Tag Archives: Sunday Night Stats

More North King County Stats

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There’s some griping around the web about my separating North King County from South King County.

Sold YTD the median home price  in North King County is $439,725 vs. $333,325 in South King County.

Sold YTD the median price per square foot in North King County is $217 vs. $169 in South King County.

I think a hundered grand difference, is a big deal.  I think a 25% variance is a huge deal.  Feel free to disagree.

Let me ask you this.  You come to me saying you would like to buy a house for about $350,000 near Microsoft.  I might be able to convince you to go to Green Lake or some point just to the other side (Seattle side) of the 520 bridge. Maybe Kenmore or Bothell or Juanita/Finn Hill…possibly Duvall. Maybe buy a townhome vs. a single family home. But would you agree to Federal Way or Auburn?  I don’t think so.  Pretending that what happens in Redmond influences what happens in Auburn, or vice versa,  is of no value to anyone.

Markets are moved by the decision makers, and the decision makers in this market are the buyers of homes.  Only home buyers can reset the data.  So reporting in the manner that buyers actually make decisions to buy, is important.

If there ever comes a day when the majority of people who want to buy a home give equal consideration to Auburn vs. Redmond, well then they will become one market.  Until then, separation is of more value than lumping everything together by County.

You should care about what happens in the market priced over your price range, as a cram down on those home prices will in lagging fashion affect the values in your price range. Knowing how many homes are sold there, and the buildup of unsold inventory there, will give you some predictive data with regard to the impact it will have on YOU. Will 100 houses not selling for over $1.2 million affect your purchase of a home for $350,000?  Not likely.  Will 2,000 homes not selling for between $600,00 and $800,000 affect the price of your purchase at $550,000? Very likely, yes.

Very, VERY important right now is the affect lower single family home price is having on the townhome and condo markets.  Most sellers look at like kind product, and rarely condsider “If someone can buy a single family home for this price, why would they buy my townhome for the same price?”  And that is exceptionally important right now for most condo and townhome owners.

I understand that it’s easier to understand data when everything is lumped together, and factoring in the specifics that affect YOUR decision is tedious and a lot of work.  But for years people have said that your home purchase decision is one of the most important decisions you make in a lifetime. If you believe that is true, then shouldn’t it be hard vs. easy?

North King County – Additional data (that is not posted, compiled or verified by NWMLS) I hate that required disclosure. Would make more sense to credit them if it WAS regurgitated from their published data. Having to say it isn’t, every time I post data, is annoying but a rule of membership. And it must be in bold lettering. Apologies for the redundancy of having to say that in every data post.

Property sold, including homes, townhomes and condos in North King County for more than $600,000 represents only 19% of all property sold YTD.

property-sold

Property FOR SALE and NOT sold in that same area as of today shows us that while only 19% of property sold is selling for over $600,000, 40% of what is for sale is priced at over $600,000.

for-sale-north-king

That tells you that under $600,000 is 1,555 divided by 4 or 388 sales a month and 3,604 divided by 388 equals a 9 month supply of inventory in North King county priced at $600,000 or less.

Over $600,000 is 368 divided by 4 month YTD is 92 sales per month. 2,443 for sale divided by 92 sales per month = a 26 month supply of inventory, which is almost 3X worse than the under $600,000 property.

Let’s separate the condos from the single family homes in the under $600,000 market.  While the overall absorption rate is a 9 month supply:

for condos under $600,000 the absorption rate is 13 months

for single family the absorption rate is 7 months

For “marketwatchers”, lumping everything together is easier.  But if you are looking at real estate blogs for more than party chit chat, if you are trying to get a lot of info before buying or selling real estate, Countywide stats do not tell you the story you need to hear.

If $100,000+ variance in median home price between North King County and South King County means nothing to you, then you are not likely planning to buy or sell real estate.

Sunday Night Stats – Volume UP YOY?

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It’s been a very long time since we’ve seen anything but volume down. Often we look for the low end to move early in the year, as a sign that there will be some increased activity in the higher price tiers in the 2nd and 3rd quarters. Though I wouldn’t bet on that this year, as many who are selling will not be buying a replacement home.

The best story is in the $400,000 and under price range (single family). If I move that mark up to $500,000 and under, there is no increase.nkc-yoy1 

 

Something good has to start somewhere, and that somewhere seems to be in the $400,000 or less price range. “North King County” was derived by drawing a line straight across downtown Seattle, and the stats are for anything in King County above that line. The increase is slight, but compared to the dramatic, continued decrease in the other price tiers, a little bit UP is big news.  In the condo market there is also a slight increase in volume YOY in the under $200,000 market.

