory in a particular area. To get to this number, a LARGE number of homes have to sell quickly — very quickly–often with multiple offers. This happens when there are more buyers than sellers. As seller’s markets strengthen, and we get into 4 week territory, the market is virtually a feeding frenzy of buyers merely trying to acquire any house. There are still homes in these markets that WILL NOT SELL, because the seller has so grossly overpriced them for condition they aren’t in the ballpark. The AR accounts for every active and pending in the area.
As supply increases, so does market time. Most any seasoned vet figures a well priced home will take 30-45 days to sell in a normal market (not hours or days like in recent seller’s markets). In a balanced market neither buyer or seller have a particular advantage and the good homes are still moving. Few escalators happen here. Normal marketing takes it’s course. Generally one buyer is negotiating with one seller at an arms length. Another way of looking at this is a normal, healthy real estate market.
As market time increases further, the sellers become starved for buyers. They see few showings. Weeks of inventory build. The buyer gains full advantage as they have so many choices. Only the cream of the crop (compelling homes) get sold. The rest just sit on the market….until the market changes…..or until the seller makes their home the compelling offering.
I started studying AR’s after listening to Larry Kendall, who owns The Group, who has the highest agent productivity of any real estate company in the US. Since, the CRS is starting to teach practical applications of AR’s in listing, etc.
I find AR’s incredibly useful in negotiations for buyers and useful to help sellers really understand the market.
Here is a link to some very graphic heat maps based on AR’s. This is for 3rd quarter 2007…..the quarter where the market shifted. I wrote this post in October of last year.
http://blog.seattlepi.nwsource.com/realestate/archives/124285.asp
Statistics are tricky and multi layered. AR’s are not the end all be all of RE stats. I am convinced after over 2 years of study and application, however, that AR’s are best way to measure the relative strength or weakness of a RE market…..and here’s why….. AR’s are the sales ratio of both supply AND demand numbers. We cannot just look at supply and have any real understanding of a market.
Used in conjunction with customary Comparative Market Analysis data, AR’s are powerful in assisting buyers and sellers understand what to do.
Thanks Greg. Still digesting some of that, but a question first.
I started using ARs back in L.A. when a broker that I highly respected used them as one of his tools and introduced me to the concept.
When you figure the AR is
2-Jan 30-May 18-Jun
500 62.5 45.9 40.9
510 24.2 25.8 38.1
520 70.6 57.5 65.9
530 31.4 24.7 33.1
540 44 30.4 35.9
550 37.9 36.7 27.2
560 56.2 57.3 43.3
600 53.6 36.7 44.4
(I’m not crazy about using Area Codes for stats, since most non-agent readers don’t have “the key” – feels less than transparent to the readership – maybe I’ll break them down into Zip Codes)
Anywho…here’s the question. When you figure that January was 62 weeks of inventory June was 40 weeks of inventory, (I think that’s what your data is saying) what do you use as “a week” to determine that? If January you use a week in December and in June you use a week from May. isn’t the decline simply caused by dividing by a larger number in June than you did in January?
If 40 weeks forward goes into a slower time, then won’t that 40 turn back into 62 simply by the diminished number of sales per week, without the market really changing except for normal seasonal variations?
It seems to be a false read to say 62 turned into 40 just because you used a different number of sales per week in the two separate calculations.
I may not be reading that right. Where do you get the number to divide into current inventory to say it is 62 weeks or 40 weeks in various months?
Here’s a past post on post with a couple of sample charts that should explain:
http://www.workingforyou.typepad.com//realestate/2008/03/kirkland-real-e.html
Click on the chart to expand it.
Each week we compute the sales ratio between Actives and Pendings.
On the last column you’ll see a 7 week average. I put the most weight on this column. This is important: every week we see a new 7 week average. This average somewhat balances weekly spikes, either up or down.
On the chart that you copied and pasted above, those numbers represent the 7 week average for the indicated week.
I often look at 14 weeks of sales (2 – seven week periods) to gage if inventory is absorbing or building.
More useful to me than the overall large area stats are the AR’s by price range. Study the price ranges for a bit! You’ll see great differences in the sales ratios.
The numbers are always raw ACTIVES divided into PENDINGS, by the week and by price range. This represents the actual sales ratio– at any given time– between supply and demand. If supply OR demand changes, the sales ratio changes. This in reality is what is telling us if we’re entering a fast season, holding steady or entering a slow season.
