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.Here is an updated version of my graph of WCRER's numbers for King County.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.
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.
(WCRER (pdf), 08.2006)
(Associated Press, Everett Herald, 08.21.2006)
Please read the rules before posting a comment.
7 comments:
We got a new headline today: Existing Home Sales Drop in July to Lowest Level Since January 2004.
But why are prices still so high here? When will they really go down in Seattle?
I think that the increase in permits is likely to have little or no effect on the downward phase of pricing. If prices start dropping signficantly, many of the new units will just go unbuilt (especially condos). The remainder (typically the first ones started) will take a while to start selling/complete, so by the time they hit the market they will represent a drop in the bucket relative to what should be high supply levels.
However, if for some reason prices do not drop, then the additional units will mercifully have the effect of at least slowing down the rate of appreciation (or perhaps tipping the balance to a slowdown).
I've been wondering what the opinions were about those building permit issuances. Good to see it seemed "astounding" to you as well.
It really shouldn't be astounding at all--the builders (and the investors that fund them) know that we're in a bubble, and they're all trying to get their goods to market before it pops. That's why there's such a sense of urgency.
If the RE market is going to keep going up, up, up forever, then there's no real reason to hurry up and build right now, as building in 5 years from now will still produce huge rates of return--even higher then those achieved today, assuming that RE prices continue to appreciate faster than the cost of building.
But if the market is going to cool off and prices stabilize or (gasp) fall, then watch out. Builders aren't stupid--they know how to strike while the iron is hot. Only once the hammer bounces off the cold, hard metal will they stop pounding. Chilled steel ahead!
Anyone on this board know about the progress with Cascadia.
I have been trying to gather data on the development and its impact to the area.
For the life of me, I can not imagine going forth with a project of such scale as we entering into a recession. In addition, this will be no ordinary recession. It will most likely be two, long and deep, back to back recessions, with a good quarter pumped in between.
Any information on Crashcadia would be appreciated.
Crashcadia
I'd be interested to see what your affordability graph looks like for the '88-94 bubble/recession. Also, would be interesting to see a similar chart for San Diego, the "canary in the coal mine" for the real estate bubble. Perhaps the affordability index you plot has a long way to go before it reaches SD's levels? Or perhaps we are already there?
do you have a plot like this for Snohomish county?
Driving around Bothell/Mill Creek/Snohomish, things still seem to be booming around here.
I'd be interested to see what your affordability graph looks like for the '88-94 bubble/recession.
Unfortunately, the WCRER data only goes as far back as '94, and I've only been able to locate complete NWMLS data as far back as '00, with incomplete data back to '93. I would love to have data for King County going back at least to the early 80's (if not further), but I just have no idea where such information would be located.
do you have a plot like this for Snohomish county?
I don't, although I may be able to make one. If I get some time this weekend I might look into it.
Post a Comment