‘A Signal Of A Trend’ In Washington
The Seattle Times reports from Washington. “At the beginning of the year, local housing experts predicted the Puget Sound area’s super-heated real-estate market would slow. What they couldn’t predict was exactly when or how much. It’s now, and the drop-off has been marked.”
“After rising for seven consecutive months, King County’s median single-family home price hasn’t risen since June. In fact it declined $10,000 from August to September, to $425,000. Four months without an increase is a signal of a trend.”
“Plus, inventory is building and homes are selling more slowly. The number of houses and condominiums for sale last month increased 42 percent in the 17 Washington counties in which the MLS tracks sales.”
“Meanwhile, the number of pending sales, those signed but not closed, declined almost 19 percent compared with a year earlier. ‘This doesn’t mean that a ‘bubble’ has burst and property values are declining,’ said Redmond appraiser Alan Pope. ‘It means we’re moving to a more-normal market where buyers have more choices. If buyers have more choices, they’re less likely to pay in excess of the list price to obtain a property.’”
“‘They’re saying, ‘Wait a minute — this is getting out of my comfort zone, and unless we have to buy or sell, let’s just sit it out,’ said (broker) Bill Riss, a real-estate veteran who has been through many housing cycles.”
“Fewer sales and more homes to choose from are causing many more sellers to reduce prices, real-estate agents say. ‘There’s no doubt about it,’ said Chris Pauling, president of Prudential Northwest Realty. ‘There’s more competition, and [sellers] are having to be more realistic in their expectations.’”
“Compared with a year earlier, September buyers had 32 percent more properties to choose from in King County — some 9,890 properties compared with 7,496 in September 2005. Snohomish buyers had 27.6 percent more, and Pierce County buyers had 54 percent more.”
The Seattle PI. “Seattle’s median home price in September was down from both July and August. It’s the lowest year-to-year increase and the first time prices have dipped two months in a row since January 2004.”
“But, the median does not account for people taking advantage of lower prices to buy nicer homes than they might have before, said Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University.”
“Crellin’s message for sellers? ‘Don’t panic. Yeah, it’s going to take a while to sell a home,’ he said.”
“It’s easy to find nice homes still on the market despite reductions in asking prices. At an open house in Greenwood last month, agent Deborah Arends was having a hard time understanding why the three-bedroom cottage was still on the market after six weeks and a price cut from $379,000 to $365,000. ‘It should be gone because it’s too cheap,’ she said.”
“Before putting an updated two-bedroom Capitol Hill bungalow on the market for $699,000 in May, agents Meredith Erickson and Anne Willoughby Nelson went through the usual exercise of comparing the prices of recently sold, comparable homes. Nelson noted two nearby homes that attracted multiple offers and sold in April for $700,000 or more.”
“In August, Erickson and Nelson dropped their asking price to $679,000. Nelson agreed the slowing market might be making buyers choosier. During peak times in the market, buyers might have set aside qualms about the floor plan and jumped at the place, she said. ‘Maybe that sense of total urgency has lessened a little bit.’”
“Realtors also say stories about the slowing market, particularly nationally, have some holding off. ‘They’re just nervous,’ said (realtor) Jill Allen. ‘They want to feel like they’re getting some sort of a deal.’”
The News Tribune. “The number of houses for sale continue to go up in Pierce County. The county measured 2,116 new listings in September, for a total of 6,341 homes on the market. That’s a 54 percent increase in the number of active listings compared to this time last year.”
“The number of pending sales has dropped 25 percent compared to last year’s record pace. Sellers might be frustrated by the length of time their homes are spending on the market, and some are now offering buyer incentives, said Dick Beeson, broker in Tacoma.”
“Brokers added 12,656 listings in Western Washington during September. September finished with 34,443 total listings regionally, up more than 41 percent from a year ago.”
“Mike Larson, a Northwest MLS director and broker in Tacoma, said he was ‘a bit concerned’ about the condo market, particularly in downtown Tacoma, ‘where they seem to be going up everywhere.’”
