Condos: Mini -> Micro -> Nano

Downtown Seattle: decent jobs, passable entertainment, increasingly unaffordable housing. So what's the solution? According to today's P-I, the time has come for the incredible shrinking condo.

Park two of GMC's biggest Sierra pickups next to each other. That's a lot of truck, but a small condominium — at least by Seattle standards.

But a local developer is betting Seattle urbanites are primed to carve out their own two-truck chunks of Belltown. The moda condos, set to break ground in October, promise "New York-style living," with units as small as 296 square feet that start at $149,950.

"I think there's unmet demand for affordable new construction in downtown," said developer G. David Hoy, president of HMI Real Estate Inc. "I also believe downtown needs more diversity."

You have to respect a guy that can so artfully spin what is essentially a glorified dorm room with phrases like "affordable new construction" and "diversity." I guess this is what it takes to get into a home downtown. I don't doubt that there will be plenty of people anxious to get their very own 296 square feet of American Dream™.

I think I'll get a few steps ahead of the curve, and look into opening an outlet where I can sell the affordable housing of the future.

(Aubrey Cohen, Seattle P-I, 08.31.2006)

CNBC : Online housing searches indicate bounce

CNBC's Jane Wells is reporting that Internet data miners indicate the online search queries for "homes for sale" is up 42%, suggesting that the housing market is poised to pick up.

The reader who e-mailed me this article suggests maybe that the opposite is true. People are searching to see what homes are listed for in their neighborhood to gauge possible list prices.

According to some Internet data miners, online search queries could be a better economic indicator.

Over the past five weeks, there's been a 42% increase in the number of Internet searches involving the phrase "homes for sale," according to Hitwise, a firm which measures Web traffic.

I for one hope that the market continues on it's track in the Puget Sound region, but my sense is that this Fall will be an indicator of where the market will go. Thing is, I thought that to be the case last year. So,what do I know?

Anecdote Updates & YAWA

I think it's time to update you on some of the local action (or lack thereof) that I've been keeping my eye on. I'll take these in the order that they were originally posted.

First up, we've got the park-backing property down the street from me. The last time I mentioned it (way back in mid-June), it had been languishing on the market for two and a half months, at a price comparable to recent nearby sales. Well it finally sold, closing about a month after I made that post. The sale price was $50,000 less than the asking price, and the poor deprived seller only made $72,500 (assuming 6% agent fees and no buyer closing costs rolled into the sale price) for doing nothing more than sitting on a property for two years.

Next up, the million-dollar new construction on my drive home. Apparently I wasn't the only one that thought $1,625,000 was a ridiculous price, because so far the fancy house on three primly-manicured acres (with a waterfall!) has taken two price drops (for a total of $130,000—8%), and is pushing four months on the market. Will the seller end up slowly chasing the market down? We'll see...

Of course we can't forget my California-bound coworker. She and her husband moved down to their new home town about a month ago, but unfortunately for them, their house still has not sold. Oddly enough, although their house has been on the market now for 73 days, they are holding firm on the asking price at $490,000. Also worth mentioning is that at around the 1 month mark, their home was de-listed and re-listed, with no change to the listing whatsoever, in what (if I'm not mistaken) is a blatant violation of NWMLS rules.

Lastly, I may as well mention yet another workplace anecdote. This coworker requested a transfer to the greener pastures of Moses Lake, and therefore is selling his home in rural Snohomish County. Purchased in 2000 for $165,000, the original asking price for his "custom built 3 bedroom 2 bath rambler" on 1/2 acre across the street from a lake was $350,000. Three price drops (down to $305,000) and 51 days later, still no takers, and I recently overheard the increasingly distressed owner talking about the possibility of taking on two mortgages at once. I guess he'll have to if he's serious about the latest price reduction being the "*FINAL PRICE REDUCTION*" he is claiming it to be. On the one hand, I feel bad that a good person like that is having trouble selling with an impending move. On the other hand, he's still asking for 85% more than he paid just six years ago. Is he just being greedy, or has he cashed out $120,000 in equity and honestly can't afford to reduce the price further?

In case anyone would accuse me of it, I'm not cherry-picking the anecdotes that fit my view on housing. These are just the housing stories that I know from the circles I run in.

As you can see, the Seattle-area housing market is still hot, hot, hot!

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Local Media "Starting to Notice Cooling"

Thanks to reader Peckhammer for pointing out an apparently self-contradictory article in today's Seattle P-I. It begins quite predictably, with the usual examples that purport to show that the Seattle market is still hot, hot, hot...

House hunter Vicky Tsai has paid for two inspections of homes she didn't buy: one that she lost out on because she was outbid by $20,000 despite offering $50,000 above the asking price, and another that she passed on after deciding it was too small.
...
Inspectors and real-estate agents say that — at least for desirable homes in Seattle's more sought-after neighborhoods — purchase offers "subject to inspection" may become as outmoded as offers contingent on the sale of another house. Instead, would-be buyers are paying for inspections before making a bid on the house as is, or forgoing inspections altogether.
...
"It's becoming a way of life," inspector Fred Grant said while waiting to look over a West Seattle house earlier this month.
...
Darrell Marsolais, who owns PSI Home Inspection Services, said he has done more preoffer inspections this year than in past years.

"It's just the Seattle market," he said. "Most any house that's being offered in the core Seattle area, there's always multiple offers."

Pre-inspections are "a way of life," there are "always multiple offers," etc... we've heard it all before. But wait! It seems that someone managed to sneak in a snippet at the end about the reality of Seattle's slowing market:

The popularity of preinspections varies from house to house and price range to price range, [Sound Home Inspections owner George] Guttmann said. "Sometimes multiple bids are expected and people do preinspections and it turns out there weren't multiple bids," he said.

He added that he's starting to notice cooling in the housing market, with more signs noting price reductions. The latest statistics show slower sales and more houses on the market than a year ago.

Yeah, "the latest statistics," along with every month of statistics since April. After four straight months of obvious slowing, we're still just getting a passing mention of it in the press. "Annoying News Coverage" indeed.

(Aubrey Cohen, Seattle P-I, 08.30.2006)

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Lender Tightening within 60 days?

From today's information at Calculated Risk Blog. It appears that federal regulation regarding non-traditional mortgages may be in place within 60 days. If this ends up having any teeth at all, it could make it more challenging for borrowers to qualify for interest-only loans or pay-option loans.

As one blogger responded: "talk about rearranging the chairs on the Titanic." Maybe a little too late, the damage is already done.

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Bubble Link Roundup

These don't necessarily have to do with the Seattle area specifically, they're just a collection of interesting housing-related links that I have come across in the last week or so and thought I would share.

• What Lemmings Believe (a comic panel)
• Housing Doom Blog Investigates Seattle's #'s
• "There hasn't been any slowdown at all" in Eastern Washington
• If construction costs are $300,000+, why are houses being appraised at such low values?
• Why Renting Really Is For Suckers
  ...followed up with...
• When You Should Not Buy Real Estate

Let me know if you like the "link roundup" kind of post. I often have stories that interest me but aren't quite enough to make a full post about. I could see making a post like this maybe once a week or so. Lastly, for the record, I thought of this concept before Dustin started going nuts with the lists.

