Seattle "Losing Some Steam"
Hissssssss...
Thanks to the reader / college mate that sent this in. Seattle got a mention in yesterday's Wall Street Journal story: Home Prices Keep Sliding; Buyers Sit Tight.
The air continues to seep out of the U.S. housing market, according to the latest data, and some economists are warning that prices will keep declining through much of 2007.That seems to be the line I've been hearing a lot around here lately. We're just "returning to a normal market." That is certainly possible, but with the increasing rates of declining YOY sales and building YOY inventory, I'm not quite ready to accept that assertion.
The National Association of Realtors yesterday reported the biggest drop in home prices since the trade group began compiling price data in 1968. Specifically, the association said the median price for home sales completed in September was $220,000, down 2.2% from a year earlier. That matched a revised 2.2% decline in August. In addition to being the largest price drops in at least 38 years, the back-to-back declines are the first time median home prices have fallen since 1995.
...
Seattle has been one of the strongest markets in recent months but is showing signs of losing some steam as inventories of unsold homes rise. In 17 counties of western and central Washington State covered by the Northwest Multiple Listing Service, the median price in September was up 9.4% from a year earlier, the first single-digit increase in two years.
Mike Skahen, owner of real estate brokerage Lake & Co. in Seattle, says inventory is still lean in good neighborhoods near the area's biggest employers. But the overall market is slowing to a more normal pace as "buyers are feeling they can be more selective."
(James R. Hagerty, Wall Street Journal, 10.26.2006)
39 comments:
Hmmmm...
If Seattle is showing signs of a top, and California was exhibiting the same things 9-12 months ago, this would be right on cue, and Synthetik's premise of Seattle being 9 months behind would ring true.
2Q-07 should be very interesting. That is when we are going to know if 4Q-06 was the bottom. Right now, all the mouthpieces in the REIC are saying that next spring will save us.
The watchword for 2Q-07?
I-N-V-E-N-T-O-R-Y
I expect a sea of For Sale signs.
and according to housingtracker, inventory is still climbing!
In 2Q-06 there were waves of Microsoft transplants that surprised everyone by paying premiums on the Eastside. The buzz last year in REIC was also a return to "normal." I'm not sure what that means.
Yeah, 2Q-06 will be interesting. It's difficult to rationalize a price collapse with our population growth. PNW IS historically steadier than CA. Hopefully next Spring will be flatter than this Spring was. Maybe slightly negative YOY inflation.
It is interesting to note that according to the Northwest Multiple Listing Service, closed sales prices in Kitsap County for Sept 2006 were down as compared to sales prices for Sept 2005. This is a reversal of a long term trend. I believe someone on this blog predicted Thurston or Kitsap County would lead the downward trend in prices in the Pacific Northwest.
PugetHouse, did you seriously just try to argue that population growth will keep prices afloat?
Terry,
It was me, in this post. Of course, a day or two later I realized that it had already happened.
pugethouse,
I think you should read some of this blogs archives... It may dispel some of the common myths that those in the RE industry so commonly hold to be gospel.
IE: Seattle is some BOOMING major metro area when in fact the population growth here has remained almost stagnant.
Pugethouse, that makes sense to me. If MS hired on a slew of experienced people over the past year, a new swarm of California (or Boston, or other IT hotspot) Equity Locusts could be a large part of what propped up the Seattle Housing market over the last year.
A couple thousand experienced IT hires (ie: people with multi-million dollar homes to sell in the Bay Area) would explain why prices continued to rise in some areas. And if that's the case, that wad's been spent, now. It might put us in double jeopardy now, though, since some of those homebuyers may be losing their shirts on their old homes in California.
Of course all of this is just hypothetical until we find some data on MS hires, but I think it's a decent working theory.
Incedentally, "negative YOY inflation" might be easily described as "deflation". Deflation of housing prices specifically should probably be referred to as "depreciation". I'm not trying to nitpick; I've just seen conversations devolve quickly in other blogs based on the terminology used.