From Bellingham:
‘You get the feeling that this is just the beginning of something bigger, and I haven’t had that feeling before,’ Stohl said. ‘I think we’re getting a business started at just the right time. There are already people here, but when you consider all the other residential projects under way, such as the Bay View Tower’ - construction of the 23-story tower with 124 condominium units is expected to begin this fall - ‘I’m pretty optimistic about the future,’ Wasley said.’
‘Hall agreed, saying he expects another flurry of new retailers when construction begins on the high-rise buildings. ‘There will be more jockeying for different spaces when the cranes show up to start construction,’ Hall said.’
‘The vandalism has been particularly disappointing to business owners, because so much is being done to make improvements to the area,’ Walker said. ‘We’re working with law enforcement to try and solve the problem.’
They’re building a TOWER in Bellingham? I’ll try not to burst out laughing. Too much of their own Kool-Aid, methinks.
Hey, don’t make fun of our tower. It’s a first!
Aaargh….I’m praying they actualy build this thing. They’re supposed to start in a couple weeks but last week the local paper finally acknowledged that the market here “may” be severely overvalued.
Any inventory we can build downtown or close to downtown would be a dream come true. Add to that some really crappy winter/spring weather (and tightened lending nationwide) and our crash should proceed nicely.
“The uniting factor for most of these reservations is the typical buyer is from the baby boomer generation, empty-nesters who are moving out of a single-family home,” Honea said. “At the end of the day, this project is about people choosing a better and more sustainable quality of life.”
The local boomers who intend to move to those condos will add more selling pressure to the SFH market. Besides Western Washington University,
the largest manufacturing employers in town like the paper mill are moving out or closing business,
There will be more minimum wage retailer jobs around the new condos, but unless home prices fall over 50%, there are no jobs paid well enough to purchase SFH in town (except doctors and lawyers).
WWU does not pay well enough and most assistant professors don’t get tenure.
It appears to me that SFH market will crash harder in Bellingham where boomers are moving out of SFH to condos and they are the only ones who can afford SFH.
Thanks for the NWest update Ben. It is getting harder and harder for the denial ridden locals (you know who you are) to put off reality.
We predicted this type of action up here and it is playing out - rising inventory, slower sales…soon more and more price drops. That takes the wind out of the refi market and it is than a self fulfilling prophecy…
Yep, the same exact market moves all the other ‘hot’ markets have gone through is playing out in the northwest, including lame press/realtor attempts to revive the ‘buy now before it’s too late’ theme. From the PI:
‘Realtor Marty Grasa, also of Windermere, said he had two clients who held off on buying through the summer and now can’t afford what they want. ‘They waited themselves out (of the market),’ he said.’
Maybe this realtor should consider what incomes are in relation to prices. Perhaps some locals can tell us what similar properties rent for in the Seattle area?
My Bro-in-law has a listing right on Lake Sammamish, beautiful place asking about 600K. He has not had ONE bite, I tell him he has to reduce NOW. The owners of the house will have NONE of that “reduction talk.” They just installed italian marble and some type of granite I can’t even pronounce…too funny…
cant wait till press and stick lenolium comes back in fashion
I agree. Homeowners up here have been drinking the Kool-Aid bigtime. It seems that no matter where I have been the last few years, there has always been someone talking about how much their place is “worth.” I happen to think that the northwest is in a lot more trouble than many other bubble markets. While we do have our share of high paying jobs, there are huge amounts of people earning minimal wages and living on public assistance. Tear downs, and remodels on 3500 square foot lots in west Seattle were going for $450-$500k. The evidence is readily available on that flipper Seattle Eric’s blog. The $450k he paid for that West Seattle flip is more than it should have sold for rehabbed. Game over for him. He is in denial right now thinking some section 8 garbage in Buffalo is going to cash flow and save him from the better than $7k per month he is burning right now, but give him another 3 or 4 months and he’ll understand.