Shoot, I thought you were calculating them yourself. Looks like Windermere is giving you that chart. Tell me I’m wrong! I was just putting you into my REGeekyBoyHallofFame. The heat maps are mega-cool, but again…Windermere? Spoon-fed stats? Say it ain’t so!
It’s so, but not always so. A friend agent and I studied Larry Kendall’s work and cut our teeth on AR’s as we were compiling AR’s on our own for 560, 550 and 600. We weren’t as complete down to the price ranges, but we did the AR’s. We kept the charts by the month.
I am a stat geek, but no need to duplicate and pay for the work and now I have every KC MLS area now, and in better form. In various comments, I’ve never hidden that WRE is supplying the tool. Now that we have what I have, I’ll never be without (even if I had to pay to have them compiled!). So I’m a happy camper that WRE has committed to this tool. I think it’s good that they are committed to good information!
Still too few agents use and understand AR’s, with or without good tools.
So, no hall of fame for Greg, but I’ve learned to use and understand and am committed to AR’s, nevertheless!
Given my feelings (as recently expressed on SB) about area code numbers, I’d say do more user friendly versions using a publicly available geogrphic description.
I love ya, Greg. But the whole thing looks pretty bogus to me. Of course 62 weeks will turn into 40 weeks if the 62 is based on 7 weeks from mid November to the end of January and June is based on 7 weeks from mid April to end of May. It would do that if the market stayed the same or got worse, just because of seasonal variances.
To say the market is “improving” because we went from 62 weeks to 40 weeks would only be valid if you used a 12 month average divided by 52 for the weekly component. Clearly a week’s worth of sales in July is not equal to a week’s worth of sales in November.
Seems slanted toward “happy news” Not quite two pom-poms, but maybe one pom-pom and a high kick.
Well, since we haven’t had a ‘normal’ market in over 10 years around here, I’d suggest that 30 – 45 days for a typical selling time is too low. More likely the typical selling time is 45 – 90 days – and it totally depends on location.
Greenlake – short selling times in nearly any market, 30 -45 days.
Bothell – middle selling times in nearly any market 45 – 60+ days.
Auburn – long selling times in nearly any market 90 – 120 days.
And so on.
“To say the market is “improving
Yes, Greg there is.
Its all pointless since it won’t be until next spring where the Seattle area RE bloodbath occurs. That is when everyone who failed to sell this year, decided not to sell and wait this year or tried to sell and pulled this year put them all on the market at the same time. Incredible panic will ensue as people realize they might have to do this again in 2010 if they don’t drop their price like a rock.
This is what has been happening in all of the other bubble areas. Initial year of price declines, then the next selling season is when they fall off a cliff.
“My observations show me that Redmond 550 is currently absorbing fairly rapidly as an area. 550 has been a sleeper and now it’s starting to move. ALL of the absorption,”
No arguments there. Two of the three properties I closed in June were in Redmond. One a 550 Redmond and one a 600 Redmond (English Hill) and the one I’m negotiating on now is a 550 Redmond. The other was a 710 Seattle and the one in escrow is further south (short sale).
I’m going to hold off on doing any more stats until I know all of the June closings are posted.
I “get” it’s simple arithmetic, I just don’t think using a strong sale week to say “40” weeks holds true in the real world, as even 8-10 weeks out the sales may be fewer per week. Clearly 15-20 weeks out they will be. So 40 can turn into 60 simply due to seasonal changes in volume sold.
I’m studying the relationship of sales MOM and YOY, as my theory is that the months will rise and fall by roughly the same percentages from September 07 to present as they did from September 06 to present. Once we hit October of 08 we should have a new standard with a full year past peak to work off of. I’m hoping volume YOY will start being consistent and stop dropping and possibly even increasing. If I see volume stablilizing, then even if prices continue to drop we can at least predict an end in sight somewhere down the line.
I’m not expecting October 08 to be lower volume than October 07. I’ll be happy to see some consistency or rise YOY by that time, and that is my expectation.
b.
You could be right as to prices. I think volume will stabilize by then (volume sold; not inventory) and I absolutely agree that prices will be lower this time next year. Not sure about “bloodbath”. How low from peak price would it have to get for you to call it a “bloodbath”. Can you define “bloodbath” so we are all on the same page 🙂
I keep watching the same condo I sold in early 2005 for $100,000 that went to $200,000 – $219,900 with improvements. If it gets to $180,000, I’d call that a “correction”. If it gets to $120,000; I’d call that a “bloodbath”.