The worst news is for anyone trying to sell in the $1.2 million and above price range, where there seems to be a 5 to 6 YEAR supply of inventory. Even so, surprisingly many of those that did sell in 2009, sold in less than two weeks and at prices close to the 2009 assessed values. But the odds of selling at all are so slim to none for most sellers.

nkg-sold-ytd-2009

While you might not think there are many homes that sell for under $400,000 in North King County, the chart above shows that this price range accounts for a large % of all homes sold.

Not really a strong buyers market in the $400,000 or less range.   To see the chart for the break down of properties for sale, vs. sold, I have all three graphs posted HERE. To get the absorption rate for current inventory, divide the amount sold by 4 and then divide total for sale by that amount.

I believe this is the first time we are seeing volume up YOY for pretty much anything, since the market turned in July of 2007.

An added sign that things are moving toward where more people can buy them.  If I look at single family and condo sales combined, under $400,000 accounts for 52% of all solds vs. last year when that same price range accounted for only 40% of all solds.

Next week I’ll break that $400,000 to $800,000 down a bit, and see if the higher end of the tier is affecting overall performance.  But at this point I do not see an increase YOY, even in the lowest price segment of that tier.

(required disclosure) Statistics are not compiled, posted or verified by NWMLS.

Sunday Night Stats – Prices Improving?

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We all know that prices can’t go up in large leaps the same way that they can drop significantly in a short time.  It takes a lot longer to go up than down, due to appraisal issues.

It will take many weeks to build up enough data post Obama $8,000 Stimulus Credit to form any conclusions. But you have to start somewhere 🙂  Stats prior to the credit are somewhat irrelevant at the moment except to later see if in hindsight pre-credit was “bottom”.  We won’t know that until next 4th Quarter and January of 2010.  Until then, we’ll track week to week until we build up enough data to do larger market segments.

I am using MPPSF Pending Inspection King County SFH, as these are the most recent “went under contract” homes. The green columns are properties that went under contract pending inspection Monday March 2nd through Sunday the 8th.  The  purple columns went under contract pending inspection Monday the 9th through Sunday the 15th.

I broke the stats down into under $500,000 (2 columns on the left) and $500,000 to $1M (2 columns on the right). The lower priced segment is doing better, but both show slight improvements.  These are asking prices, so all this is telling us at the moment is that buyers seem to be making offers on houses that are not priced quite as low on a median price per square foot basis, as they were pre-homebuyer credit. We won’t know if actual prices close higher until we get at least 45 to 60 days in front of the credit passing.

Data is not compiled or posted by NWMLS (required disclosure)

King County Home Prices inching Upward?

King County Home Prices inching Upward?

 

Sunday Night Stats – Housing Market is “Stimulated”

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As you can see from the graphs below, there has been a 50% increase in the number of properties going pending in the last 7 days, compared to the week of 2/7 to 2/14 before the $8,000 “first time” homebuyer credit passed.

427 sales went pending in the first week in March. That’s a 50% increase over the 286 that went pending in the 2nd week in February.

The second graph shows the increase in the number of homes that are selling in 30 days or less.  Not sure if that increase is “normal”  for January through the first week in March though.  Still, worth reporting the positive trend upward.
I combined condos with single family homes in King County. I think it’s fair to say that the credit stimulated home sales.  It’s also fair to say that people waiting for the credit, depressed home sales in the previous period.  So the real stimulus may lie somewhere in between.
 
On a side note, I am hearing of a few pending sales falling out, because the owner/seller is now eligible for the new assistance that came out on 3/4, and may not “have to” sell after all.
King County Condo and Home Sales Improved by 50%

King County Condo and Home Sales Improved by 50%

% of homes and condos sold in 30 days or less improving

% of homes and condos sold in 30 days or less improving

 Statistics are not compiled or posted by NWMLS

Sunday Night Stats

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As of tonight, prices are showing at down 5% in January vs. the 4th quarter median price per square foot in the graph below.  That would take prices back to the 2nd quarter of 2005 at $185 MPPSF (vs $195 4th quarter median).  That would also be 20% under peak price of $230. ($230 minus 20% – $184)

I expect the median for the 1st quarter to be higher than that, and the median for the second quarter to be higher than the first.  Not by a lot.  But clearly there are more people out to buy property in the last week to ten days, than we have seen for the 6 to 8 weeks prior.

Given Friday was the end of the month, I don’t want to post the January stats yet, as some sales will be recorded by the agents during the coming week.  That could affect the median pricing somewhat, but as of now, January prices are down, and fairly significantly.

Good for buyers…not so good for sellers.

For now, stick a big red dot on the chart below at $185 MPPSF.  That’s where we are as of tonight for MPPSF, King County, Residential vs. Condo.