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Unaffordability Spotlight: Queen Anne

Despite my prediction that we would not see Bibeka Shrestha's name on another Seattle Times' real estate article, she has resurfaced this weekend with one of those "neighborhood in focus" type articles. The neighborhood in focus: Queen Anne.

Single-family houses and condominiums in the area that includes Queen Anne had a median price of $483,000 in June, up 13.7 percent over the past year, according to the Northwest Multiple Listing Service.

Janet Gabbert, 65, and her husband bought their house on in 1968 for $22,500. "And we thought we were being taken," she said with a chuckle.

"Even for an attorney with a good salary, it's getting difficult" to buy a house on Queen Anne Hill, said Jeffrey Valcik, an associate broker with Windermere Real Estate.
...
While most homes are single-family houses, condominiums and apartment buildings are going up.

Helen Bigelow, 81, has lived in the area for 13 years and lamented the redevelopment on the hill.

"It's horrible," she said, while taking a break from grocery shopping. "They're tearing down some of the lovely old houses ... they replace it with a lot of boxes with no grass, no flowers."

With the new development comes more traffic and difficulty in finding parking.

But that just comes with the territory of being what Valcik calls Seattle's most sought-after neighborhood.

What really strikes me as crazy is that the price of homes just five years ago on Queen Anne has now become what you can expect to pay in much less desirable neighborhoods like West Seattle, Mountlake Terrace, or even Ballard. It's understandable that a place like Queen Anne will have considerably higher prices than other parts of the county. I just don't believe that it's sustainable for prices to be so high that even affluent people with high-paying jobs have to stretch to afford a home in the "sought-after" neighborhoods.

(Bibeka Shrestha, Seattle Times, 08.27.2006)

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Lawrence Yun is back

From the New York Times today-

“‘Certainly, the housing market is undergoing a measurable adjustment,’ Lawrence Yun, senior economist with the Realtor association, said. The bloated inventory levels, Mr. Yun said, indicate ‘a very sudden change which I have never seen before.’”

-Lawrence Yun, NAR economist.

Earlier this year, he mentioned that he expected Seattle to achieve 30-40% median price increases. I'm no fan of economic problems, but I don't see how the 30-40% increase in median prices will happen.

Free Pass: DOJ drops Fannie Mae charges

How surprising!

This morning at CNBC.com, Reuters news services is reporting that the Department of Justice has dropped charges against Fannie Mae and has concluded their investigation. Fannie Mae was "fined" $400 million.

"The Justice Department probably decided that there was little to be gained by bringing charges against the company because that would only punish shareholders, who have been punished enough," said Josh Rosner, a housing analyst with Graham Fisher & Co. in New York. "But that does not mean that former executives are not being scrutinized."

My last post a couple weeks ago about this scandal... I recall thinking and suspecting that some very very high level talks would take place behind closed doors. Seems like my hunch had some merit.

Fannie Mae gets a pass. Unbelievable. Franklin Raines and all his former Fannie Mae executives under him—do you really think this guy will get prosecuted? Time will tell, but when this guy is connected to Washington the way he is, it's going to be difficult.

Seattle Bubble Poll Time

Given the variety of opinions expressed in the discussions on this blog, I am curious about the general statistical status of the readership, with respect to the issues that we focus on. To satisfy my curiousity, I have created the following series of polls. Vote in as many or as few as you like. The poll is completely anonymous—I have no way of even associating an IP address with poll selections. Please vote only once for each question, and please be honest. Feel free to use the comments to discuss the results or suggest additional/future poll questions.

FYI, "own" is in quotes because as long as you are still carrying a mortgage, it's really the bank that owns your home.

My heated argument & bombshell shocker

I got into a great argument with one of my allied real estate professional hate mail fans recently. It was good. Educational and revealing too. Not too much spit exchanged. Not like an in your face Lou Piniella type tirade, but quite animated. Man, can you imagine the comments from Lou over the past couple weeks if he was still the Mariners manager? It would have been really funny seeing him explode in the clubhouse after this dismal road trip. Anyway...

We agreed on one issue. I was early thinking that our market was exibiting bubble like tendencies. Mostly because of witnessing first hand the type of financing making it possible for consumers to purchase homes that in markets of past, there was no way the borrower would qualify. But the other reason was due to being personally involved in multiple offer situations back in the fall of 2004. I knew right then that the buyer of the home that successfully out bid ours and two other parties, probably paid more than they should have. But who am I to judge. Maybe for reasons unknown to me, the property was worth it to them. You can never fault someone for that. I would also guess that the other buyers were not armed like me with the mortgage information about the existing seller, nor armed with information that the home had just been purchased three months earlier.

The question of whether the Seattle market will follow the footsteps of other markets that have had sales drop off significantly is what our argument was really about. In localized areas of our market, multiple offers still continue. Sales levels are dropping off ( I know I know, the "median" thing...). I can tell you that our summer business was less than that of '05. Bummer.

In escrow, from my perspective, there is no other position in real estate where you see the good and bad in a real estate transaction. You see and hear it all. Almost without question, 95% of the comments excited buyers make at the signing table relate to the home as an "investment," and a good portion of those words are from first time home buyers. These comments from buyers really contradict other real estate agents who have only recently blogged about telling their clients they should treat their home as a place to live, first, and as an investment later. It seems to me the tune is changing. The clients we have seen over the past 2 yrs. seem to have that glossy-eyed-equity look in their eyes. Recently I've read many comments from agents on real estate blogs both locally and nationally, who say they are telling clients to stay away from ARM's and not get in over their heads, along with the "buy the home to live in vs. investment" talk-- I understand agents who say this in a genuine manner and spirit, but it just doesn't jive with the conversations I have with many of their clients, nor the financing that the buyers are still receiving. Although ARM's are falling off in favor, they are still THE 30 yr fixed program of the day. In other words, ARM's are still King. Don't believe me? Go to any open house and check out the financing sheet provided by the agent's favorite mortgage broker. I'll bet more often than not you'll see only ARM programs and no 30 yr fixed rate quoted on the rate sheet. Many of the clients at the signing table openly talk about the equity gravy train. Don't get me wrong, I don't believe that buying for investment purposes is a wrong analysis. It depends upon the property and the reasons of the purchase. My best guess is that buyers have learned this 'real estate only goes up in price' thinking through conversations with agents, friends, relatives, business associates etc.

Then the bombshell

I have never heard of an agent ever tell a client that they should not buy. I'm sure there are cases out there, but, generally, I have never heard of it. Recently, I had the pleasure of signing some clients who were sellers. I asked the sellers in casual chit-chat conversation where they were headed or moving to. They said, " no where, we are staying put, but our agent suggested that we wait to buy until the market settles down." I was stunned. I almost asked them to repeat what they said, but decided it was innapropriate given my position. Apparently there are Realtors out there in our Seattle market, perhaps experienced and seasoned, that believe we are in fact in a bubble. Perhaps there are more than we know of. Any experienced agents want to chime in? Both bearish and bullish invited.