Ardell,
Numbers posted are not “sales weeks”. They are a 7 week averages. Because we use 7 week incremental averages, we have less volatility than even “monthly” AR’s. At the end of every week, I get an updated 7 week average. We see individual weeks within the 7 week average spike or drop, but not huge movement from week to week with the average. Because I use blended averages, I’m confident and comfortable with the outcome. When 60 changes to 40, it’s done with 7 week averages, not sales weeks.
Have you seen Alan Pope’s work? he’s been charting AR’s for years. These are not as detailed as what I use, but give an interesting historical perspective (at least to 2003).
http://www.alanpope.com/May08/500-600.pdf
It shows me that we were losing about 1/3 of our inventory every year until late 2006.
In 2008 we see inventory building (supply), yet at the same time pendings (demand) have roughly kept pace resulting in incredibly flat AR’s since September 2007. The customary spring bounce is virtually flat.
Which is why I’m so curious about how the market is going to perform (as related in AR’s)in this coming quarter. This is the quarter the market changed direction. September and the 4th quarter will give us interesting YOY comparisons.
For other charts on Alan Pope’s site:
http://www.alanpope.com/charts.htm
Ardell –
15-25% off peak is what I would consider it. This is consistent with what other areas have seen in their second season of price declines.
Basically you can sum my feelings up as next season being a race for the exits, building serious price decline momentum into the summer. If volume stays how it is now, or is further depressed by interest rate hikes, I think this is very likely. I personally know of three people who tried to sell, or were going to sell this year, but have decided to wait until next year when “things are better”. I think there is going to be a lot of panic reductions if/when things are not better in 2009.
“Numbers posted are not “sales weeks
b,
I don’t really see how a property that went up 100% from 5/05 to peak, going back by 15% to 20%, would be a “bloodbath”. Clearly that is a “correction” phase.
b.
“This is consistent with what other areas have seen in their second season of price declines.”
Prices have not come down far enough to entice me in areas I would consider for retirement. Those that have had a “bloodbath” are places I wouldn’t want to be…even on vacation.
San Diego’s down 25%, and is now cheaper than Seattle. I’ve enjoyed it there on vacation.
biliruben,
It’s a little too big and south for me. I would be leaning toward Redondo Beach or Seal Beach in CA, and Kim is thinking about Vegas. Not for the gambling. He doesn’t drink or gamble. For the readily available top quality entertainment.
I’d like to get a place in the next couple of years that we can visit while we are still working in Seattle and pay off by the time we retire. Even if we keep it as a second home and never move there as a primary residence, I’d like to own it free and clear within 7 years as a backup.
I bought in Manhattan Beach, CA in 2001 for $545,000. Those prices have only backpeddled to $1.1M last I checked. Not deep enough. I want them back a whole lot more toward 2001 pricing. I sold it for $685,000 in 02 or 03. That would be good enough.
No Ardell, no false read.
I don’t really follow your logic. We add seven week’s ACTIVES and divide by 7 for the 7 week average. We add seven week’s PENDINGS and divide by 7 for it’s 7 week average. You divide Pendings into Actives at this point.
This 7 week average is computed every single week.
These numbers represent a snapshot of the market for that day in time and these numbers also tell us what the “season changes” actually are when graphed. We can see clearly see if AR’s are building or absorbing.
As I pointed out this year’s seasonal spike did not materialize.
Ardell –
I would consider an additional 8-18% drop in one season to be pretty bad. With things still selling (although off 30%+), I don’t see how we could drop much more than that in one selling cycle. Keep in mind that my belief is next spring we will see our largest decline, then have more 0-10% declines each season until that 100% run-up is gone and then some. Maybe 4-5 years we will have hit bottom and stagnation.
I guess I should clarify. The drops I am talking about would be a bloodbath /for Seattle/. Obviously a bloodbath in the Seattle market verses the Stockton, CA market are going to be very different.
b.
Here’s how I see it. X% the marketplace is gone for good. That X% equals the zero down; stacked costs buyer. Areas that ran up using 50% of that type of loan, will go bac 50%. Areas that ran up using 20% of that type of buyer; will go down 20%. Now add another 10% to 15% for “the fear factor” that will eventually swing back. The zero down buyer will never swing back.