No stats in any of my posts are compiled or published by NWMLS. All are hand calculated by ARDELL (required disclosure)

mppsf

Click here for previous Sunday Night Stat posts

4.5% Interest Rate's Affect on Home Values

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When interest rates are up, home values go down.  When interest rates go down, home values go up.  That’s a basic principle, but I do agree with those who expect this market to perform counterintuitively to stablize prices vs. causing them to go up.  Basically that means they go up to where they are, counteracting the continued pressure for them to decrease. (see 5th paragraph below)

In 1990 when I started in real estate, the common walk-in client said “I want to buy a 4 bedroom, 2.5 bath colonial, with a basement and a monthly payment of $1,200”.  Let’s set the bogey at double that and toss out the basement 🙂  The number I hear most often for the neighborhood below is a rental payment of $2,500 a month or a mortgage payment of $3,000 or so with 20% down. (talking SFH Redmond here)

I like using Abbey Road in Redmond as the bogey house.  Kind of like Goldilocks and the Three Bears selection process.  Not too big, not below desirable…just right.  Good schools.  Popular neighborhood;  3 car garage most times. Current median price around $700,000.  Range of pricing from $630,000 to $830,000.  Not too new to be affordable, not too old to be acceptable.

Let’s test the theory with a monthly payment of $2,800 a month not including taxes and insurance which would add about $500 a month to the payment, and using 20% down (see next post for ratio of value to total mortgages of the neighborhood). Let me test that against $3,000 net after tax payment.  The after tax benefit should be about $700 minimum, so $2,800 plus $500 = PITI of $3,300 less $700 gives plenty of breathing room for price to go up to $750,000 or for people to stick at $650,000 if their household income is $100,000 vs, $150,000.  Depends on whether you use 28% or 33% for housing payment.  At 33% of $100,000 you would need about $200,000 down on the $650,000 purchase price.  Fits the basic buyer profile for that area anyway you slice it.

Rates of 6.25% and 20% down and a payment of $2,800 P & I,  would equal a sale price of $570,000.  Current prices would continue to be drawn down toward $570,000 at rates of 6.25% even in a seller’s market (which this neighborhood still is) due to financing qualification changes. Someone asked me from Sunday Night Stats why prices are continuing to go down in Seller’s Market neighborhoods.  That’s your answer.  Qualifying guidelines & interest rates reducing the ability to purchase and pressuring prices downward.

Now let’s change the rate from 6.25% to 4.5% and see what happens to sale price.  Keeping the same monthly at $2,800 and 20% down at 4.5% the sale price would be $690,000. 

So, my gut was right.  As rates go down to 4.5%, it does not increase the price from the $700,000 bogey we started with, but it does stablizes home prices and keeps them from slipping further down.  I always work through these things in my head in real time, testing my perception against reality.  I’m always happy when I prove myself right, and admittedly sometimes scratch the post if I prove myself wrong by the end of the post :).

I test the same theory on Rivertrail Townhomes with a bogey of $1,800 a month P & I.  High end I won’t calculate…and clearly not at 20% down.  I can’t realistically do townhome scenarios until FHA rates get lower.  But the $700,000 give or take single family home market will clearly be supported in value by interest rates of 4.5% preventing prices from slipping further back.

So to answer Jillayne’s question on my Sunday Night Stats post (sorry for the delay, Jillayne; had to test my answer) the 2nd wave of Alt-A’s will not affect pricing in this scenario IF 4.5% interest rates take hold, counter-acting the negative impact.

Sorry for the long drawn out answer to Jillayne’s question, but I don’t answer off the top of my head, even when I think I know the answer in two seconds.  I test my answer first…and this one tests out in this example.  FHA won’t test out, I’m not even going to try to test it out.  Unless FHA rates get much lower, the middle value market is going to win on all fronts.  High end will continue to suffer from Jumbo Loan issues.  Low end will continue to suffer from cash to close issues unless FHA rates come down substantially and toward at least 5% or less.  FHA and VA rates were conspicuously missing from Rhonda’s Friday rate post…  Maybe she can pop her head up from her busy day and catch us up on where those rates are, or at miniumum include them in this week’s Friday Rate Post.

Bottom line…4.5% interest rates will stop property values from declining…at least in my service area of North Seattle and Eastside.  Someone else will have to test the theory in the South End of Seattle and beyond, and for the rest of the Country.

November Home Sales – Is Seattle Bubble Overly Optimistic?

