In looking at the latest Northwest MLS statistics for King County, it would be tempting to say that our housing market is recovering. But it is an odd mix of data. Single family home sales volumes are up (even better than last year), inventory is down sharply from last year, prices seem to be starting to rise again, and average days-on-market is dropping. That all sounds pretty good. (larger residential stats charts)
(Note that the Northwest Multiple Listing Service neither prepares nor is responsible for these charts – the interpretation is my own.)
But condominium sales are still slow (though rising some), inventory is staying high, and median prices are not rising. That doesn’t sound quite as good. (larger condo stats chart)
What are we to make of this seemingly conflicting data?
What it looks like to me is that we are in the early stages of a housing shortage. While Seattle and the west side have been built out for decades, Bellevue and the east side communities have been absorbing most of the region’s growth for the past 50 years or so. But we passed the Growth Management Act in 1990, and then we added the Critical Areas Ordinances. As a result, it has become harder and harder to get permits for housing developments of any significant size. In fact it appears that over the last 10 years or so it has become far easier to get a permit for a 100-unit condominium high-rise than for a 100-home residential development. The rate of application for new building permits “fell off a cliff
I would not mind a turn for the better. Things are certainly doing better in Portland since the weather turned nicer but I would not say that we have recovered much yet. It is still too early to call the bottom for most places.
-Tyler
I would not mind a turn for the better. Things are certainly doing better in Portland since the weather turned nicer but I would not say that we have recovered much yet. It is still too early to call the bottom for most places.
-Tyler
Q: Are We Facing A Housing Shortage?
A: No.
M Realty, Tyler: What is doing better in Portland?
The prices of condos in the core are are sinking as developers attempt to liquidate their holdings and condos elsewhere in the metro area are even worse off. This must be very discouraging to anyone who purchased in the last 3 years and now needs to sell. Around the west hills homes over $1M are wilting on the vine.
From what I hear starter single family dwellings in established neighborhoods are selling but area wide layoffs of executive and administrative employees will make further strengthening difficult.
My $0.02.
M Realty, Tyler: What is doing better in Portland?
The prices of condos in the core are are sinking as developers attempt to liquidate their holdings and condos elsewhere in the metro area are even worse off. This must be very discouraging to anyone who purchased in the last 3 years and now needs to sell. Around the west hills homes over $1M are wilting on the vine.
From what I hear starter single family dwellings in established neighborhoods are selling but area wide layoffs of executive and administrative employees will make further strengthening difficult.
My $0.02.
Tim, you do elegant and thorough work, and I have read your previous posts on your own blog on March 19th and July 13th2.
However, your analysis doesn’t match my impressions in the field, nor does it seem to fit with what we see in the data on Months-Supply for single-family homes in King County.
So I wrote the post to fit a long standing impression I’ve had that we were barely keeping up on housing supply for houses vs condos, and that maybe the construction drop has finally pushed us over the edge. Let’s see what other comments and insights we get. We always learn a lot when a bunch of smart folks chip in.
Where this gets fuzzy for me is when the number of people that stop paying their mortgage (defaults) is greater than the number of people that start (new buyers).
Under that condition, it’s hard to imagine how there could be a shortage of homes – unless, as we’re seeing, people are allowed to keep their homes regardless of whether they pay for them.
How long that can continue is unclear.
Where this gets fuzzy for me is when the number of people that stop paying their mortgage (defaults) is greater than the number of people that start (new buyers).
Under that condition, it’s hard to imagine how there could be a shortage of homes – unless, as we’re seeing, people are allowed to keep their homes regardless of whether they pay for them.
How long that can continue is unclear.
Shortage? Yes of course there is shortage. Don’t you see the prices skyrocketing because the houses are so hard to find?
my answer to: “Are We Facing A Housing Shortage?
i guess it depends on how many arms will reset by 2012.
http://www.bloodhoundrealty.com/BloodhoundBlog/?p=8871
This is an article on the side bar of the Blood hound Realty Blog. It out lines how sales data from the Multiple only addresses current and past sales activity. Sales activity only reflects what is “on the market.”
Tim at the Seattle Bubble has a set of charts showing the number of housing units to households and household size.
Nationally we have an over supply. Locally we have thousands of people who would sell in a minute if the price was right. I think a lot of people looked at this market as rebuilding prices for next year.
If you can sell this year you will sell for more than you will be able to next year, or the year after. If your property is on the market and you want to sell, lower your price until some one buys it.
Sell now or plan on keeping it for the long term.
http://www.bloodhoundrealty.com/BloodhoundBlog/?p=8871
This is an article on the side bar of the Blood hound Realty Blog. It out lines how sales data from the Multiple only addresses current and past sales activity. Sales activity only reflects what is “on the market.”