Basically the market will recede back to where it would have been without loose lending practices. The more stringent ones of today will level back a bit. Expecting 700 or better won’t last. Going back to 580 won’t come back. It will land at 620 or 660 as being “good”.
You really can’t compare to the rest of the country, as they were not impacted by lending and fear alone, as we are.
If you think we are experience a lag effect to the rest of the Country, and are now experiencing what they did over the last two years, I think you are incorrect. I think everyone is feeling the pinch of lending and we are ONLY feeling the pinch of lending practices. That is no small thing…I do not mean to belittle it…we just didn’t have a double whammy.
i.e. if Federal Way processed 50% of the purchases between 2004 and 7/2007 as zero down loans, then they will be down by at least 50%. If Redmond processed 20% of the purchases between 2004 and 7/2007 as zero down, then they will go down 20%. It can jump over temporatily by as much as 10 for fear factor swing, but that part will bounce back.
I think it will be a 3 year downtown…go flat…and then will start up again unless something changes between now and then…which it will.
“As I pointed out this year’s seasonal spike did not materialize.”
Acccording to Mr. Pope’s chart:
http://www.alanpope.com/May08/King.pdf
May sales were up by 59% over January sales in 2007.
May sales were up by 44% over January sales in 2008.
That would be a bump diminished by 1/3 or so, but I wouldn’t call it no bump.
My point is to predict what will sell off between September and December, basing that on what happened in the 7 weeks of April 15 through May 30, is not an accurate prediction of how many weeks it will take to sell inventory going forward.
IF the AR was 7 weeks…well maybe. But when the AR is 40 weeks, you need to use a longer time frame to get a weekly average.
If you use the first six months of this year, you get a weekly rate of 418.50 sales a week.
If you use the three months of March, April and May, you get 461 sales a week.
Since going forward many weeks is more likely to replicate the first six months of the year, than the shorter hotter period immediately preceding a summer read, you skew the data going forward.
Current inventory of 15,843 would be 37.9 weeks of inventory using the 416 rate of sale, which is more likely to replicate 37 weeks going forward from here.
That same 15,843 of current inventory would only be 34.4 weeks of inventory using the hotter months, and I’d venture to say that going out 9 months from here the rate will be even less than the first six months of the year (as it normally is) and the current inventory is more like 40 weeks than 34.
You simply can’t use 7 weeks of the tail end of the highest season to predict how long it will take inventory to absorb through the future, if that future period does not include another high season, which it doesn’t.
P.S. I’m having fun…not arguing. My logic is just different than yours. That’s why I don’t like to take someone else’s word for it. I don’t trust just about anyone to put words in my mouth. I have to do my own stats. My stats say you can’t use April to predict October.
When the weekly integral includes April and May and the period forward needed to absorb includes November and December…it just does not make sense to me. It projects a rosier picture than we know it will be. As I said, not two pom-poms up, but one pom-pom and a leg kick for sure.
“My point is to predict what will sell off between September and December, basing that on what happened in the 7 weeks of April 15 through May 30, is not an accurate prediction of how many weeks it will take to sell inventory going forward.”
I agree. Never a way to predict how many weeks it will take to sell inventory going forward.
Absorption rates = the CURRENT rate of sale, or “How many weeks (or months) will it take to sell through existing inventory at the current rate of sale?”
AR’s are not a prediction of the future. They are recorded like a time stamp. By tracking them we can see readily see if inventory is building or absorbing.
If inventory starts rapidly absorbing, a seller’s position will become stronger. If it builds, the buyer’s position will become stronger.
This market corrected because of rapidly building inventories. (As shown on the 3rd quarter heat maps).
I”m having fun, too.
Just making sure. Didn’t want to get into that “enemy” conversation again 🙂 We should have coffee one day down at that newer place at 1st and Central. I can roll down the hill if it is early.
Just a quick comment for b,
I think a ‘bloodbath’ is something coupled with high unemployment, which would cause people to absolutely get out from under their payements. I’d define a ‘bloodbath’ as more than 30% drop in prices, not less.
Here in our area, we had far fewer subprimes than the areas across the US that have been so badly hit – so as Ardell states, we won’t have the ‘local’ subprimes that were made causing much of a mess in terms of our pricing.
What we do have is a correction – which may end up at 10%, 15%, 20% or even in some areas 30% lower than our peak. But, our peak was only available for ‘A FEW MINUTES’ in the scheme of things if you look at it that way. Real estate is supposed to be a long term hold.
