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Monday, November 06, 2006

Inventory Eases (Very) Slightly In October

The NWMLS has posted October statistics. Although residential (excludes condo) inventory did indeed follow its usual October downward course, the decrease of less than 1% of listings was the smallest since at least 2000 (I don't have reliable inventory statistics further back). The YOY increase in inventory stands at almost 31%—a new record—while the YOY decrease in pending sales eased to 10% (from 20% last month).

The statistic that I find most bizarre is the median price of closed residential sales, which increased $15k (3.5%) from last month. The median price has only increased by more than 3% from September to October one other time since 1993—in 1995.

Anyone out there care to venture a guess as to what the heck is going on? Have home buyers in King County all gone 100% mad? What could possibly have driven prices up another $15,000 in one month?

P.S. - The Seattle Bubble Spreadsheet has been updated.

58 comments:

rentalbliss said...

Mortgage fraud, we are not immune from this phenomenon either. From Bens blog

The Columbus Dispatch from Ohio. “The peculiar but tempting offers sometimes came a year or more after homeowners planted for-sale signs in their front yards. Interested buyers suddenly appeared, proposing to pay hundreds of thousands of dollars more than the asking price for houses in some of central Ohio’s elite neighborhoods.”

“The catch: the sellers must agree to immediately refund the difference between the asking price and the sale price. At least 14 such deals worth more than $11 million have closed since spring, and the offers continue.”

“‘We turned down five of them,’ said Bryan Wing, executive VP of CV Perry Builders. ‘Believe me, in this day and age, we could have used it.’ Others couldn’t resist.”

“A lawyer for the central Ohio chapter of the Building Industry Association warned group members in October to steer clear of such deals. Even sellers could be held liable if deals turn out to be fraudulent, he said, reminding builders of the danger of lawsuits or criminal racketeering charges.”

“‘This has been a really recent phenomenon,’ said David Martin, chief executive of Stewart Title, which refused some of the deals. ‘It’s like a whole new industry has formed overnight.’”

“It’s not unusual to borrow more than the price of a house to make improvements. But most of these houses are new, or nearly new, and the buyers in each case borrowed upward of $250,000 extra with little or no down payment, according to mortgages and deeds filed in Delaware and Franklin counties. Meanwhile, weeks or months later, the houses sat vacant.”

“‘Clearly, in times like this, when there’s a major shift in the market, people try to take advantage of situations,’ said Martin, the title agent. ‘Keep in mind, sellers will do anything. They’re desperate.’”

flopfolder said...

It doesn't have to be anything that dramatic...

It could be a big stall in the first-time buyer (i.e. lower price) homes. The majority of the sales activity for the month taking place at the top end could account for the "large" increase is median price.

If only the MLS reported price per sq. ft. Then we wouldn't have to guess and could simply attribute the increase to mind-controlling space aliens...

meshugy said...

The statistic that I find most bizarre is the median price of closed residential sales, which increased $15k (3.5%) from last month. The median price has only increased by more than 3% from September to October one other time since 1993—in 1995.

That's interesting...I just looked at the pending sales which show about a $5K MOM decrease. But I guess since it's pending, those #s are subject to change. If I remember correctly the pending sales also showed MOM decrease in the Sept report. But now that they are closed, we actually see an increase.

meshugy said...

It could be a big stall in the first-time buyer (i.e. lower price) homes. The majority of the sales activity for the month taking place at the top end could account for the "large" increase is median price.

Hi Flop,

I don't think that's the case. MLS shows that most closed sales were in the $250-$349 range. (2,316 sales)

There were only 277 sales in the $750-$999 range.

See: Closed Sales Report by Price Range and Bedrooms

MisterBubble said...

Stop abusing the statistics, Meshugy.

In order to answer the question (are skewed sales causing an artificial rise in median prices from month-to-month?), you need to compare two histograms. Looking at the histogram from October alone doesn't cut it.

The Tim said...

Meshugy,

The stats in the link you provided are interesting, but don't really go very far toward answering my question or flopfolder's theory.

First off, I'm only interested in "residential," while the link you provided is for "res + condo." I would expect the inclusion of condos to skew the figures toward the lower end.

Second, I agree with MisterBubble, in that it's really only useful if we can see how the disribution is changing (or not changing) from month to month.

MisterBubble said...

Hey...how are you guys getting these summary reports? I can't even view the NWMLS site because it has some inane requirement for Internet Exploder (why someone thinks you need a specific browser to download a PDF file, I'll never understand....)

The Tim said...

I use Firefox, so I don't know what your problem might be. If you can right-click and "save file as..." you can save the report to your computer and then open it in Acrobat Reader.

meshugy said...