Tim at the Seattle Bubble has a set of charts showing the number of housing units to households and household size.
Nationally we have an over supply. Locally we have thousands of people who would sell in a minute if the price was right. I think a lot of people looked at this market as rebuilding prices for next year.
If you can sell this year you will sell for more than you will be able to next year, or the year after. If your property is on the market and you want to sell, lower your price until some one buys it.
Sell now or plan on keeping it for the long term.
David Losh is right. We certainly have a lot more “correction” in store for the Pacific NW and we are not near bottom.
I have been telling people to sell for the last two years and unfortunately many of those who did not listen, no longer have the option.
Properties are still selling, but they have to have a motivating price – you can no longer sell for listing price just because you list it.
After five years of collective kool-aid drinking followed by the biggest bust in history, while foreclosures are clearly on the rise, Case-Shiller clearly trending down, cities all across the nation still trending down, and rate have nowhere to go but up…..
….realtors are still talking about an immiment housing shortage.
I am speechless.
PS For evening reading, may I suggest (both NAR endorsed):
1) The Seattle Anti-Bubble Report, publisher by the NAR
2) Why the Real Estate Boom Will Not Bust – And How You Can Profit from It. By David Lereah.
Both are absolute collector items.
After five years of collective kool-aid drinking followed by the biggest bust in history, while foreclosures are clearly on the rise, Case-Shiller clearly trending down, cities all across the nation still trending down, and rate have nowhere to go but up…..
….realtors are still talking about an immiment housing shortage.
I am speechless.
PS For evening reading, may I suggest (both NAR endorsed):
1) The Seattle Anti-Bubble Report, publisher by the NAR
2) Why the Real Estate Boom Will Not Bust – And How You Can Profit from It. By David Lereah.
Both are absolute collector items.
Sorry to be away from the action for a couple of days; I know its not nice to post and run 🙂
This post was intended to be provocative, and get a bunch hopefully get a bunch of smart people to post additional insights and alternate views.
Basically, there are two things that drive median prices up:
1. A change upward in the price that people are paying for similar houses. My observation is that this only happens when buyers have to compete with each other to get the house they want. Otherwise they get to take their time and offer what they want. If the market is fairly stable the seller will hold out for what he thinks is a fair market price, and if he is on thee market for too long he may get pushed down. Case-Schiller tries to do this same-house analysis, and their stats say we have been trending down lately year-over-year, but they can’t measure current market dynamics that way.
2. A change upward in the mix of houses bought. An example of this in the current market might be that if a high proportion of the buyers early in the year were low-end first-time buyers, then you might expect that the people who sold their houses to them are now buying back in again for somewhat larger houses a somewhat higher price point. Mix matters.
Separate reply to Tim on housing oversuppy. I have some concerns about how precise or fuzzy the tie is between the # of households statistic and the # of housing units statistic.
First, there are always some vacant housing units as new ones wait to be sold and as people have to move before getting their places sold or rented – just as there are always some people between jobs and unemployed. Might be an interesting study about rates of vacancy in houses and condos over time, but that is for another day.
Second is how minor the apparent difference is between the two measures, and how systematic it looks over time. Looks like it has grown systematically from 0 (meaning the indexes were force-matched at 2000, with not indication of what the ‘oversupply’ number of units was then) to about 3% today. I’ll post this same comment over on Tim’s blog and see if we can get some more insight on what the measures mean.
Separate reply to Tim on housing oversuppy. I have some concerns about how precise or fuzzy the tie is between the # of households statistic and the # of housing units statistic.
First, there are always some vacant housing units as new ones wait to be sold and as people have to move before getting their places sold or rented – just as there are always some people between jobs and unemployed. Might be an interesting study about rates of vacancy in houses and condos over time, but that is for another day.
Second is how minor the apparent difference is between the two measures, and how systematic it looks over time. Looks like it has grown systematically from 0 (meaning the indexes were force-matched at 2000, with not indication of what the ‘oversupply’ number of units was then) to about 3% today. I’ll post this same comment over on Tim’s blog and see if we can get some more insight on what the measures mean.
My apologies – that last line was supposed to be a live link to Tim’s blog and the oversupply series of posts
Although I thought it was clear, my thesis is about a possible emerging shortage of low-to-mid-priced single family homes, and I wonder how much of the rising oversupply numbers are from overbuilding condos.
I wrote a long comment that got lost when I submitted it.
Let me recap what it said.