This session of the real estate class at least should teach people that basic!
And, you always can find individual properties who may show a 50% or worse decline — but on those, most likely the price paid wasn’t smart in the first place.
Yeah,
We’re due. I’l bring my charts and give us both a headache.
Better make it the huge cup of coffee then 🙂
Leanne,
I think it’s an age factor. I’ve seen a 50% drop and it wasn’t a “bloodbath” at all. After a quick run-up, most people at 50% drop still had nice gains on their properties. It was the people who relocated in and out in a short period of time that took the bath.
For a younger person who will need to sell their townhome or condo to get a home, or a transient person who transfers jobs a lot, any loss is considered a bloodbath if they bought at peak and then need to sell during the correction phase.
I do not blame the younger people for being cautious and fearful, unless they are buying their dream home that they can raise their family in for 20 years. In fact my clients break down into sellers, and buyers who are buying their long term raise a family house. I walk away from people who say they want to buy for a year or two at a profit these days. I did not in 2005 and 2005, I did in 2007. I can’t remember what I did in 2006…I’ll have to check.
b.
“I would consider an additional 8-18% drop in one season to be pretty bad. With things still selling (although off 30%+), I don’t see how we could drop much more than that in one selling cycle.”
I have one in escrow at 60% less than a recent cash out refi. Not quite the same. Way south. Not all about market conditions. Just saying…
In areas with lots of short sales, don’t be surprised by anything.
Ardell:
Re #66, I think that is a fairly reasonable analysis, just difficult to quantify.
Can you think of anyway to get the data of loan types/LTV by area? I cannot.
2nd papargragh, are you referring to credit scores, and the return of 100% financing at those scores?
The conclusion that the decline in Seattle area prices is largely due to the decreased availability of credit and qualified buyers seems to correlate with the facts, at least as I know them.
I do not see any evidence that credit availability (at higher LTV, and DTI’s/documentation) is going to improve anytime soon.
I do enjoy your columns, and the exchange between you and other RE’s.
Ardell –
I think your are discounting two factors too much in the market: investor purchases (which are also gone from the market in bubble levels) and the “ladder” effect of the real estate market. Prices in all segments were pushed out of control because marginal buyers were given buckets of cash to buy lowend/marginal properties. That pushed up those prices and enabled the sellers to then push up prices on the property they purchased and so on. So I think the elimination of those buckets of money is going to effect a whole lot more than just the “subprime” areas or neighborhoods, its going to effect everything in the non-cash buyers market.
I also see prices returning to pre-crazy lending levels, so like 2002ish timeframe for prices. But I think eventually that will be everywhere, all neighborhoods and areas unless something specifically happened to the area between 2003-2007 that would have effected prices up or down without the bubble. The places which will go below those levels are going to be those where builders went crazy and overbuilt supplies relative to true demand (not bubble demand).
This is what I am seeing here in Silicon Valley. The choice neighborhoods and areas are drifting down, behind the marginal areas which have fallen faster. No more funny-equity for people to buy up. The really stupid areas of oversupply where nobody really wanted to live in the first place are dropping like a rock (e.g. Stockton). I think the same pattern will play out in Seattle.
I also think you are really underplaying how similar Seattle is to other markets. I agree Seattle was really driven by credit expansion and investor mania, but I think most other metro markets were as well. According to the Fed, Seattle has similar levels of non-owner occupied purchases as the bay area or LA (not the valley), for example. Those areas are certainly not doing great, and neither will Seattle. What set Seattle apart is that we had not reached the point of no return before the credit implosion occurred, but we would have soon. Places like San Diego reached that before the credit implosion and started to decline. Think of it as a graph of affordability, at a certain peak point even with crazy credit the unaffordability level is reached. When the credit implosion occurred, that peak point was simply moved down a bit for Seattle to stop it in its tracks, but it would have reached it anyway.
“Can you think of anyway to get the data of loan types/LTV by area? I cannot.”
I can, but it’s too tedious and unnecessary. Working agents have a pretty good feel for how those numbers break down, and we can test our best guesses by spot chiecking. I would never do all of King County, as I don’t work all of King County. I did a spot check once before and came up with the answers I expected. So it’s a balance between knowing and double checking. No need to get every last one on paper. i.e. I can tell you that Federal Way had more than Medina 🙂
“2nd papargragh, are you referring to credit scores, and the return of 100% financing at those scores?”