If you go back an look through the "Closed Sales Report by Price Range and Bedrooms" over the last year you'll see not much has changed. The vast majority of sales are in the $250-$349 range.

Tim, why don't you make a spread sheet of it all? That would make the trend clearer...

silenttimes said...

>Anyone out there care to venture a guess as to what the heck is going on? Have home buyers in King County all gone 100% mad? What could possibly have driven prices up another $15,000 in one month?
For existing single king, Area 520 median price went up from 900k to 1.6m, no of units was down from 53 to 28.

Still end nos say, closed price YOY is 12.82%, closed sales down 15%.

MisterBubble said...

I can download the linked files using Firefox, but Meshugy keeps coming up with reports, and I have no idea where he's getting them.

Is there an index somewhere that's viewable with a non-IE browser?

The Tim said...

MisterBubble,

There's no public index of these reports. You either have to be a member of the MLS (i.e., a real estate agent) or really good with Google.

I found most of the reports that I grab from there via the latter method.

MisterBubble said...

Thanks, Tim.

Hmmm....I find it very interesting that Meshugy is a musician who is so brilliant with google that he can pull up years of obscure NWMLS reports almost on demand.

Terry said...

".....The majority of the sales activity for the month taking place at the top end could account for the "large" increase is median price."

As flopfolder mentioned in his post quoted above, an increase in median prices could be a result of the top end of the market being more active than the lower end of the market.

As an example, about a month ago the Kitsap Sun ran an article about real estate in the Kitsap County area. The reporter interviewed a Bainbridge Island Realtor and the Realtor actually said that affluent types from Hawaii were buying up the top end investment properties while sales at the low end were slowing. That kind of sales activity would definitely skew sales statistics upward, but it does not mean that the overall market is appreciating.

Any change in the data mix can cause a change in the average / median and not necessarily be indicative of the overall market. Average / median sales statistics can be misleading.

Wanderer said...

Grasping at straws. I don't have time to post much... calling REA now. It turns out they aren't making any more land. Who knew?

PugetHouse said...

flopfolder was right
terry was right;

Inventory exerts price pressure in the immediate future, but doesn't reveal anything about recent inflation or appreciation. Nor does median price. We want median sq ft price.

I looked at Oct. v. Sept. closed sales for King. Square foot price had increased around 2%. But closed sales are less current than pending. So far I can't find a way to search all pending sales for a full month.

Median price does reflect the affordability of the market. If the median is creeping toward the average, we can sort-of infer that the normal people are getting increasingly priced out. Such was not the case in Oct. The med & avg prices in pending sales (all areas) returned essentially to June levels. Avg went up from Sept, indicating a return of higher-end activity.

I know. That's MOM, but all can follow up on '05 via my previous post on the open thread.

Enough topics for one post.

dalas said...

Another stat to point out, total new listing YOY on both monthly and YTD are lower this year than last. More sellers panicking to sell, bubble bursting?

Still just speculation.

PugetHouse said...

Speculation among Seattle Bubble contributors?

Tim,
Dalas has a point about new listings. It would be nice to see the curve for those against inventory and pending sales.

MisterBubble said...

Uh...am I the only one who is now getting the August numbers when I click on the "October statistics" link?

I think the NWMLS is monkeying around with the files, Tim.

Ardell DellaLoggia said...

1) Someone in Seatac entered a sale in October of $244,950 as $24,495,000

2) Number of sales in Oct. vs. Sept. over a million was virtually unchanged while the under $400,000 sales decreased by 13%. In between decreased by about 5%.

So few sales, but more with higher sale prices than the previous month.

MisterBubble said...

Dalas has a point about new listings. It would be nice to see the curve for those against inventory and pending sales.

Yes, dalas has a point. It's just not the point that he thinks he's making.

It is perfectly reasonable to expect that new listings would decline -- it's nearly winter, after all. Few people want to sell their homes during the holiday season. Fewer want to begin the process in October.

But dalas goes too far -- he is trying to suggest that this means that there are no "panicking" sellers, and therefore, no bubble. Neither conclusion follows from the evidence. Aside from the fact that he is mischaracterizing the discussion (no one has mentioned "panic" except for dalas), inventory is up fairly dramatically, indicating that a larger number of people are trying to sell their homes in the winter months -- an unusual phenomenon. These sellers could very well be worried about their propects. Likewise, rising inventory and slowing sales are both strong indicators that the market is cooling.

In other words: nothing new to see here. The world continues to rotate on its axis, the sun continues to rise in the east, and dalas continues to troll.

PugetHouse said...

dalas & mrbubble both correctly cite the facts. New listings are down YOY, but up MOM. The latter seems quite unusual. I buy most of mrbubble's analysis, noting that:

... rising inventory and slowing sales are both strong indicators that the market is cooling.

is the correct inverse of the present case. Further, I decline any implication of dalas' trolliness or non-trolliness.