The argument wraps up

So, in continuing with our argument, we eventually settled with a psuedo question: What is a "normal" market for our area. What is not normal? Moreso, for all the bubble believers on this blog who rent, how can you determine the bottom? It's tough enough to predict market tops, so when will you make a determination to buy? If prices do fall, yet inflationary pressures continue, interest rates will rise to counter it; your price drop advantage may or may not be helpful to you in that situation. What if the Seattle market and vicinity DOES NOT experience the hard sales price drops that other markets are experiencing and will continue to experience as this conundrum unfolds.

Your transparent escrow friend,

S-Crow

WCRER: Sales Slipping, Affordability Tanking

As a number of readers have pointed out in the comments, WSU's Washington Center for Real Estate Research has released their latest quarterly statistics. There's not much new in there for anyone that has been following the monthly NWMLS releases, but it's at least worth mentioning. Here's a blurb from the Associated Press report, courtesy of the Everett Herald.

Among Washington's largest counties, King County sales declined 13.7 percent, Pierce County slipped 10.7 percent, Snohomish County slid 11.8 percent, and Spokane County declined 11.9 percent.

The sharpest declines were seen in Island and Jefferson counties, each of which experienced nearly a 33 percent dip in sales.

Only three counties - Yakima, Thurston and Grant - reported modest increases in the number of homes sold.

But prices continued to increase across the state, though at a slower rate.

Here is an updated version of my graph of WCRER's numbers for King County.

Click to enlarge

The Affordability Index (refer to my previous post for the definition) for King County continued its descent, down almost 7 more points to 70.4—the largest drop in the index in two years. One thing that is interesting is that rather than reporting inventory (# of homes on the market), the snapshot includes the number of units for which building permits have been issued. Although that measure was up just 6.7% statewide, King County had an astounding 4,217 units for which permits were issued last quarter, up 43.2% from last year. Remember that King County is already in the midst of a trend of increasing inventory and decreasing sales. If supply keeps shooting up (bolstered by increased building) and demand continues to wane, real price drops won't be far behind.

(WCRER (pdf), 08.2006)
(Associated Press, Everett Herald, 08.21.2006)

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July Jobs: Mixed Bag

Since the housing market is so closely related to whether people can find decent jobs, here is the latest in our continuing series on Washington State employment statistics. Things are looking up... sort of.

Washington's jobs picture was mixed in July, and revised data shows that the first half of 2006 wasn't quite as red-hot as first appeared.

The state added 8,700 jobs last month, according to seasonally adjusted figures from the Employment Security Department, but the unemployment rate edged up to 5.3 percent from 5.1 percent in June.

Evelina Tainer, chief economist for the department's Labor Market and Economic Analysis branch, said the increase in the jobless rate wasn't statistically significant. But since the rate was as low as 4.6 percent as recently as March, it's worth watching.
...
Instead of the 6,900-job average monthly gain that had been previously reported, Washington actually added an average 5,400 payroll jobs each month between January and June.

"On the whole, I think the numbers are still looking pretty good," Tainer said.

8,700 new jobs is definitely better than the previous six months. However, it's interesting to see exactly where those 8,700 jobs are coming from (and where jobs are leaving):

Wholesale and retail trade in the state showed the biggest job drops last month, respectively losing 800 and 1,000 jobs, since June.
...
Education, both public and private, posted the strongest gains in the month, a total of 6,200 jobs. However, Tainer questioned whether that was due more to the quirks of the seasonal-adjustment process than real growth, noting that those same sectors lost 6,400 jobs in June.
...
Statewide, professional and business services, something of a catchall category for white-collar jobs, added 2,200 jobs in July, with most of the gains coming in managerial, administrative and support jobs.

Construction, which has been one of the mainstays of the state's economy, lost 2,000 jobs last month, due entirely to declines in the heavy and civil-engineering sector.

In King and Snohomish counties, though, 3,000 construction jobs were added in July, and manufacturing added another 1,300 jobs.

The P-I offers some additional analysis:

The largest job growth occurred in government (up 4,200 jobs), education and health services (3,100 jobs) and professional and business services (2,200 jobs).

Retail trade lost 1,000 jobs, financial services lost 300 and information lost 200.

So disregarding the odd fluctuation in education, we're really only talking about a net 1,500 jobs. Not exactly an economy to write home about. However, there is definitely some ammunition in there for the Seattle is Special™ crowd, what with construction jobs decreasing statewide (by around 5,000 jobs!) but increasing in King & Snohomish. I also notice a distinct failure to mention what's going on with jobs related to real estate. Presumably they were mostly flat last month. Particularly interesting to me is that retail is floundering. Perhaps the housing ATM is drying up, even here in Washington?

Whichever way you slice it, it's pretty difficult to skew these numbers to fit a "Seattle's economy is booming" argument. I think at best, we're treading water right now.

(Drew DeSilver, Seattle Times, 08.15.2006 )
(Drew DeSilver, Seattle Times, 08.16.2006)
(Dan Richman, Seattle P-I, 08.16.2006)

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Picture A Healthy Housing Market: Yakima

This story about the Yakima housing market caught my eye because my wife and I stopped in Yakima yesterday on the way home from our 3-day weekend trip. I thought it would be worth posting here because it's an interesting contrast to the type of piece you find in the Seattle-area papers. Notice the tone of moderation, and the distinct lack of hyperventilated price-gain cheerleading.

Yakima County's housing market is showing signs of bucking a national cooling trend.

It is just one of three counties in the state — along with Grant and Thurston — where second quarter sales activity increased over the year.

Yakima County's home sales jumped 9.3 percent, according to data released last week by the Washington Center for Real Estate Research at Washington State University.

The county's median home price also increased, by 5.4 percent to $133,500, said center director Glenn Crellin, who notes that Yakima missed out on the huge gains that other markets, such as Seattle, have seen in the last few years.
...
Higher rates have not had the same dampening effect in Yakima [as in CA & FL], where median prices are still some of the lowest in the country, [NAR economist Ken] Fears said.

Local real estate agents say there are plenty of ready buyers here — supply is not keeping up with demand.
...
Fears said the county has a solid economy and slower price increases — an ideal environment for a healthy housing market.

Rich, the Prestige Realty broker, said other factors such as the area's proximity to wine regions and recreational activities will also draw people to the area — and create more demand for homes.

"We're in the middle of it," he said. "I don't think it's going to end anytime soon."

In Yakima it actually might not end anytime soon. It sounds like they have been fortunate to miss out on the insanity that the Puget Sound housing market has experienced in the last few years. Moderate appreciation, affordable homes, and strong demand—everyone is a winner. Contrast that with Seattle: Unsustainable appreciation, ridiculously over-priced homes, and weakening demand... You tell me which housing market is healthy and which one is likely to catch the flu.

(Mai Hoang, Yakima Herald-Republic, 08.21.2006)

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Why Can't We All Just Get Along?

Have you noticed how touchy some people can be when it comes to discussing the subject of whether homes are overpriced or not? It's almost gotten as bad as politics. For the best/worst example of this, head over to the Craigslist housing forum (if you dare). I read it occasionally, but honestly not very often, because it seems like all day long, all it is over there is bickering and name-calling, from both sides of the aisle. Heck, in my first visit over there in nearly a month, I discovered someone throwing insults at me, and I barely ever post there (and when I do, it is never anonymously). If you've got something to say to me, come to my blog and say it "to my face" so to speak.