I’m talking about the fact that the pendulum always swings too far after a mess up and then comes back to center. You live in the real loan world, Roger. On the street there’s lots of people thinking they have to have 20% or more down and a credit score of 700 or better. That portion of the market that is on the fence will swing back at 5% – 10% down and 620 to 660 credit scores, or FHA.
When I started in the business in 1990, lots of people thought you needed 20% down to buy a house using conventional financing. Not only buyers, but sellers too. I hear a lot of that thinking again today.
I’m glad you enjoy my posts, Roger. When you say “at higher LTV”, higher than what? I think you’ll see FHA and 5% down. Higher than that, we don’t need.
“Can you think of anyway to get the data of loan types/LTV by area? I cannot.”
Loan types by area such as a zip code or city are available through your local title insurance company. This is a simple Metroscan report. Anyone with a full subscription to Metroscan should be able to run this.
Title companies may you charge for the report these days.
Jillayne,
Part of the reason I think the numbers will fall back accordingly is that the areas with the highest zero downs will also have the highest default numbers as well. The % down will be partly due to the fact that that many fewer buyers can buy, and partly do to the market being dragged down by foreclosures and short sales in the areas that had the most zero down purchase loans.
Then you have those who can’t borrow off their equity to make their payments, who owned their houses longer and did huge cash out REFIs.
b,
Agree to disagree at “but would have soon”. There’s no way to say at this point. I say it’s credit implosion, and without credit implosion, the demand would still be there. Clearly the drop was like a stone…and credit implosion based. To suggest what would have happened, maybe, if…
The reason I don’t think so is because Seattle did not have the same appreciation from 1998 through 2005 as the other areas in the Country that experienced a correction before the credit implosion.
I still say Greenspan was the one who said it in 2004, but I can’t give you a link. 7 up; 3-5 down, and he said it in 2004. It came out as a warning to appraisers. We didn’t have the same 7UP by 2005. In a lot of ways we were just getting startedin 2005.
“Clearly the drop was like a stone…” As to volume, not price.
Ardell –
True we cannot know, but housing prices which outpace wage inflation regularly is not something that can go on forever. Those places just started earlier or had different demographics which allowed them to reach peak affordability before the credit implosion. I don’t believe its possible Seattle could have keep going without a serious correction unless there was incredible new wage growth or a huge influx of people to the area. Either way, the situation has certainly changed and it looks like neither of us see it getting much better for a while. It is quite a change in general attitude from when I started reading this blog last year and a big reason I come back!
5 to 7 up, 3 to 5 down, b. Not forever. 5-7. 1998 to 2005 for the rest of the Country. We were a late bloomer and the bloom hit a frost.
Now if something happened at Microsoft that wasn’t offset by Google…LOOK OUT BELOW! But I don’t see that happening. Do you?
Ardell –
Sorry, misread what you meant and I agree. I don’t see anything happening to Seattle short of an earthquake or national depression that would cause insane drops, just a slow drift downward for a while (3-5 years :-)…
Ardell:
There certainly is good financing available at 5% down, and you don’t always need 700 FICO.
I just don’t think many lenders are going to go back to 100% financing for quite some time, I don’t think many will go back to high LTV’s (80%+) with stated income, or interest only, or less than interest only, some combination of risks factors.
The absence of Options Arms now, and in the foreseeable future, is also going to have a large effect on home values, as people now actually have to be able to afford a fully amortizing payment to get 95% or less financing.
The complicated part for folks to understand is that is usually the combination of risk factors, that keeps someone with a 700 FICO from getting 95% financing. No real substitute for talking to someone who really knows, and has a wide variety of solutions at their disposal.
As for data mining, you RE’s are accustomed to having a rich and malleable database to run your numbers (I know, you pay dearly for that privilege).
There is not such a readily available storehouse of data for existing loans. Yes, the county has some data, but it is highly incomplete. There is probably not a sufficient market to create a database as good as the NWMLS at a reasonable cost per use.
I definitely agree with your earlier inference that you wish folks would bring more data, and less “rah-rah”, to support their opinions.
I love the stuff (data), but I have a hard time gettin my hands on it! When I do, I share.
“(I know, you pay dearly for that privilege)” Not really. It’s pretty cheap. There’s just a lot of us 🙂