Oh brutal! (but i love it :-/)
Update:
I just read Seattle Eric’s blog. My how his tune has changed in just a week. His irrational exuberance is quickly disappearing and reality seems to be sinking in. Apparently little traffic and no offers on his flips has got him sweating. He is now trying to unload the $2100 per month teardown at a loss. He dropped both flips by $10k, but realistically, a $50-$75k reduction on each would probably not even cut it at this point as they are WAY OVERPRICED. At a burn rate of more than $7k per month, and prices dropping, unless he has some rich relatives, it will be foreclosure and BK before long.
Great job, please keep us posted on that loser in Seatle from time to time. Very entertaining to read, keeps me from falling asleep.
I’ve also noticed that you can’t post comments on his blog now, but I can’t remember if you ever could.
It may simply be that his clients have come to their senses that they can’t spend 12x of their gross incomes on those homes, I don’t think prices have risen at all.
Renting is definitely cheaper than buying in close-in Seattle. A friend has a 2/2 condo on the market in Pike/Pine neighborhood for 670K, no bites on it for 6 weeks. He spent over $1K in ’staging’ and it’s optioned to the max with finishes. To compare,I have a 2/2 apartment about 9 blocks north of him, same neighborhood, that’s about 35% larger and has more outdoor patio space and a better view (downtown, Elliott Bay, Olympic Mtns). Finishes aren’t fancy, but I’m paying $1850/m rent for it. Between our two places are at least ten new condo buildings under construction, many squeezed in between older apartment buildings. The condo market in downtown Seattle is probably the most vulnerable to the downturn, considering how many new units are coming on line in the next 24 months.
Tell your friend condos in DC went for 50 times a month’s rent after the 90’s bust. Seattle is different, I’m sure.
The Northwest seems to have a 8-12 month time delay. It’s like we’re reading headlines from last Spring from the rest of country. If that’s the case Seattle (and the rest of you Northwesterners) you know what comes next.
How true nnvm…, I have been trying to make the “we are special, intelligent, unique, wonderful (add descriptor here) Seattle people realize that it is NOT about who we are, it is about what happens when a mania subsides…PAIN…
California flippers are probably a big part of the Pacific Northwest RE market- many I am sure are high and dry. Calif buyers have been the primary engine to the Pacific northwest RE market for the last 10 years.
Plus companies like Intel locating manufacturing facilities out in the boondocks which is great until they decide to shut the doors and good overseas. Seattle in particuliar is a beautiful city but the number of buyers for 600 to 800K 2 bedroom 50 year old houses on tiny lots has run its course.
Yes, here in Oregon, our economy lags by a year or so. It doesn’t quite get as crazy, either. The economy here is still adding jobs but it’s slowed down… my guess is that OR will be in recession mode by mid-late next year. I’m seeing more price reductions, and people who stood fast have had places sit for a full year.
Down here in Ashland things are definitely crazy. A tripling in home prices since 2000. We also are seeing a quicker deflation. Inventory started rising last winter and is through the roof. Prices have already dropped 10-15%, but there is currently a lot of variation in pricing between realists and those still in denial.
you mean the housing bust will spread like leprosy?
one neighborhood has it all over its body while another sees small spots just starting to form. 12 months from now they’re both dead
Ironically, your description matches the origins of life, organic growth, etc (as well as most diseases of course).
Same situation in Vancouver and Victoria here in Canada; we’re now seeing the rising inventory and slowing sales that the US bubble markets saw eight months ago, and the same realtor “balanced market” rhetoric designed to calm the jittery herd. I look forward to June 2007 for some hardball to start being played.
Saw this 100 year old quote and two things popped into my head. David Lereah - Bureau of Labor Statistics.
Don’t drunks also use lampo posts in the same way that a dog finds a different use for a fire hydrant? Seems to me like there’s a lot of people lining up to urinate on statistics rather than use them to guide their future decisions…
Good point, here’s an updated quote for you…
Speaking of Seattle…”Seattle Eric” (http://seattlerei.blogspot.com/), a youngish flipper with a blog has shut off public comments on his blog, reduced his prices on two of his finished houses, etc.