So if the last "normal" market was 2001, how does current inventory compare to the last "normal" market? Seems you are comparing on a month ot month basis for a few months. Maybe I'm missing something. Don't you have to compare this October to last October? And this October to last "normal" market October inventory? Maybe we are defining the word "normal" differently. Normal is not equal to last year, which was still a seller's market. Normal to be is a "balanced" market, not equal to last year.
I can do stats on a smaller scale, but not on a County scale, as I can only get 250 at once. Would doing one zip code in Seattle and one on Eastside give me any quantifiable results?
Tim,
Now I am disillusioned. I was going to compliment you on the clarity of your crystal ball!
Pugethouse,
I guess the PNW would be more stable than California, if you draw in your historical perspective close enough.
How is it that the Northeast has declining population, but is quite bubbly, yet Texas has rapid population gains, but homes are quite affordable?
david lereah said a few months ago that the US housing market would slow to more normal single-digit growth.
how'd that work out, seattle bull's? maybe there is a price moat around seattle.
The buzz last year in REIC was also a return to "normal." I'm not sure what that means.
Let me help you out.
"return to normal" is REIC-speak for "we have no freaking clue what is happening, but we slap up this euphemism to keep the panic down to a dull roar. All we know is the salad days of 20% y/y appreciation, and bidding wars are over."
"passive security system" = bars on the windows
"vibrant neighborhood" = multi-linguistic ghetto
"peakaboo view" = in the dead of winter, during a 50 knot gale, you may, if conditions are perfect, be able to use a 500 power telescope from the upper windows in the laundry room, and be able to see more than 1/4 mile for half of a second.
"looking for an owner that will give plenty of TLC" = crack house.
"recent thorough renovation" = granite countertops with Made in China cabinets from Home Depot.
"quaint/charming" = smaller than a NYC studio apartment
"professionally decorated" = gay chic.
"blue ribbon schools" = we, along with 99.999999999999% of all sellers, believe our school district is the best in the state.
"exemplary schools" = our graduates can read their diploma
"won't last! HOT! HOT! HOT!" = recently relisted due to lack of activity over the past 6 months.
"professionally landscaped" = Pedro's lawn service.
"natural setting" = house being overrun by vegetation.
"convenient walk to..." = can get to your destination with less than a gallon of gas. The walk refers to the distance to your garage.
"terrestrial view" = no view
"semi-private" = zero-lot-line zoning.
"classic architecture" = 70s style tri-level.
"two mile exercise loop outside the front door"*** = you can run on the county road that goes by your house.
***That last one is absolutely true. We looked at a home on Bainbridge Isl with this write-up. I'm fairly familiar with the neighborhood, and wasn't aware of a PAR course, or bike path. The RE agent said, with a straight face, that she was referring to Agate Pass Road.
I asked why she didn't include the entire Interstate Highway system.
Tim, re. the population argument>building has even surpassed demand by a non-trivial amount I've no reason to question your previous analysis. I just don't think that new housing supply has a predictable influence on prices. Yes, I am arguing that population growth and affluence will keep prices unobtainably high for the median income. I left the affluence argument out earlier for brevity. We have such a conglomeration of export industry here: Nordstroms, Amazon, Eddie Bauer, etc. that median demographics hardly influence housing prices. If the world made sense, Downtown would suffer much more for its poor school districts and transportation problems. Like a few others, I was disappointed to see continued inflation in Oct. I'm LOOKING FOR MY FIRST HOUSE.
appreciation=the increase in value of an assetWe're talking about the overall housing inventory, not specific assets, so I chose words with care. But I can try to avoid terms like "negative inflation".
I'll look up some data on 2001 when I get a chance. Thanks to eleua for the above eloquent exploration of my profession's BS.
Downtown=Seattle proper. I don't mean to play fast and loose with terminology.
I just don't think that new housing supply has a predictable influence on prices.