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When I did my stats for King County for the month of November, my numbers were actually worse than those reported on Seattle Bubble.  I have come to rely on Seattle Bubble as being the place where I can find the worst possible news about the housing market.  But I have double, triple and quadruple checked my numbers, and I still come up with only 768 sales of single family homes in the month of November.

This from The Tim at Seattle Bubble: “What immediately jumped out to me was Closed Sales, which were down a whopping 43% YOY, coming in at just 869 SFH sales county-wide.”

My figures show a drop YOY of just over 46% from 1,427 sold in November of 2007 to 768 sold in November of 2008 for Residential Property in King County.  While that is only a modest difference, when I look at condo sales YOY, the numbers are even worse and down 58% from 555 sales in November of 2007 to 230 sales in November of 2008.

A more significant factor is the % down from peak volume for any month of November.  For Single Family Homes, that would be November of 2004.  For condos that would be November of 2005.  Based on my previous research, that variance is due to the fact that by November of 2005, many people were priced out of the single family home market, which pushed the peak sales into 2005 for condos.

For single family homes, November of 2008 sales are almost 70% lower than peak volume for the month of November.

For condos, November sales are slightly more than 70% lower than peak volume for any month of November.

The Tim correctly points out that “For comparison, that is lower than any month on record (post-2000).”  However, I think it is more currently relevant to point out the relationship of November 2008 sales volume to a most recent lowest volume, that being January of 2008,  I have shown this figure as a dot on the graph below, green for condos and purple for SFH. 

Conclusion: Both single family and condo sales in Novmeber of 2008 are approximately 70% under peak volume, and 20% under the previous, recent low point of January of 2008.

Seattle Area Home Sales Volume

Seattle Area Home Sales Volume

I think we can all agree on one thing…for the first time in a long time I think we can all be confident that 2009 WILL be better than November of 2008, as to volume of property sold, since it’s hard to imagine that it could get any worse, even for the most pessimistic among us.  Well, maybe not Sniglet 🙂
If November sales volume is not AT BOTTOM…we may have to start looking at an “exit strategy”.
(required disclosure) All stats in this post (and graphs) compiled by ARDELL and not compiled, verified or posted by the NWMLS.

Is the housing market performing "as expected"?

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To some people, that question will seem ludicrous.  If you are buying or selling a house every 7 years or so, you may not care about this somewhat complex answer to the question raised.  I am writing this post for real estate professionals, rather than the individual who may be buying or selling a home every 7 years or so.  My hope is that if more real estate professionals understood the housing market, more consumers would be better served by those professionals.

For those that want to hear that the market is doing much worse than expected, I give you Detroit.  I heard on the news yesterday that home prices in Detroit have rolled back 8.5 years.  That is much worse than “expected”.  For those that want to hear that the market is doing much better than expected, I have to say “jury’s still out” on that one, as the down market has not yet completed its “expected” cycle. 

Yes, real estate prices always go up.  But when did real estate professionals en masse start thinking that meant it looked like the chart below?  It DOES NOT!

Housing Prices do not go up in a straight line

 
Housing Prices do not go up in a straight line!.  I can honestly say that 20 years ago the only agents I met who thought this way were the salesmen vs. the professionals…and they were few. The first time I overheard an agent at an Open House talking to a first time home buyer explaining the real estate market in terms of “AWAYS GOING UP!” and drawing a chart like the one above for them, I thought “What an Idiot!” 

It is only in the last couple of years that I have seen MOST of the professionals, and consequently the general public, setting the unrealistic expectations noted in the chart above.  Many of those professionals have left the business, and more will follow.  For the benefit of those who will continue in the industry, and for the public at large, lets get back to basics and set our expectations properly. First you set realistic expectations based on an Annual Cycle of Real Estate markets.  The one below is primarily for single family residential housing.  Not condos, not multi-family, not commercial – Single Family Residential Housing Market.

Annual Cycle of Home Prices

Annual Cycle of Home Prices

When home prices increase from year to year, most of that appreciation happens from March through July.  Even when home prices decrease from year to year, prices are still expected to be up from March through July vs. January and November.  THAT is the expectation.
Think of it this way, retail sales are expected to be higher in November and December than in February.  They may not go up as much as expected, and that is not good.  But if sales in November are lower than in February, that’s really bad.  So up vs. down is NOT the barometer…it is up when expected to be up, down when expected to be down…and then it is all a matter of degree.

If you heard a store owner who only sells Christmas Ornaments complaining that his April sales were lower than his Nov/Dec sales, what would you think?  That’s how I scratch my head when I hear someone saying “I’m waiting for the lowest possible prices, so I’m going to buy a house in May or June.  Does not compute!  I’m not saying it could never happen, I’m just saying that is not an appropriate expectation.  As long as you are willing to wait until 4th Quarter of 2009 or even 2010…fine.  But if you are determined to buy within 12 months, wanting the lowest price and wanting to buy in June is not a match.  You will likely get a better house if you wait until May…but not a better price.  Again, not impossible…just not likely.  Go back and study the graph above before we move to broader market descriptions.