He still is upbeat and hopeful, but as someone else pointed out here last week, his burn rate has to be getting painful. Now with reduced prices on his properties, things are grim. He has another unsold unfinished property in the pipeline that is a total failure, a teardown he was hoping to rebuild. The project has had contractor problems and unsolvable drainage issues. His blog is like watching a slow motion train wreck….I tune in regularly. Bummer his comments are off though! :-/
Interesting…months ago I had an exchange with Mr. Seattle Eric. I tried pointing out what was happening in the world “outside Seattle” and that it would make its impact here as well.
He acted as if I was attacking him, which I wasn’t, I was trying to point out that he could get himself into some real trouble, especially because he has a wife and kids, if he was a single male who was playing fast and loose with borrowed money I wouldn’t have bothered.
I was unaware that he is having problems, but I am not surprised.
Oh…I see that Seattle Eric opened a second blog for bubble talk…much fun! http://bubbleator.blogspot.com/
SolvingADream
As with that idiot in Sacramento, don’t help this flippin loser make any money on his blog. Let him starve.
Brutal.
- His blog is like watching a slow motion train wreck….I tune in regularly. Bummer his comments are off though! :-/
This guy is a goner. He doesn’t even believe his own happy talk.
I thought the comments encouraging Seattle Eric to consider other views on the housing market were generally pretty restrained, but so far Eric has derided the people who have tried to warn him.
I saw where he recently posted at SoCalMtgGuy’s site with a couple of questions.
He acknowledged about a month ago that properties couldn’t cash flow in Seattle. (Took him a year to figure that out). Then berated the young inexperienced fippers who wre still buying in the Seattle area. Then sent his wife to Buffalo to buy 3 buildings.
He got into the biz August ‘05. Which is right about when anyone who was really paying attention to the MLS could see the market was turning in Seattle.
Quit a good job a few months back to go into RE full time. Which is right about when anyone, even if you WEREN’T paying close attention, could tell the market had turned.
Love upstate NY and really wish that it WOULD experience a renaissance of sorts. But cannot think of one plausible explanantion for why that would happen in the next several generations. If they can’t fix Albany, with it’s proximity to NYC, why the heck would Buffalo make a “comeback”?
Seattle Eric is textbook for how not to build an RE empire.
It’s bizarre to watch these people making the hugest mistakes and misjudgments of a lifetime right out there in a public forum. A real life soap opera.
Agree 100% with everything you’ve written. The guy has no clue on how to read a market and apparently no concenpt as to what a sunk cost is.
So I expect him to appear as a commentator on CNBC any day now…
Went to SUNY at Fredonia, just southwest of Buffalo. At that time the economy was in retreat as all steel mills where closing for good, one at a time. I recently met someone who is originally from Buffalo and he says that town has basically been toast ever since the steel mills left, has not really recovered.
Thanks for the link to his blog - it is indeed a train wreck underway. Sending his wife to Buffalo to buy property?? WTF??
He is making the same mistake as most of these rookie “investors.” Running to the cheapest market they can find, hoping to experience the next round of appreciation, never considering the local economy etc. They cannot comprehend that there is a reason things are so inexpensive and don’t do any research on rents, etc. They will throw a bunch of borrowed money into an old POS multifamily, and then jack up the rent only to find that there are no takers. Unreal.
Jacking up the rent won’t be his problem IMHO.
He’s going to try to manage Section 8’s at a distance of 2000 miles or so.
2007 should be interesting.
We should see a deluge of new listings, starting in January and Febuary, as sellers try to grab any available buyers early. Add to this rush for the exists, the coming ARM adjustment sunami, Inventories will mushroom and competition for buyers will be great. We should see many flippers at the end of their ropes in 2007 and having to throw in the towel.
As speculative demand disapates, medium incomes will start haveing a greater affect on home values. As speculators leave, the only thing left to determine value is the incomes in a given area. This should particularly affect those low cost areas whose values were driven up by out of state flippers and equity locasts. When the only buyers left are the locals, prices will have to come down to levels that local people can afford.