Number one low and middle income housing units were built into the town house design. Unfortunately those low income housing units began selling at $270K to $350K and that drove up the price of multi family lots. That in turn pushed the price of low income housing units up to $500K. Some middle income units have sold for as much as $650K to $800K.
Granite and Stainless Steel do very little to add value.
We still have the Growth Management Act and Comprehensive Plan which call for low and middle income units. As those get built the price of the other units will come down.
Town house prices drove up the price of down town condo units. Those started at $450K to $800K. Kind of a big jump in pricing but that’s what happens when you use sales data.
As the market place unwinds we will see dramatic drops in sale prices while the projects that are on the books continue to get built, slowly.
The market is going to go back to normal. Those hoping for a miracle can move to other market places. What we will find is that builders will have no greener pastures. If you look at just the amount of available dirt you’ll see we have plenty to finish.
I wrote a long comment that got lost when I submitted it.
Let me recap what it said.
Number one low and middle income housing units were built into the town house design. Unfortunately those low income housing units began selling at $270K to $350K and that drove up the price of multi family lots. That in turn pushed the price of low income housing units up to $500K. Some middle income units have sold for as much as $650K to $800K.
Granite and Stainless Steel do very little to add value.
We still have the Growth Management Act and Comprehensive Plan which call for low and middle income units. As those get built the price of the other units will come down.
Town house prices drove up the price of down town condo units. Those started at $450K to $800K. Kind of a big jump in pricing but that’s what happens when you use sales data.
As the market place unwinds we will see dramatic drops in sale prices while the projects that are on the books continue to get built, slowly.
The market is going to go back to normal. Those hoping for a miracle can move to other market places. What we will find is that builders will have no greener pastures. If you look at just the amount of available dirt you’ll see we have plenty to finish.
“Dirt” it ain’t- what we’re talking about is valuable Pacific NorthWest land upon which to build well-designed communities of family homes. David- Otherwise I agree with most of the below: “The market is going to go back to normal. Those hoping for a miracle can move to other market places. What we will find is that builders will have no greener pastures. If you look at just the amount of available dirt you’ll see we have plenty to finish”. (“Finish” used thusly sounds rather ominous to me). J-
Jerry, it won’t happen. We are a small back water hick town with an ah shucks mayor and city council who have killed any chance of well designed development.
Every low level developer who would make a campaign contribution got to put in a high profit project. We have ended up with a mish mash of nothing that is going nowhere. We do however have Light Rail to connect our future slums.
We also have acres of dirt in down town Seattle and Bellevue. We could, if started today, have world class cities here in the Pacific Northwest. Portland may be an example of reasoned development.
We would need to pay attention to our politicians and vote out a lot, if not all, of the dead wood.
Jerry, it won’t happen. We are a small back water hick town with an ah shucks mayor and city council who have killed any chance of well designed development.
Every low level developer who would make a campaign contribution got to put in a high profit project. We have ended up with a mish mash of nothing that is going nowhere. We do however have Light Rail to connect our future slums.
We also have acres of dirt in down town Seattle and Bellevue. We could, if started today, have world class cities here in the Pacific Northwest. Portland may be an example of reasoned development.
We would need to pay attention to our politicians and vote out a lot, if not all, of the dead wood.
David- As to your: “Light Rail to connect our future slums”- this well-designed new civic acquisition goes right through Hooverville which my father took me to see. So maybe some things have gotten somewhat better in my native city.
third attempt,
Again second attempt to post a comment,
We still have Hooverville. It is a mobile tent city that can not be permitted for one spot. There is a soup kitchen at 6th and Cherry surrounded by scattered encampments that the police break up from time to time. Rather than address any pertinent issues in the city our mayor along with the city council have rubber stamped bad development. We have squandered millions of dollars in park funds, transportation, and now Light Rail so developers can claim to have increased property values.
It’s all about what low level developers want. Large scale developers want concessions from a city. Low level developers pay bribes. That’s what we got, and we got to pay for it by providing amenities.
third attempt,
Again second attempt to post a comment,
We still have Hooverville. It is a mobile tent city that can not be permitted for one spot. There is a soup kitchen at 6th and Cherry surrounded by scattered encampments that the police break up from time to time. Rather than address any pertinent issues in the city our mayor along with the city council have rubber stamped bad development. We have squandered millions of dollars in park funds, transportation, and now Light Rail so developers can claim to have increased property values.
It’s all about what low level developers want. Large scale developers want concessions from a city. Low level developers pay bribes. That’s what we got, and we got to pay for it by providing amenities.
I really don’t see the point here if the site keeps having issues.