So what is it about this subject that makes people get just downright mean? Real estate enthusiasts throwing out the "bitter renter" insult, and bubble believers cheering on the economic destruction of their neighbors... Obviously not everyone involved in the debate stoops to those levels, but there are enough examples of these kinds of attitudes out there that it tends to color the entire debate.

On an almost unrelated note, I was "interviewed" by Frank Sennett for the Spokane Spokesman-Review a few weeks ago. Here's my 15 seconds of Spokane fame:

Seattle Bubble is a real-estate blog with teeth. It focuses on signs of a hard landing for the housing market. Tim Ellis, a twentysomething electrical engineer, started blogging about a bubble after encountering what he viewed as unrealistically high prices while house hunting last year.

But unlike the proprietor of Housing Panic, who seems almost gleeful about a crash, "I try to keep a fairly level head about the subject," Ellis said via e-mail. "I don't really get why some bubble bloggers seem so excited about the very real potential for a serious economic downturn. It's certainly not a prospect that thrills me, considering that any economic pain is likely to be felt across the board, which includes me."

Heh... A blog with teeth. Amusing.

So like I asked in the subject... Why can't we all just get along? You've got your opinion, I've got mine, and we each do what we think is the best given all of the information available to us. What do you care if someone else doesn't see things the way you do?

(Frank Sennett, Spokesman-Review, 08.07.2006)

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Condos Booming All The Way To Olympia?

Okay maybe booming is too strong of a word. Blossoming may even be too strong of a word. Whatever word you choose, demand for condos in Thurston County is apparently on the rise.

Demand for condominiums is growing in Thurston County, but several proposals to build more have yet to get off the drawing board.

After years of dormancy, the condo market is taking off, driven by early retirees who want a break from home maintenance and singles who want a price break compared with single-family homes, real estate agents say.
...
"There's definitely a need for more upper-end condos," [Realtor Spence] Weigand said. "There are a lot of people tired of the taxes and the maintenance of their property, but they can't give up their views."

South Sound's condo market is still small compared with the large, booming market in Seattle. More than 1,600 Seattle condos are on the market, compared with 51 in Thurston County, according to the Northwest MLS.

"There's a need..." I think this gentleman must be using some meaning of the word "need" that I'm not familiar with.

(Jim Szymanski, The Olympian, 08.13.2006)

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Seattle: Smug, Arrogant, Delusional?

The Seattle P-I Virtual Editorial Board highlighted an excellent comment to an editorial about the $1.6 billion tax package. A reader going by the handle "Face Reality" made the following insightful observations:

Seattle has no coherent "tax plan": Or finance, revenue, fiscal or spending plans for that matter. It hasn't for over 20 years. A succession of irresponsible Councils and Mayors (that we insist on re-electing) seeking short term gratification has seen to that.
...
Instead of a measured, predictable tax package for very specific, prioritized needs we get an endless, open ended "all at once" debacle and xmas tree wish list that still includes money for needless things like Paul Allen SLU beautification.

Reckless tax and fiscal policies make this city that much more unaffordable for all but those who can blithely pay for our "new urban" paradise while unwittingly contributing to the very sprawl they decry: When everyone else is driven to more affordable areas outside Seattle – along with many of the businesses that employ them.

There is a direct correlation between taxes, sprawl and affordability. So many people here are in denial about that reality - you can't simply tax, grow or densify your way to affordability and a quality city. The concepts are mutually exclusive if badly applied - as in Seattle.

Poorly applied and rapid ramp ups in taxes raise housing prices and mortgage qualifications, stagnant business growth and cause decline in real revenues as the increased taxes are eaten up by more service demands that density creates. If this continues, a city inevitably declines as demographics and businesses leave for cheaper pastures, ie, the 'burbs.

The real bill will come due in just a few years, when the inevitable economic downturn combined with higher taxes that narrow the base and discourage businesses will bring both an actual DECLINE in tax revenues across the board and a grinding halt in City business and population growth.

With the usual Hobson's choice of cutting services vs raising taxes even higher, setting up the potential for the classic revenue "death spiral".

An experience well documented in just about every other American city the last 30 years – including memory challenged Seattle, once again the caboose on the train of national experience.

Smugness, arrogance, delusional growth projections, pseudo - environmentalism and the attitude "its different this time" are no defense against the lessons of history.

You should really go read the entire comment.

This was cross-posted on both Seattle Bubble and Seattle Traffic.

(Face Reality, Seattle P-I (comments), 08.16.2006 )

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Conflicting Reports On Luxury Homes

Depending on who you want to listen to, the luxury home scene is either a stagnant buyers market or it is trending upward. The Seattle Times reports on the small number of buyers relative to million-dollar-plus listings.

There are dozens of grand homes — daresay mansions — such as the Westwold in Snohomish County. Yet despite their size, these houses have gone somewhat unnoticed in a real-estate market usually characterized by new subdivisions.

From Woodway to Mukilteo to Lake Stevens, Snohomish County is home to some luxurious estates. With high bluffs on Puget Sound to the west and many lakes, the county has prime real estate for homes that rival those in King County's upscale areas.

There are large homes along the bluffs in Mukilteo and south Everett — former Everett Mayor Ed Hansen has one. There are some grand estates on Lake Stevens, including a 10-bedroom home once described in a real-estate listing as a "castle on the lake."
...
Elizabeth Erickson, a real-estate agent and owner of Gallery Homes in Mukilteo, said luxury homes have always been something of a buyer's market.

Pulling listing data for Mukilteo, where she does most of her business, she said that for the 22 active "luxury" listings in that city, there probably are two or three buyers at any one time. The average time those homes have been on the market is 91 days, she said.

With luxury homes and their amenities, the rich can pick and chose.
...
Large homes started popping up in the county at about the time the railroad got here, said David Dilgard, a history specialist with the Everett Public Library's Northwest Room.

People first got rich here through land speculation, Dilgard said. A parcel in what would become Everett became exponentially more valuable when the railroad came to town in 1892.

Many unlucky speculators, however, literally died waiting for the train.

"In this area, speculative nonsense was always kind of the rule rather than the exception," Dilgard said.

I think that quote applies to a lot more than just the luxury real estate market, even if it wasn't meant that way.

From the other side of the fence, John L. Scott himself makes the case that luxury real estate sales are climbing their way out of a post-dot-com slump.

The dominant story in the Seattle/Puget Sound housing market over the past five-plus years has been historically low interest rates leading to record first-time buyers and record home sales—primarily in the more-affordable price ranges. During this time of abundance for much of the housing market, luxury real estate sales were slowly recovering from the residual effects of the dot-com decline in early 2000, which saw luxury home sales plummet in a matter of months, causing values to fall, and a surplus of inventory to flood the market. However, time and a stronger economy have helped heal the luxury market, and 2006 is showing continued signs of improvement for the highest echelon of the Puget Sound housing economy.
...
The past few years have been a time of recovery for the luxury market, but the first half of 2006 is appearing to follow the ten-year cycle as described above by Alan Pope. The proof is in the stats which indicate that while inventory continues to rise, so too do the number of buyers and the absorption levels. Sales are definitely strengthening with a 50% increase over year ago totals. However, inventory levels are higher too. In June 2005, there were 1,428 million-dollar-plus homes on the market, compared to 1,839 available properties in June 2006. While inventory is higher, so too is the absorption of this inventory—up by nearly two percent compared to the first half of 2005. All of this points to clear indications that this segment of the market is trending upward.