Up here in Bellingham, in 2005 I had a local RE agent tell me that she was working almost exclusively with clients from out of the area - other states and countries.
The sadest RE story I’ve personally run across so far was a total POS that was on the market for over a year till the owner/flipper convinced a friend that RE is a great investment and got the friend to take the POS off his hands at full market price (over 400k). The friend seems like a nice guy and is clueless that he has been left holding the bag.
From http://en.wikipedia.org/wiki/Seattle#Demographics
“The median income for a household in the city is $45,736, and the median income for a family is $62,195.”
Banks would traditionally make loans in the amount of 3 times a person’s income. 3 x $62,195 is $186,585, while the article states that the median priced home is $425,000.
If the traditional lending standards come into play again, I would expect median family income to rise to $141,666, or the price of a median single family home come down to $186,585. Since this area is “special”, I can only conclude that the median family income will rise to $141,666, or that lending standards will remain the same.
I personally live in the area and make over 80K, and will NEVER buy in this area. Even if the prices get whacked by 50%, what a buyer has to choose from is a collection of poorly built eyesores, on postage sized lots.
Yeah, it’s a nice place to rent, but I would never want to own there…
LOL
Did banks really used to loan only 3x income? I thought it was more along the lines of total debt service (monthly amount) cannot exceed 35% of income, and mortgage itself cannot exceed 28-30%. Or thereabouts.
With a median income of $62,195, or $5,183/mo, 30% of that for a mgt pmt, a 6% rate, a 30year fixed mortgage, and zero down (I’m guessing that will change as lending tightens), I get a median affordability house price of $259K.
Am I making an incorrect assumption in the above?
Jon
“Banks would traditionally make loans in the amount of 3X income”.
Actually, I think the 2.5-3X was only introduced after Fannie Mae was invented in the 70’s.
Before that , I’ve heard it was more like 1-1.5X income. No Fannie Mae = cheap houses.
Any way to permanently get rid of these “Affordabilty” programs? The PTB seem really loathe to allow them to collapse under their own weight.
We bought our first house in January 1980, in Seaford, Long Island for $46,000. It had been on the market for almost a year; first deal fell through; sellers had already moved to their new house; we probably could have gotten it for less but the amounts seem so small now. That house, today, would sell for over $350,000 (we moved from there in 1990). But at the time we bought it, most mortgages required 20% down and we were lucky to get into a state first time buyer program that required only 5% down. Our income was $42,000 (2 salaries), which was fine for that program, which required income of at least half the house price. (There was a maximum, too, but I forget.) Mortgage rate was 10.75%. When we moved on in 1990, our new mortgage on the new house was almost 9%.
I don’t understand how young families are affording these houses. That little house in Seaford was not well built. When we had some renovations done, we tore through exterior walls and there was no insulation and a lot of repaired termite damage. I saw a show on HGTV the other night where a young couple had a budget of $450,000 and was looking to buy a house in that area, south shore of Nassau Cty. , LI. What they were looking at was even junkier than our old house when we bought it. It was a show about remodeling and renovating and the idea was that this little place had so much potential. Anyone who thinks you can remodel for the costs that show was telling that young couple is very naive.
Where is the advantage of low mortgage rates when the house prices are so out of this world?
BH- Interesting coincidence that you figure the median price should be around 180K.
150-180K was in fact the price of a typical, “nice” home in a decent Seattle neighborhood in ‘96/’97, just before they began their zoom up, nearly doubling in price every few years til they’ve arrived at their now-lofty 600K- over a million .
In the meantime, income has FALLEN in Seattle since the late ’90’s (when inflation-adjusted).
If things DO go back to fundamentals, they’ll go back to where they were when the wild appreciation first began. Right around 180K.
“agent Deborah Arends was having a hard time understanding why the three-bedroom cottage was still on the market after six weeks and a price cut from $379,000 to $365,000. ‘It should be gone because it’s too cheap,’ she said.”
Apparently not cheap enough. I’m tired of these pissant reductions. $14K off of a $379K home is just 3.7%. Someone else said it well - the sellers act like $14K should be a big deal to buyers, but it’s just a tiny bit off the top for the sellers. Why should buyers subsidize seller’s greed and/or need to get out from under?