David- Please clarify these for me: JG
1- It’s all about what low level developers want. Large scale developers want concessions from a city. Low level developers pay bribes. That’s what we got, and we got to pay for it by providing amenities
2- I really don’t see the point here if the site keeps having issues.
The CAP initiative was in place during the entire Comprehensive Plan process. Down town development was brought to a halt for the at least ten years we had the CAP initiative. What we got, rather than a Martin Selig was a Paul Schell. Paul is a small timer as is Murray Franklin.
Then we had Paul Allen swoop in asking for concessions on the Commons which he never got. We have the South Lake Union mess instead. Let’s not forget that the Cascadia District is included in South Lake Union. When will we see those low and middle income housing units come on line?
The list goes on from Columbia City, to Ballard, to Fremont, Beacon Hill, and Rainier Vista. The glitzy project go in, oh I forgot my favorite at Northgate, and the displaced housing units will be built later.
I had two comments get lost after submitting. It’s frustrating and time consuming for me. Since the change to the new look of the site there have been glitches.
The CAP initiative was in place during the entire Comprehensive Plan process. Down town development was brought to a halt for the at least ten years we had the CAP initiative. What we got, rather than a Martin Selig was a Paul Schell. Paul is a small timer as is Murray Franklin.
Then we had Paul Allen swoop in asking for concessions on the Commons which he never got. We have the South Lake Union mess instead. Let’s not forget that the Cascadia District is included in South Lake Union. When will we see those low and middle income housing units come on line?
The list goes on from Columbia City, to Ballard, to Fremont, Beacon Hill, and Rainier Vista. The glitzy project go in, oh I forgot my favorite at Northgate, and the displaced housing units will be built later.
I had two comments get lost after submitting. It’s frustrating and time consuming for me. Since the change to the new look of the site there have been glitches.
That worked. First time in a long time.
Thanks for the answers, David. You’re closer to all this by far than I am (by design). As to the new redesigned RCG site, I really like the multi-subject layout and the UpDate column on the left. Your stuff is always worth reading. Jerry
I’m just going to try this again to see if it’s working better today.
The post is about facing a housing shortage. There is a lot of chatter on the internet and in Real Estate offices that as construction stops we will eventually run out of new construction inventory. The theory is if we stop creating supply the demand will catch up.
What I was pointing out is that we have thousands of projects with multiple units in the pipe line. They may never be built at this point. Jobs are very questionable for the State of Washington and Seattle. We have had a holier than thou attitude here. That’s why I always point out the CAP Initiative. When most cities encourage large scale anchor development Seattle has shunned it.
Seattle has forsaken night life for keeping the quiet neighborhood feel in our down town core. Rents are rampant for commercial space while we have a police force figuring out how to boost parking meter fines. It’s no accident that the parking lot tycoon is building quality low rise office space on Elliot. He can certainly afford it.
I have a long list of stymied development plans for Seattle. We have spent more concern for the Monorail than having a world class destination to operate it in.
So in terms of supply we have yet to build the low and middle income housing units that are a prerequisite to the Comprehensive Plan. That will be thousands of units that are mandatory.
Yeah, yeah, yeah people tell me that we can just allow the housing units already built to revert to low income. Unfortunately too many people have already bought in at premium prices.
As to: “We have spent more concern for the Monorail than having a world class destination to operate it in”- the Monorail had to come first so we can progress toward said “world class destination”.
I’m just going to try this again to see if it’s working better today.
The post is about facing a housing shortage. There is a lot of chatter on the internet and in Real Estate offices that as construction stops we will eventually run out of new construction inventory. The theory is if we stop creating supply the demand will catch up.
What I was pointing out is that we have thousands of projects with multiple units in the pipe line. They may never be built at this point. Jobs are very questionable for the State of Washington and Seattle. We have had a holier than thou attitude here. That’s why I always point out the CAP Initiative. When most cities encourage large scale anchor development Seattle has shunned it.
Seattle has forsaken night life for keeping the quiet neighborhood feel in our down town core. Rents are rampant for commercial space while we have a police force figuring out how to boost parking meter fines. It’s no accident that the parking lot tycoon is building quality low rise office space on Elliot. He can certainly afford it.
I have a long list of stymied development plans for Seattle. We have spent more concern for the Monorail than having a world class destination to operate it in.
So in terms of supply we have yet to build the low and middle income housing units that are a prerequisite to the Comprehensive Plan. That will be thousands of units that are mandatory.
Yeah, yeah, yeah people tell me that we can just allow the housing units already built to revert to low income. Unfortunately too many people have already bought in at premium prices.