The largest influence on the local luxury real estate market is the Puget Sound Economic Cycle, which is currently running contrary to much of the rest of the country because our largest corporations, such as Boeing and Microsoft, are hiring—including at the executive level. The Puget Sound region continues to see migration from California and other areas outside of the Northwest because of the economic opportunities and quality of life that is available here. Furthermore, the record sales over the past few years in the more-affordable and mid-priced housing markets have caused a chain reaction of sales that are now being felt in the high-end.

And of course for good measure, Mr. Scott made sure to throw in your daily dose of the "Seattle is Special" mantra. I should trademark that phrase. Maybe come out with a line of t-shirts or something.

Seattle is Special™

(Brian Alexander, Seattle Times , 08.16.2006)
(J. Lennox Scott, RISMedia, 08.17.2006)

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Shocking: Tax Assessments Continue Climb

I hope you're sitting down, because you're in for a shock. Get this... when "hot, hot, hot" home prices "soar" "sizzle" and make "huge gains," tax assessments that do the same aren't far behind! I know—who would have thought!

Linda Peterson's 1,200-square-foot rambler in Monroe has the same avocado-colored sinks it had when she bought it in 1975. She and her husband, David, finally replaced the shag carpet a few years ago, but few other improvements have been made.

Imagine their surprise when they received a notice from the county assessor that their property's 2006 assessed value had jumped more than $86,000 from the previous year.

"And I'm thinking, 'For what?' I can't imagine why," Linda Peterson said.
...
Snohomish County properties had an average increase of 20 percent in assessed value this year from 2005, according to a report from the county assessor.

That's almost double the 11.3 percent increase in property values statewide, according to the state Department of Revenue. It's also a leap for Snohomish County, which saw increases of about 11 percent in 2004 and again in 2005.

A blazing real-estate market in Snohomish County is to blame, County Assessor Cindy Portmann said.

"As long as people keep buying at these prices, market values will continue to climb," she said.

But former King County Assessor Harley Hoppe, who now helps homeowners with appraisals, property taxes and appeals through his firm on Mercer Island, thinks that assessed values are sailing so much higher not because of the market, but because of county officials.

"This is a criticism of Pierce, King and Snohomish counties. They've gone to the max height of the market and it's scaring residents," said Hoppe. "It's absolutely ridiculous. Values do not increase like this."

I agree. It is absolutely ridiculous. But unfortunately for homeowners, soaring tax assessments is a reflection of the absolutely ridiculous housing market. You know, the double-digit year-over-year gains that have been persistently trumpeted in the news outlets for years now? I'm sorry, but this story just gives me the impression that as a group, homeowners just want to have their cake and eat it too. Sorry darlin', the real world just don't work that way.

(Kathy F. Mahdoubi, Seattle Times, 08.16.2006)

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Zillow Releases Market Report, P-I Swoons

Enjoy this puff piece from today's Seattle P-I about the latest report from Zillow on Seattle's "impressive" real estate market.

A steady stream of potential buyers flowed through a big Craftsman house a couple of blocks from Green Lake on Sunday, apparently undeterred by its $695,000 asking price.

The house went on the market Aug. 8, but listing agent Mark DeSpain of Windermere Real Estate was not taking offers until today. He was expecting to get several.

"There was a time in the last couple years when you could get away with (waiting a week to accept offers) in almost any neighborhood," DeSpain said. Now, he said, it's possible only in certain high-demand areas.

DeSpain is backed up by new estimates released Monday by the Seattle online real-estate company Zillow. com for the first quarter of 2006.

Zillow pegged the median home value in Green Lake at $521,916 in June — up by an annualized rate of 32.2 percent from three months earlier, compared with 16.5 percent for the city as a whole. Broadview, Wedgwood, Westlake and Windermere were up by an annualized rate of more than 40 percent.

Wait, wait, wait a minute... Is there really a neighborhood in Seattle called Windermere? I've never heard of it... Can someone enlighten me here? [Update: Thanks to commenter Richard, I have discovered the elusive Windermere neighborhood.]

And now back to your regularly scheduled real estate cheerleading:

Zillow showed much lower appreciation in some other city neighborhoods, and even declines in Broadway and downtown. But the city's overall number was still impressive compared with the national increase of 6 percent.

"The market's still strong, particularly in desirable neighborhoods like Green Lake," DeSpain said.

"Green Lake is hot, hot, hot right now," said Susan Ryan, a real estate agent with Coldwell Banker Bain. "The amount of money that people are willing to pay to live in Green Lake boggles the mind."

Write that down, all you potential home-buyers out there. Real estate in Seattle is "impressive," "strong," and "hot, hot, hot..." Have I ever mentioned how much I love, love, love the balanced real estate reporting that comes out of Seattle's dailies?

(Aubrey Cohen, Seattle P-I, 08.15.2006)

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Olympia Inventory "Substantially Higher"

Here's another report out of Olympia, on the significant cool-down that housing is experiencing there.

As the South Sound real estate market cools from overheated to warm, sellers are increasingly offering price reductions in order to speed up sales.

Real estate agents say the recent appearance of homes marked as "Price Reduced" indicates that this summer's housing market is cooler compared with a year ago.

Last summer, the Thurston County housing market was so active that it was common for homes to sell before they were listed.

But this summer, inventory levels and interest rates are higher, and newly constructed homes continue to come onto the market, contributing to longer selling times.

In July, there were 1,633 active listings, compared with 1,031 for the same period last year, according to the Olympic Multiple Listing Service.

Some agents, though, speculate that because builders don't always list all of their new homes, inventory levels could be much higher, in the range of 2,200 to 2,500 homes.

Obviously they're not to the "meltdown" point yet, as the median price is still going up (although quite a bit more slowly than in King County—just 5% from January to July). But with the number of listings increasing this fast, and more new construction coming on the market every month, will Thurston be the first Puget Sound county to turn?

(Rolf Boone, The Olympian, 08.13.2006)

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US Financial Systemic Risk: Fannie Mae & Freddie Mac

I know many readers have asked me to provide information regarding the tightening of lending standards. In researching this (maybe some loan officers that sleuth this site could be much more helpful) I did find the following:

August 11, 2006--Federal Deposit Insurance Corp. Chairman Sheila Bair says federal banking regulators are still a few months away from finalizing guidance on interest-only and payment-option mortgages.

This shows that the "guidance" and any recommendations will probably not occur until some time later (as in 2007).

Now for the meat 'n taters

Both Fannie Mae & Freddie Mac are the country's largest private mortgage buyers.