Agreed, I’m not willing to let a GF realize a windfall off my back.
I’m looking at a nice condo on the MLS…county records show it sold in 2004 to current owner for $154K.
Current asking price: $209K
I probably will go and look at this property, but I am really curious to know what justifies a 55K increase in the price, over two years?????????????
and in my area, Philly metro, prices are already starting the slide…
rehabbers in the city are the first ones to “get it”…they are slashing and burning asking prices, but still inventory piles up.
“…price cut from $379,000 to $365,000. ‘It should be gone because it’s too cheap,’ she said.”
Since when is $365,000 for a “cottage” cheap? This lady is off her rocker. I have friends who purchased 5 bedroom homes on shy half acre lots for less than that
pre-bubble.
Approximately 30-40% of Seattle’s eastside homes that are actively listed on MLS have seen one/more price drops. You can use http://www.ZipRealty.com to check out the history of a listing (# of days on the market, log of any price drops, etc); you can also use this site to narrow down on the area you are interested & see how many active-listings have seen a price drop.
And that doesn’t even count the ones that were delisted, then relisted under new MLS# with lowered price as “New on Market!”.
The problem was so rampant on the NWMLS that it was singled out a few months ago as one of the regional MLS’s that needed to be reprimanded in this respect.
Because of the pathetic drop in real estate prices (I don’t consider a $20,000 reduction on a grossly over-priced house anything to get excited about) I keep hearing these, “Now is the time to buy,” comments being made by realtors. My answer to one of the most sleazy “professions” in the US is, “Okay. If I buy a property now, will you guarantee to pay me the difference between todays price and the price 2 or 3 years from now and put it in writing?” I leave others to guess what their answer will be.
‘ The two year run of double-digit percentage hikes in the prices of sold homes in the Puget Sound area has come to an end. There’s more housing inventory for buyers to choose from, according to the NWMLS, and pending home sales in the area dropped nearly 19 percent compared with a year ago. NWMLS officials say they believe the drop in pending sales is attributable to indecision by buyers and reluctance of sellers to lower prices to reflect reduced demand.’
‘We all knew that the almost ridiculous growth we’ve experienced couldn’t be sustained and that the market would eventually soften a bit,’ said NWMLS Director Mike Larson.’
NWMLS officials say they believe the drop in pending sales is attributable to indecision by buyers…
—————————
These comments bug the heck out of me. No, we are not indecisive. Matter of fact, we know exactly what we want (MUCH lower prices) and how to get it (not buy until those prices are reached). Nothing indecisive about that.
I drive by a PoS by Lake Washington every day. It has a nice view, but it’s been for sale for several months now. Just recently the seller stuck a crudely-hand-painted sign on it: $649,950. It’ll sell now, I’m sure.
Just down the street a new development is just starting to go up. “Grand Opening!” because the models are now done. When I saw the models being built, I thought, “These have been beaten with an Ugly stick.”
Bakersfield market update - topic Foreclosures and Short Sales, these kool-aid drinkers are finally admitting their is a local problem:
http://www.kernradio.com
“NOD are rising dramaticaly” - Big Surprise
“NOD updates used to be updated weekly - Now NOD list is updated twice a day” - WOW
“10 NOD’s a day”
“At the beginning of the year local housing experts predicted that the Puget Sound market would slow down”.
Now THAT’S an interesting remark. In January ‘06, it was clear to anyone who was really watching the market that it was in slowdown mode. You did not need to be an “expert” to ferret out that trend.
But where was the Seattle Times hiding all these experts who were “predicting” the slowdown back then?
All winter spring and summer all you ever heard about the local market was that it was “Still HOT!!!” and “different” from the rest of the US and would not experience any slowdowns.
Now that they can no longer spin the numbers, they’re trotting out a new set of experts.
Are there any places left in the US where the local papers have not yet acknowledged, even fleetingly, the possibilty of a local slowdown?