David-
There are a lot of interesting thoughts in what you’ve just posted- in particular:
“The post is about facing a housing shortage. There is a lot of chatter on the internet and in Real Estate offices that as construction stops we will eventually run out of new The post is about facing a housing shortage. There is a lot of chatter on the internet and in Real Estate offices that as construction stops we will eventually run out of new construction inventory. The theory is if we stop creating supply the demand will catch up”.
It’s apparent to me as a long-time custom home architect: with all the foreclosed houses available at discounted prices, realtors and architects’ customer/clients have no incentive to build new and/or remodel until said construction inventory is worked off. However buying off the bargain shelf is the smart thing to do using the savings to upgrade the perhaps fortunate purchase.
David-
There are a lot of interesting thoughts in what you’ve just posted- in particular:
“The post is about facing a housing shortage. There is a lot of chatter on the internet and in Real Estate offices that as construction stops we will eventually run out of new The post is about facing a housing shortage. There is a lot of chatter on the internet and in Real Estate offices that as construction stops we will eventually run out of new construction inventory. The theory is if we stop creating supply the demand will catch up”.
It’s apparent to me as a long-time custom home architect: with all the foreclosed houses available at discounted prices, realtors and architects’ customer/clients have no incentive to build new and/or remodel until said construction inventory is worked off. However buying off the bargain shelf is the smart thing to do using the savings to upgrade the perhaps fortunate purchase.
David and Jerry,
You are right that this post is about a possible housing shortage – specifically in single family homes. And I am not at all sure the the encouraging signs is see are price rise or an uplift in the mis of prices – the latter may be then more likely. But the Months Supply numbers are giving us some interesting numbers to chew on. I did a little study last week on months Supply in King County and in a couple of specific neighborhoods:
Four months supply in the middle price ranges feels to me like it is getting pretty tight. Perhaps a sniff or rising prices will prompt more people to put their houses on the market and squash it, and maybe we’ll start seeing inventory building up again in the Fall. I’d just like us to be careful when we talk about oversupply or undersupply to specify whether we are talking about single family houses or condominiums – those seem to be increasingly two different worlds.
David and Jerry,
You are right that this post is about a possible housing shortage – specifically in single family homes. And I am not at all sure the the encouraging signs is see are price rise or an uplift in the mis of prices – the latter may be then more likely. But the Months Supply numbers are giving us some interesting numbers to chew on. I did a little study last week on months Supply in King County and in a couple of specific neighborhoods:
Four months supply in the middle price ranges feels to me like it is getting pretty tight. Perhaps a sniff or rising prices will prompt more people to put their houses on the market and squash it, and maybe we’ll start seeing inventory building up again in the Fall. I’d just like us to be careful when we talk about oversupply or undersupply to specify whether we are talking about single family houses or condominiums – those seem to be increasingly two different worlds.
Well it doesn’t seem to want to insert my image, so here’s the link to the little Months Supply study.
Chuck- as to: “single family houses or condominiums – those seem to be increasingly two different worlds”- twas ever thus. I’ve always had trouble with including both under “housing” per se. Jerry
Glad to hear that certain areas of the U.S. real estate market is on the road the recovery. I recently read that the housing market had improved by 11-percent. Let’s hope this contributes to an improving economy. Kudos on this blog post.
Seems as though the segments that are stirring are the mass builders. We already have enough of their indifferent product. Of course, as a custom design architect, I’d like to see more people buying existing homes worthy of updating- like the one I’m sitting in as I write this. JG
I will be interested to see a housing recovery while unemployment is rising. I’m wondering how people can buy a home without a job.
Can we define “recovery?” What exactly do you mean by “recovery?” Home prices the same as 3 years ago? Or home prices that just don’t drop every month? Since the last few years were an anamoly of easy credit/bad loans/unsustainable house prices, what exactly are you looking at to say, “We’ve made it. We’re there. We’ve recovered.”
Incidently, I rent. My rent was $1460/w utilities for a 3 bedroom, 2 bath in Issaquah. I just signed another year lease. It just dropped to $1360. That’s the lowest it’s been since I moved to Seattle in 2006.
Weird.
I will be interested to see a housing recovery while unemployment is rising. I’m wondering how people can buy a home without a job.
Can we define “recovery?” What exactly do you mean by “recovery?” Home prices the same as 3 years ago? Or home prices that just don’t drop every month? Since the last few years were an anamoly of easy credit/bad loans/unsustainable house prices, what exactly are you looking at to say, “We’ve made it. We’re there. We’ve recovered.”
Incidently, I rent. My rent was $1460/w utilities for a 3 bedroom, 2 bath in Issaquah. I just signed another year lease. It just dropped to $1360. That’s the lowest it’s been since I moved to Seattle in 2006.
Weird.