Why not? One of the big reasons the REIC touted the viability of higher prices was a curious lack of inventory. If prices go up on lower inventory, why wouldn't they go down on higher inventory?
Now, I'm of the opinion that the main reason we had a lack of inventory was due to a short-circuiting of the feedback mechanism in classical economics. We had a bubble, and in a bubble the normal propensity to sell into higher prices is inverted, causing people to hoard. Now that the bubble seems to be unwinding, I expect to see exactly the opposite happen: people selling into weakness. Also, as the prices grew, new construction came on-line at a record clip. Perhaps on the Eastside, you are getting added population, but on the Westsound, we are losing population, while building more houses. Every school district in Kitsap County - except Bainbridge - is losing enrollment, yet prices continue to climb.
Yes, I am arguing that population growth and affluence will keep prices unobtainably high for the median income.
For how long? This works if the entire population gets replaced by higher wage homeowners, and all the Great-Unwashed don't sell, unless it is to move out of the PNW. Absent that, someone will shout "fire" in an overpriced market, and put homes into the affordability range of people who are the buyers. Wages in the PNW are not increasing, and are not high enough to support current prices.
We have such a conglomeration of export industry here: Nordstroms, Amazon, Eddie Bauer, etc. that median demographics hardly influence housing prices.
Traditionally, retail doesn't pay high enough to justify these prices.
If the world made sense, Downtown would suffer much more for its poor school districts and transportation problems.
Don't fret; it will very soon.
Like a few others, I was disappointed to see continued inflation in Oct. I'm LOOKING FOR MY FIRST HOUSE.
I wish you well. If you are patient, and don't blow too much of your income on your airplane, you will be able to buy more than you think.
ughhh.... Things are rough all over, "Brother, can yah spare a Half-caff Frappiatto?"
Housing weakness bashes down GDP
A slumping housing sector helped slow economic growth in the third quarter to its weakest pace in more than three years, the Commerce Department reported Friday.
hmmm... yes.... Well if we could get the darned media to quite reported and the inconsequential things like 'facts', industry shills wouldn't have to write articles like this...
Days Before Halloween, NBC Treats Real Estate Like Dawn of the Dead
Oh, the horror!!
“The good news is that fewer new listings are coming online. A stable sales pace is expected to draw down the number of listings to a supply balance that will support positive price growth within a few months,” the real estate trade group president added.
mmmmhhh... yeahhh... alright dude.
Well, it looks like the media's driving down the real estate market, not fundementals... Bad reporting=agrevatted housing sector=drop in GDP...
Wow, if I were the media outlets reading this, I'd feel like a turned-out hooker, where's the love? These were the people hyping the market for years, and now when the news turns on 'em, nothing?
This goes back to my 'theory', which I don't think is a theory at all.
Housing will lead to recession, recessions hit Seattle harder than the rest of the country, viscious circle = depressed home prices
Sorry folks, there is no 'normal'. Normal's merely an inflection point on a cruve as it passes through the zero point e.g. throw an egg into the air, they'll be a small moment in time, where the egg appears to float in mid-air, defying fundementals of gravity... on a slow enough time scale, one could assume we've decoupled from the affects of gravity themselves...
(sorry, my degrees in physics)
Wages in the PNW are not increasing, and are not high enough to support current prices.
Sadly true. I won't conjecture about how long it will last until there's some clarity about what's propping up prices. Obviously, something has to give. Right now, our negative savings rate absorbs the financial imbalance. There's also that backsliding of real wages and benefits. As long as Americans tolerate these conditions, your observation will be true. Given this situation, local price movement will be determined largely by whether money is moving out of or into PNW. Watch the major employers.
Traditionally, retail doesn't pay high enough to justify these prices.
Verily. However, I was talking about corporate HQ's, not outlet stores. There are also the obvious heavy-hitters in coffee, aircraft, law, insurance, and universities. The biotech startups are worth watching too.
eleua,
May I infer a hypothesis that severe price corrections could start in Kitsap &/or Island and work their way into the Lake Washington basin?