For this next part, different people will have different market theories.  Mine are primarily based on a “7 steps forward, 3-5 steps back” theory, that I attribute to having entered my head via Alan Greenspan many years ago.  Nationally the market started moving up past it’s previous peak in 1998.  Consequently the expectation would be for it to go down in 2005.  When it did, people freaked out while I said “DUH”. 

The market performed as expected.  But when professionals don’t know what to expect, they react inappropriately, which creates an unexpected market condition.  It’s like playing a sport where half of your team is not performing their role “as expected”…it throws the whole game off.  When your quarterback starts throwing to the guy in the wrong colored Jersey…all hell breaks loose.  As a real estate agent, you are the quarterback, time to learn the plays.  The people in the stands have a harder time betting on the game, when the quarterback is messing up the plays to the degree that we as professionals have been screwing up.  STOP sending GOOD NEWS! C-R-A-P.  This is NOT an industry based on consistent and continual “Good News”!  STOP wishing ONLY for Good News, and blaming market conditions on the purveyors of “bad news”.  Get Real – Real Fast…or suffer the consequence.

Another analogy.  The market went down when the Dow hit 14,000.  If most people said “DUH”, there wouldn’t have been panic selling.  Yes the market still would have gone down, but the market loses all semblance of sanity when expectations are set at unrealistic levels.  Momentum created by panic forces markets out of their natural cycle.  That is true both on the up side and on the down side.  The Dow was supposed to go down when it hit 14,000…in fact it should have gone down when it hit 12,000.

This is my expectation of the housing market.  Yours may differ.  Lacking an informed and valuable opinion from the professionals, the public will start imposing their own opinions like “markets should only increase at the same level as median income.”  That is not correct BUT professionals have no one to blame but themselves for all of the Bubble Blogs.  When professionals started lying both to themselves and to the public, the public had to move in a different direction.  You hate Bubble Blogs, you say?  Well then stop acting like you don’t have a freakin’ crystal ball!  If you don’t like the public not relying on your opinion…well then go get yourself an opinion!  OK, here’s mine.  Beyond the Annual Cycle above for single family homes, there is the YOY expectation in a long term cycle.

Home prices up for 7 years; down for 3-5

Home prices up for 7 years; down for 3-5

Now let’s define what a Housing BUBBLE is.  A housing bubble is when the market outperforms expectations…not when it goes UP.  A housing slump is when the market underperforms expectations…not when it goes DOWN.  Bubbles ALWAYS burst.  That is why you need to know the degree to which the market should go up (like Christmas Ornament sales in November and December) so that you know when you are entering a bubble zone.

I learned this many years ago…so long ago I don’t know where.  A market will ALWAYS reach and surpass a  level it has previously achieved.  It’s not a matter of IF…it’s a matter of WHEN.  If it happens too quickly, the downside of the cycle will hit harder.  If it happens as expected, the people betting on that expectation will do well.  We want to be a Country that always does WELL…not that always goes UP beyond normal market expectations and never, ever goes down.

Once you set a realistic expectation, you can predict markets.  When the market moves outside of predictable levels, you know you are in a bubble or a slump.  If you think every batter is supposed to hit a home run…you will spend your life in misery and disappointment.  If you expect the batter to always hit a home run…one day he will hit you instead of the ball.

Real Estate Prices are supposed to stop going down, nationally that is, somewhere between 2009 and 2011.  They were supposed to go up from 1998 to 2005 and down from 2006 through 2009 – 2011.  The degree they went up was “bubbled” by the loose lending practices in the latter part of the up cycle.  First that bubble must pop, as it did, and now we’re looking for the end of the down cycle.  If the government wants to make sure the down cycle is only 3 years and not five, then they have to do something to cause interest rates to stay at or below 5.75%, even if that is an artificial stimulus level.

No one can, nor should anyone try to, force the market to be always up.  That kind of talk is for salesmen, not professionals.  If you don’t want to hear ANY bad news, ever.  If you don’t understand that there should be at least 3 years of “bad news” following a consistent 7 year trend of “good news”, please go do something else for a living.  That’s like a lawyer who tells everyone they can win a case, cause they get paid whether the client wins or loses.  That’s like a doctor ordering MRI’s every week for a hypochondriac, because he makes money whether the patient is sick or not. 
Don’t want to be compared to a Used Car Salesman?  Then stop acting like one.