There haven't really been many interesting stories out there in the last few days that are Seattle-specific, so I guess now is a good time to post the NAR's Home Price Analysis for Seattle Region (pdf) I haven't bothered posting it yet because it's not really anything new or interesting, but rather the same rah-rah real estate fluff you've come to expect from the NAR. Here are some choice quotes.
Granted, none of these statements are necessarily false, but it's clear that they're being very careful which facts they choose, in order to paint the rosiest picture possible.
- Home prices, though high, are affordable when compared to those in California markets.
- Because of the strong increase in home prices over the past two years, mortgage debt servicing costs have risen significantly. Nonethless, [sic] the debt service cost relative to household income stood at 23% — only a tad higher than the national average of 22%.
- Local job growth has been strong. The three-year job growth of 3.5% easily tops the national pace. Gains have been particularly strong in 2006.
- Job growth attracts additional potential homebuyers to the market and limits the number of "forced home sales" (as was the case in the early 1980s and 1990s). This suggests that any price decline will likely be short lived given the additional buyers ready to enter the market.
Newsflash guys, a slowdown in home sales activity is already under way. But hey, at least we're making a little bit of progress toward the truth. If you recall, a year ago they were saying that price declines would occur "only under extreme unlikely scenarios" such as "mortgage rates rising to 10.5% in combination with 3,000 job losses could lead to a price decline."
- However, the biggest risk is the drastic slowdown in home sales activity that could result from further measurable increases in interest rates. Should the 30-year average fixed rate approach 8% (from its current 6.8%) as a result of too much monetary tightening by the Federal Reserve, home prices in the region could well decline.
What they conveniently fail to mention here is that this is only possible because of the wide variety of risky, "exotic" loans that are now available.
- A more relevant measure [than home prices] for assessing the risk of a home price bubble is the median mortgage servicing cost relative to the median income. This ratio is at near the local historical average. It implies no widespread financial overstretching to purchase a home in the region.
That number sounds really low to me... too unbelievably low. I have a feeling that when they say "of new loans," they're counting 80/20 loan combinations as two individual loans that are neither one for more than 90% of the value of the home that was purchased. How convenient.
- Only 3% of new loans had a loan-to-value ratio of greater than 90%. Therefore, prices would have to decline by more than 10% to have a measurable impact on foreclosure rates.
Oh, and if the "Additional Discussion Points" on page 8 sound familiar, that is because it is the exact same drivel that they included in last year's PDF on page 7.
All in all, what we have here is another disappointing showing from the NAR. If they're going to have any chance of convincing a thinking person of a strong, resilient Seattle housing market, they're going to have to come up with something more than this steaming pile of tired catchphrases and misleading statistics.
(National Association of Realtors®, 07.2006)