What do you think it would take for devaluation to cross over on the ferries?
May I infer a hypothesis that severe price corrections could start in Kitsap &/or Island and work their way into the Lake Washington basin?
You can do more than infer. That is exactly what will happen. You, sir, are dead-on-balls-accurate on that score. The bigger money will abandon the outlying areas and then move in to the pricier suburbs. The rats are moving to the higher parts of the ship, but the ship is still sinking.
What do you think it would take for devaluation to cross over on the ferries?
Not much. I am amazed that people are moving to Kitsap and commute to Seattle and Bellevue. If you hit the ferries perfectly, you are still looking at a 90 minute commute - ONE WAY! Every dollar you spend on tolls is one dollar that does not support your house.
Californians come here in the summer and take a ferry ride to Bainbridge. They think this will be a superior way to commute, but fail to realize that parking in Bainbridge sucks ass, and if you don't work in downtown Seattle, you are still taking your car.
The romance of ferry living wears off pretty quickly. Now, if I worked directly in Downtown, that's different...How many people can engineer that kind of location for their job? Not many.
Bainbridge is not the home of the truly deluded. That is Kingston and Silverdale. In addition to all the hassles that you encounter when you live on BI, you have to add another 30-40 min (EACH WAY) to your commute.
A nice, new home in Silverdale runs $400K+, and Kingston is one of the most inconveniently located cities in Kitsap.
I don't get it.
Bottom line...people are bidding homes up because they think they are not the 'greatest fool,' or as Synthetik puts it - PEAK IDIOT.
Once the PEAK IDIOT buys his home, it is all downhill. Yes I am forcasting a big, BIG drop in prices, and I stand by that prediction.
The other area that perplexes me is Orting/Graham. You are truly, truly out in the middle of nowhere, the place being overrun with new homes, and the traffic to anywhere is a clutch-grinding, mind-bending, follicle killing, cardiac-arrest inspiring hellish nightmare - on a good day.
Nope, this won't take long to jump the Sound and make its way to Mercer/Medina/Redmond/Kirkland. They will be the last to fall, but they will still fall.
The biotech startups are worth watching too.
Ah, you mean the ones that keep getting bought out.
OOPS! I thought you were the originator of "peak idiot."
Sorry.
OK, which one of you Seattle Bubblonians coined "PEAK IDIOT?"
OK, which one of you Seattle Bubblonians coined "PEAK IDIOT?"
The winner is...
Well, speaking of "peak idiot..."
Just how do you use the search function to find "PEAK IDIOT."
I've spoken of it today, and it has appeared on this blog over the past few days, yet when I use the search, I don't get dinky-doo.
Anyone have a tutorial on "PEAK IDIOT'S GUIDE TO USING BLOGSPOT SEARCH FUNCTION?"
OK,
CRASHCADIA!!!!
You coined PEAK IDIOT!
Thanks,
Now, what term do I use for someone that can't use a basic search function?
Unfortunately, the Blogger search function stinks pretty badly. I found it by searching my Gmail account, since all comments get emailed to me.
Ardell,
I think you are missing something. I'm not comparing on a month-to-month basis. I'm looking at year-to-year figures for the last few months. In the table I was referring to the May '06 numbers are the percent change from May 2005 to May 2006 in Inventory and Sales. Likewise through September.
It's a bit confusing to many people, but what I find quite interesting is the second derivative of the inventory and sales numbers. The first derivative is simply the rate of change—the YOY figures. The second derivative shows the rate of change of the rate of change—a number that has been climbing every month since January for inventory and decreasing (becoming increasingly negative) every month since May for sales.
AKA inventory acceleration.
"peakaboo view" = in the dead of winter, during a 50 knot gale, you may, if conditions are perfect, be able to use a 500 power telescope from the upper windows in the laundry room, and be able to see more than 1/4 mile for half of a second."