It appears that from all indications that financial problems at Fannie Mae and Freddie Mac, due to the mismanagement and risk associated with these institutions, could possibly result in the largest financial scandle in US history. Both of these institutions represent over 40% of the entire US mortgage market. The scale could make Enron's debacle look like a tug boat parked next to the USS Abraham Lincoln.

After Fannie Mae's having to restate earnings in the billions and recent filing with the SEC that they will miss another (possibly for the foreseable near-future) deadline for financial reporting, the investigations into these companies is revealing the potential for systemic risk to the US financial markets. Time will tell.

History

In 1968, Fannie Mae became a private company operating with private capital on a self-sustaining basis. Its role was expanded to buy mortgages beyond traditional government loan limits, reaching out to a broader cross-section of Americans.

"Today, Fannie Mae operates under a congressional charter that directs us to channel our efforts into increasing the availability and affordability of homeownership for low-, moderate-, and middle-income Americans. Yet Fannie Mae receives no government funding or backing, and we are one of the nation's largest taxpayers."
- From Fannie Mae's website.

The Risk

"The result of the Enterprises' rapid growth unconstrained by market forces and a weak regulator was years of mismanagement, flagrant earnings manipulation, and systems-and-controls problems. Managements of both companies were forced out, earnings were misstated by an estimated $16 billion, fines exceeding one-half billion dollars were imposed, and remedial costs will exceed $2 billion" - OFHEO

Of the five unique systemic risk factors as reported by the Office of Federal Housing Enterprise Oversight (OFHEO) , the government office tasked to investigate the companies, the second risk factor just blew me away.

"Second, Fannie Mae's and Freddie Mac's low capital requirements (much lower than traditional banking institutions) and unusually low funding costs because of their GSE status allow them to build huge mortgage asset portfolios. Fannie Mae's mortgage assets grew from about $124 billion in 1990 to $905 billion in 2004, and then declined to about $727 billion last year. That's equivalent to average annual growth of more than 13 percent over the 15-year period. Freddie Mac's mortgage portfolio grew 26 percent per annum from less than $22 billion at year-end 1990 to $710 billion in 2005. In contrast, the residential mortgage market grew at an average rate of 8.5 percent. Absent regulatory constraints, Fannie Mae and Freddie Mac could each increase their portfolios by well over $100 billion without exceeding the present minimum capital rules, including the 30 percent operational risk requirement that OFHEO imposed."

If you read the papers, you know that the CEO's at the top, such as Fannie Mae's Franklin Raines, resigned under serious allegations of corrupt management. The bonuses were obscene (tens of millions) and allegations of "cooked" books appear to be coming true.

An interesting side note: If John Kerry had taken the White House, many had pegged Raines to be Treasury Secretary. Franklin Raines was the Director of the Office of Management and Budget under President Bill Clinton. (I'm not making a political statement, these are facts.)

Further, Raines grew up in Seattle.

Whether or not people feel Raines and his executive staff/subordinates should be in jail is for debate on another blog. Many in Washington feel it is only a matter of time before he is idicted.

Spotted In Monroe

Name & phone number have been liquified to protect the—well, just as a courtesy. In case you are wondering—no, they are not a REALTOR®, so I guess they don't have that pesky code of ethics to be concerned with.

Thanks to my former coworker JP for the heads up on this.

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Slowing Housing Market? NIMBY!

The real estate writers for the Seattle P-I apparently aren't capable of leaving well enough alone. Even when they print an Associated Press wire report about the serious housing slowdown underway across the nation, they just have to slip in a "but not in Seattle" clause (P-I addition italicized).

The "For Sale" signs are staying out longer. House prices are easing as sellers try to lure in buyers.

The big question now: Will the nation's five-year housing boom turn into a devastating bust that could derail the overall economy?

"We recognize the risk ... and we are watching it very carefully," Federal Reserve Chairman Ben Bernanke told Congress recently.
...
"So far, the correction in housing has been orderly, but there is a significant risk that this orderly correction could become more chaotic," said Mark Zandi, chief economist at Moody's Economy.com.

"The housing market has been driven by euphoric optimism about future house price growth. That could quickly change to dark pessimism, and we could see sales and prices fall much more than expected," Zandi said.

That may be true nationally, but Seattle and the rest of Washington area continue to see double-digit growth in home prices, although there are more homes on the market than a year ago, according to the latest data from the Northwest Multiple Listing Service.

I wouldn't mind so much if the talking points were something like "...but Seattle has not yet seen as much slowing as elsewhere." It would get a little old after a while, but at least it would be an accurate statement of fact. But instead, the local media's line is almost uniformly "Seattle isn't slowing now, and we're completely immune to any serious slowdown, ever." Prices may fall significantly, but not in Seattle. It's just not possible.

Really what it boils down to is a local manifestation of the prevailing national sentiment reported on back in April.

...71% of consumers say it is likely that a housing bubble and collapse of prices could occur in the United States within the next year. Twenty-four percent say such a housing bubble is not likely. In contrast, a much smaller number of consumers, 32%, expect the collapse of a housing bubble within their own area in the next year, and 65% say it is not likely.

You'd like to think that the people that bring us our news would be more objective than the obviously fickle American public, or that they would at least set their biases aside and just report the facts, but clearly that just isn't the case.

(Martin Crutsinger, Associated Press, 08.10.2006)
(additions by: Aubrey Cohen, Seattle P-I)

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Two More July Anti-Bubble Reports

According to pretty much all the local news outlets, the story of the real estate market in July is basically "things are slowing, but." We've covered the major papers, but I wouldn't want to leave out the King County Journal or the Everett Herald, who both got a piece of the "keep the market afloat" pie. From the Journal:

Home sales activity in King County is slowing compared to last year's blistering pace. But don't bother waiting for prices to plunge, similar to what happened to tech stocks when the late '90s dot-com bubble burst.

While the number of homes and condos sold in King County last month is down 12 percent from a year ago, "that doesn't mean we're in a bust market by any stretch of the imagination," said Glenn Crellin, executive director of the Washington Center for Real Estate Research at Washington State University.

Crellin and other local housing market observers believe home prices in King County will keep climbing, albeit slower than the past couple of years.
...
Crellin said 2006 is shaping up to be another strong year for home sales in King County, even though it's off the record pace of 2005 and 2004, which may have created unrealistic expectations for some.
...
Despite concerns of housing bubbles in some parts of the country, including California, Arizona, Florida, Las Vegas and Washington, D.C., Crellin said King County will not likely see an overall reduction in home prices, although prices of some individual properties may fall.

The Puget Sound region differs from other parts of the country where there is greater cause for concern about housing bubbles because property sales to investors — which can boost prices beyond normal appreciation levels — has not been as great here, Crellin said.

Different, different, different... Seattle is different! Wait, what's the basis for the assertion that we haven't had many investors? Is there any reference to solid statistics to back up that claim? Let's see... no. I can only assume that we're basically taking Crellin's word on that one.

And if you think that anti-bubble chant was shrill, just wait until you feast your eyes on the gem from the Herald:

Home sales in Snohomish and Island counties dropped in July, while the number of homes on the market increased.

The law of supply and demand and even common sense would tell you that means the area's soaring home prices finally have started to fall.

But common sense is wrong.

Median home prices in Snohomish and Island counties rose 18 percent and 19.5 percent, respectively, during the past year. And they'll likely continue to go up for a while.

In addition, analysts said, there's little chance here of the sort of bursting housing bubble that has pushed down home values dramatically in other parts of the country.
...
[Windermere broker Vern] Holden said he expects homes to continue to appreciate in this area.

"I don't believe we'll see a bubble," he said. "We have a limited amount of product on limited land in a desirable area with a strong economy. We are a port community, we sit on a north-south corridor. We have manufacturing, we have technology and all sorts of amenities for people. We're lucky. We're doggone lucky."

Phew! Oh man, we are lucky. No other place in the entire country is desirable, has a strong economy, and amenities! Let's hear it for the super special Puget Sound and the death of common sense! Woo!

(Clayton Park, King County Journal, 08.08.2006)
(Mike Benbow, Everett Herald, 08.08.2006)

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Greed at all costs

There is nothing more vile, obscene, unethical and disgusting than predatory lending to the elderly by loan officers with absolutely no moral compass.

There is nothing more that I can add to this post.

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Realtors & Government Team Up To Look Good

As effective as government is at addressing most issues, it only makes sense that once the real estate market finally starts to slow down, that's when they decide it's a good time to try to do something about unaffordable housing.

Gov. Chris Gregoire and top legislative leaders on Tuesday authorized a study of ways to promote affordable housing in Washington.

The governor, House Speaker Frank Chopp, D-Seattle, and Senate Majority Leader Lisa Brown, D-Spokane, asked the state Affordable Housing Advisory Board to convene a bipartisan group to recommend legislation for the 2007 session.

"In some communities, even middle-income working families are finding it difficult to find affordable homes," the leaders said in a joint letter to the Washington Realtors, which requested the task force.

"A balanced approach is necessary to develop an effective response to this growing social and economic problem."

The Realtors said recently that housing affordability has fallen to the lowest point in 12 years*, with median home prices in some Puget Sound communities topping $500,000. Statewide, home prices increased 19 percent in the past year, the group said.

So let me see if I have the Realtor™ logic/strategy straight... 20% year on year gains are a good great thing as long as the population continues to willingly jump into the market feet first. 6% x (expensive houses) x (loads of buyers) = Gold Rush. If inventory begins to build and sales slow, first try to deny it, explain it away, and keep everyone convinced that everything is golden with slogans like "Home Prices Never Go Down!©" and "Get On The Equity Ladder!©" However, eventually when your tactics start to fail and the sales slowdown becomes undeniable, you realize that 6% x (extremely expensive houses) x (very few buyers) = Trade In The BMW For A Saturn. So, now it's time to run to the government, claiming that you care deeply about how unaffordable housing has become, when really you desperately hope that prices stay high and the trickle of buyers turns back into a raging river.

That might be a bit abstract, but I think it's a fairly accurate portrayal. What do you think? The whole thing seems like an exercise in futility to me though, because it's not as if the government can somehow force housing to become more affordable—and even if they could, I highly doubt that they would since it would mean a dramatic reduction in the "value" of homes that people suicide-financed their way into in the last few years.

Basically what you have here is the Realtors trying to look good by appearing to care about "affordable housing" (when really all they want is more buyers), and the government trying to look good by appearing to "do something" (when they are really unable to and wouldn't even if they could).

*Fun fact: Housing in Seattle was not less affordable 12 years ago than it is today. Rather, the WCRER's data on affordability only goes back 12 years. A more accurate statement would have been "...housing affordability has fallen to the lowest point in the 12 year span that such data has been collected."

(Associated Press, Seattle P-I , 08.08.2006)

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Even Inman Acknowledges Seattle Slowdown

You know the signs of a slowdown in Seattle must be reaching critical mass when even Inman News is unable to ignore it. (Article becomes subscription-only after today.)

Home sales in western Washington fell for the fifth straight month in July, as year-over-year prices continued their impressive double-digit growth, according to the latest report from the Northwest Multiple Listing Service.

Brokers reported 8,496 sales last month, down 15 percent from a year earlier when 9,999 sales were recorded, according to MLS statistics. Realtors report that the consistently rising inventory has been a major factor in the sales slowdown.

Area-wide there are about 9,000 more listings now than at this time a year ago, NWMLS reported.
...
Although both prices and inventory are up compared to a year ago, J. Lennox Scott, chairman and CEO of John L. Scott Real Estate, emphasized the importance of keeping those figures in perspective.

"One year ago, King County (Seattle) had only 1.7 months supply of housing inventory available; today we have approximately 2.3 months of available inventory," Scott said. "While this represents an increase, we are still well below the national average of five to six months. This is especially true in the markets close to the job centers where competition and demand for homes are still strong, causing prices to continue to appreciate at a steady pace."

D'Ann Jackson, president of the Seattle-King County Association of Realtors and the broker at John L. Scott's Mercer Island office, expects the market will continue to level out. Commenting on the slower sales, she said, "I think buyers who entered the market a little later this spring either bought already or got frustrated with the lack of inventory and multiple offers." Move-up buyers are having difficulty finding the right properties, she observed, noting some are spending more to get "at best something comparable," and others may be waiting until after vacation to resume their search.

Of course, they still managed to slip in a few of the usual qualifiers. I love how they try to explain fewer sales than a year ago by saying that buyers are "frustrated with the lack of inventory," which happens to be significantly higher than it was last year. Also, I wonder if Mr. Scott will ever get tired of the "strong demand around the job centers" line that he's been using rather frequently since May. I know the news outlets won't get tired of quoting it.

Anyway, nobody worry. Our inventory is still "well below the national average," and we're just "leveling out." Sales will pick back up when buyers get back from vacation, or recover from the heatwave... or... something.

(Inman News, 08.08.2006)

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A Foot In The Door Of "Out Of Control" Prices

The P-I's July real estate report is amusing enough that I thought it deserved its own post. Apparently they got the "focus on condos" memo a week late. Plus, Kathy Mulady didn't have the same cleanup work to do as Ms. Rhodes. Anyway, here's a newsflash for you: condos are slightly cheaper than single family homes. You too can be a big-name real estate reporter. Just start with that amazing truth, then pump it, hype it, and transform it into yet another "real estate in Seattle is teh rox0rs" article! Ready... go!

Bob Hyde and his wife searched for a house they could afford in Seattle off and on for two years before they decided that maybe a condominium was the best way to break into the housing market in Seattle.

"Ideally, we wanted a single-family house, but we are priced out of a house in town," said Hyde, 31. "Finally we decided that this was the time to buy if we were going to. Prices are escalating out of control, and we thought we'd better get into someplace and start building equity."

That place is a 600- square-foot condominium on Capitol Hill in a fully renovated 1910 building. With one bedroom and one bath, Hyde said he already knows it will be too small once they have children. By then, he said, he hopes they will have built up enough equity to buy a house.

Many first-time home buyers in Seattle and King County are looking at condominiums as a way of getting their foot in the door of the real estate market, and plan to trade up to a house later. With condo prices increasing faster than single-family homes in King County, it could be a good plan.
...
Hyde said they paid $271,000 for their condo when they bought it in April.