That Eleua really cracks me up!
I have seen quite a few views in my day. One of my very best view experiences was in unit 2404 Newmark at 1415 2nd Downtown Seattle. I felt like I was in a Salvador Dali painting when 50 birds flew by and I was looking down at their backs.
Name that view.
"shows like a model" = the owners have vacated the house and are moving on.
"old world charm" = 95 year old woman, painted the house pink prior to WW2.
"good investment potential" = you wouldn't want to live here.
"highly desireable neighborhood" = characterless track home.
"priced for immediate sale" = we hope you don't lowball us.
"good highway access" = freeway noise will rattle the fillings out of your teeth.
"revived in-town location" = chalk outlines have been washed away.
"gourmet kitchen" = kitchen
"country setting" = you need a 4x4 to get from the paved road to the driveway (not recommended for pregnant women)
"peaceful and serene" = UPS won't even deliver here
"shop" = rotted-out 6x8 woodshed
"watch the eagles soar from the comfort of your Bainbridge dream home" = roof needs replacing
"eclectic" = owner's multiple do-it-yourself projects make the place look like Fred Sanford lives here.
"unlimited potential" = tremendous money pit
Eleua, you're having too much fun with this. Especially for a Friday night. :^P
"active community" = neighborhood youth actively recycle (fence) anything they can see in your car, or through your window.
"Japanese garden" = ungroomed bamboo tree and ceramic frog.
"park-like setting" = clearcut
"high quality construction" = at least one person on the job site speaks English. Builder's pending law suits have not yet bankrupted him.
"affordable fixer" = Has been neglected for 50 years, and you are the overambitious sucker that we are looking for.
"seasonal pond" = mosquito breeding ground. Wetland that renders most of the property worthless and will be protected by a phalanx of overeager civil servants. Will be taxed at waterfront rates.
Yes,
Mrs. E is studying for mid-terms, and I had kiddie duty.
This is the exciting life we all dream about when we are in our early 20s.
E
Another great write up was for a house on Bainbridge. It advertised a - and I'm not making this up, I ASSURE YOU -
Goddess Studio.
Yes, I kid you not! In my most polite way, I asked the agent just WTF is a 'goddess studio?'
Apparently, it is a detached, New-Age feminist version of 'The Cave.'
The Cave is where guys go to be guys. They drink beer, watch sports, build model airplanes, but most importantly it is a place where guys go to get away from the unending torrent of requests for their time and money (unless it is a poker game with other guys).
So, this 'goddess studio' was some freaky-deaky woodshed with a wood-burning stove, some art supplies, crystals, shrunken heads and Heaven only knows what else - voodoo dolls of her husband, whatever...
Apparently, the house was for sale because (and if you didn't see this one coming from over the horizon, you are an idiot), they were getting a divorce.
We passed.
Then, we toured a house that had no kitchen. Apparently, someone stole the kitchen. I wasn't up on just how one steals a kitchen on Bainbridge Isl., but apparently it happened. The house was fundamentally flawed, with the house sprawled over the side of a hill, and each bedroom had its own set of stairs. The floorplan looked like Moonbase Alpha from Space 1999, but no kitchen.
They stole the toilets too.
Just how do you fence a stolen crapper? Psst, buddy! Do you want to buy an American Standard, cheap? Step back into this alley and check it out.
Wierd, very wierd...
I've collected all the euphemisms and made a blog entry out of it.
Feel free to add, if you come up with any.
>Sounds like you should create a Bainbridge POS blog.
I've given that serious consideration. Perhaps by spring...
The Marin POS blog is tooooooooo good.
Great chart on Seattle listing prices. Look at the flat line for the last several months and now the down trend for the last few weeks. Info here includes inventory stats heading up. (Note the area is not the same as the gov. MSA.)
That chart sort of reminds me of the part of a roller coaster ride where the 'clicka-clicka-clicka-clicka' ends and there is this serene silence before the screaming begins.
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