He said they couldn't envision living in any of the houses they saw for under $300,000.

"We looked at a lot of dumps for around that price," he said.

In addition to their mortgage, the Hydes pay a $300 monthly association fee, and could face extra assessments if major repairs are suddenly required for the building.

Hyde said he's optimistic that it's a good investment that will help them build the equity they need to buy a house in a few years.
...
Developers are responding to the needs of first-time buyers, with more moderately priced condos located closer to jobs.

"We recognize that there are a lot of higher-end high-rises and saw that the market might become saturated," said Doug Daley, president and chief executive officer of Harbor Properties.
...
If condo buyers live close to work, they might be able to get by without a car and put that money toward their housing, said Daley.

Wow. After reading that, who wouldn't do whatever it takes to hitch a ride on the Great Seattle Equity Railroad? Drop the car, take out crazy financing, live in half the space for twice the price... just get in, no matter what.

(Kathy Mulady, Seattle P-I, 08.08.2006)

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Real Estate Honesty Spotted In Seattle Times

As is the custom each month when the MLS statistics are released, the Seattle Times yesterday published a short "foot in the door" article briefly discussing the numbers, followed today by a full-length feature that takes a certain "angle" on the "story." What's interesting to me is that the author of yesterday's blurb was not a name I recognized (Bibeka Shrestha?), and what she wrote was shockingly non-booster-ish. Even the headline was frank and to the point: King County home prices barely budge in July; sales down.

Home prices are still rising in King County, but not by much. The median sales price of a single-family home in King County in July was $435,000, up only $50 from June.
...
The number of homes for sale in the area generally rose in July, as the number of sales declined. Pending home sales fell 11 percent in King County, 15 percent in Snohomish County and 16 percent in Pierce County. The number of homes on the market rose 53 percent from last July in Kitsap, while Pierce saw a 52 percent increase in the same category.

"Home are taking a bit longer to sell," said Michael Tenore, area director for ZIPRealty.

Of course, when the "themed" article came out today, Ms. Rhodes got in on the action, and made sure to balance out Bibeka's reality check with a heaping dose of unbridled optimism and calming reassurance.

Home sellers spoiled by three years of record or near-record sales may have to lower their expectations.

If the Puget Sound area's July home-sales numbers, released yesterday by the Northwest Multiple Listing Service (MLS), are any indication, homes might sit on the market longer.

But the slowdown was just a move toward normal levels, not a sign that any bubble might soon burst, said Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University.

"Some consumers have become accustomed to homes selling in 60 hours rather than 60 days," Crellin said. "We have to remember that the year-ago market was operating at record levels."
...
July traditionally is a slower sales month, and last month's heat wave likely hurt sales, the MLS said. Vacations — of buyers, sellers and agents — and uncertainty about interest rates also affected the numbers.

But the region continues to enjoy a relatively strong market when compared with the rest of the country.

"You can see the national trend is happening here to a lesser degree," Tenore said.

Washington state has always been a little late to the party, Crellin said. While housing markets took off in other parts of the country, the state waited to recover from a recession. Now, as other markets have cooled, ours remains strong. And we're not likely to see a huge downward trend.

"We're just going to return to more normal sales expectations," Crellin said.

Wow. I guess this month's theme is: "Everything is fine—seriously. Seattle home prices are invincible." I'll be surprised if I see Bibeka Shrestha's name under another real estate story in the Seattle Times.

Everything is fine. Nothing is ruined.

(Bibeka Shrestha, Seattle Times, 08.07.2006)
(Bibeka Shrestha & Elizabeth Rhodes, Seattle Times, 08.08.2006)

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Area Foreclosures On The Rise

Even though our area doesn't have as high of a foreclosure rate as you might expect, the toxic loans and suicide financing are still having somewhat of an effect...

In Seattle's hot real estate market a growing number of people are losing their homes in foreclosure.

For most people losing their homes, there are several investors waiting to snap them up.

In Washington state the foreclosure rate is up nearly 30 percent over last year, and more than 1,000 homeowners have been going through foreclosure this past year.
...
Why are more people losing their homes?

Experts say interest only and adjustable rate loans are enticing buyers into trouble.

"So they can get into their dream house when maybe they should have waited a few years when their income went up and not taken these risks," said lender representative Karen Gibbon.

In other news, experts say that when an egg is dropped on the sidewalk, it is likely that it will break. Who can blame those overeager buyers though? I mean, they're just trying to live out The American Dream™, right?

(Linda Brill, KING 5 News, 08.04.2006)

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July: Inventory Up, Sales Down (Yet Again)

Well I waited all weekend for the NWMLS "recap" pdf to be posted, and it's still not up. In the mean time, here are the pertinent numbers for King County (residential only), pulled from the summary sheet, which has been posted.

Active Listings: 6,909 (+ 19.29% YOY)
Pending Sales: 2,665 (- 13.08% YOY)
Median Closed Price: $435,000 (+0.01% M2M, +16.00% YOY)

Nothing too surprising. The trends of the last few months are just continuing—increasing inventory and decreasing sales. The median price pretty much stalled, but it seems to do that pretty much every July. (Last year it was unchanged at $375,000 from June to July.) Generally speaking, inventory tends to start decreasing month to month during the last half of the year, but as you can see, active listings are still increasing at over 6% per month. If the trend continues, I think we will start to see a real slowdown in the median price next spring.

Meanwhile, in Olympia...

Thurston County home sales continue to show signs of slowing as the South Sound housing market crossed into uncharted price territory last month.

For the first time, the average price of a single-family home rose above $300,000 in July, according to Olympic Multiple Listing Service data released Friday.

The average price of a home was 21 percent higher than last year at $301,129, while the median price of a home also was higher at $262,000, up 12 percent compared to July 2005.
...
Regardless of the increase in average and median prices, South Sound real estate professionals say there has been a noticeable shift in the market.

"The ratio of buyers to sellers has drastically flipped from the past," said Chad Roraback, a real estate agent with Abbey Realty in Lacey.

"The buyers haven't left the market; there is just so much more to choose from," he said.

Roraback attributed the surge in median and average home prices to sales of higher-priced homes.

Sales of homes priced at more than $450,000 have doubled since 2005, climbing from 106 to 216 home sales in 2006, an increase of 104 percent.

Roraback also thinks inventory levels are much higher in Thurston County than the Olympic MLS data would indicate because large home builders don't always list every home available.

The number of homes on the market is more in the range of 2,200 to 2,500, he estimated.

"I just think we will be flattening out and take a while to absorb the inventory," he said. "The population growth isn't going to match the number of homes available right now. Builders may have to slow down production."

At 1,928, the total active listings (residential & condo), Thurston County is already over 80% higher than a year ago. If they're really looking at 2,500, that's an over 100% increase. I don't see how that kind of increased inventory can sustain continued price increases. I guess that's why I'm not an economist.

(Rolf Boone, Olympian, 08.05.2006)
(NWMLS, 08.2006)

Update: The recap pdf has been posted. Also, the big Seattle Bubble Spreadsheet has been updated to reflect the July numbers.

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