Ardell,
I infer that you're citing closed sales, which were lower in Oct. than Sept. Citing those without mention of pending sales is confusing at this point; pending sales are back up in Oct. The discrepancy is due to time lag.

PugetHouse said...

Tim,
Any chance of getting that curve of new listings on the chart?

wansuiclay said...

I can give some observations and possible explanation for the 'price increase of sold houses'. I've been house hunting (my wifes idea, not mine) pretty heavy for the past 3 months. I see at least 2 houses a day and have put 4 offers together in that time. What ive noticed is the following:

Nice properties, with upgrades, well maintained, and are not 'flippers' are relatively low percentage of whats out there, and those are still selling quickly in the first 5 days. Couple of specific examples-I missed on a nice duplex in Sammamish which had everything upgraded and was amazing it sold for the asking price of 423K in 2 days. The duplex across the street (exactly the same) but with zero upgrades was 45+days and i think never sold. Two days ago, a nice house in Klahani was recently reduced from 540, to 520, to 499K then it came into my range and i was one of 3 offers in the first days. It had been well taken care of, with nice upgrades, and was last sold in 2000 (ie not a flipper).

Probably 80% of the stuff out there is overpriced junk and not moving at all. Owners of these junky/marginal properties are needing to reduce their price by about 10-15% to sell it. So the market IS ADJUSTING by about 15% TODAY, but only on those junky/marginal properties. On the other hand, the 20% or so of the nicer stuff its pretty much business as usual, and selling fast at list price with multiple offers. Basically what im seeing today is "no upgrades? no sale".

MisterBubble said...

New listings are down YOY, but up MOM. The latter seems quite unusual.

Don't forget active listings! They're up dramatically YOY.

Also, I'm not sure I follow your logic regarding the "inverse of the present case." I think it's absolutely clear that the market is cooling.

wansuiclay said...

Yes, active listings are increasing absolutely, one can see this very clear in the field without having to see it on paper.

The stuff that is piling up however is the marginally acceptable, less desirable, over priced properties.

The increase in listings is a function of seller denial.

trackbike said...

If the facts don't support your theory, just toss out the facts!

PugetHouse said...

I think it's absolutely clear that the market is cooling.

The 2006 market has been consistently cooler than the 2005 market, i.e. cooled YOY.

Oct. pending sales & volume were unexpectedly up MOM, part of the strange direction shift that prompted this thread.

Cooling would only apply if you lump Oct. in with the rest of the year. You seem to be the only one doing that.

dalas said...

to me, first sign of bubble bursting is rise in new listing...

I'll just ignore the comment of the guy who doesn't understand what YOY means and attribute the fact as seasonal.

as of October, I still don't see any sign of bubble in KC on paper.

Kaleetan said...

"to me, first sign of bubble bursting is rise in new listing..."

To me the first sign of a bubble bursting is a sharp rise in Foreclosures...something no-one ever seems to mention.

MisterBubble said...

"Cooling would only apply if you lump Oct. in with the rest of the year. You seem to be the only one doing that."

I don't see your point.

Look at the graph attached to this post. The YOY increase in inventory has been increasing linearly since January. That's a cooling market -- inventory is accumulating at a faster YOY pace with each passing month.

Grivetti said...

My own personal barometer to how the Seattle housing market is changing is by the increase in Seattel RE cheerleaders that have joined the bubble blog here.

A year ago or so, it was the arch-bears ruling the roost, no one seemed that interested because no one had the notion that 'googling', SEATTLE and HOUSING BUBBLE, would give you any hits...

Now its a year on, and it seems like the more voices that argue there isn't a Seattle bubble, merely lend credence to the fact that there IS one....

If I started a blog, "Ranier to blow within 5 years", and posted geogological facts, my guess is I'd be ignored, why? because it seems far fetched... given a few earthquakes here and there, and I bet I'd start getting megahits.

trackbike said...

A year ago or so, it was the arch-bears ruling the roost

Yep, and a year or so ago, the bears were saying that in a year's time, the bubble will have burst and home prices will have plummeted and so on.

Just sayin'...

dalas said...

track, I said the same thing. funny how one of the supporters of this forum said that bubble existed as early as 2003.

somebody set a timeline on this thing? $100 bet that there won't be sure sign of bubble by next April?

dalas said...

btw, my comment was for you "mr.bubble".

It is perfectly reasonable to expect that new listings would decline -- it's nearly winter, after all. Few people want to sell their homes during the holiday season. Fewer want to begin the process in October.

perhaps you should learn what YOY means before attributing factors to seasonal changes.

dalas said...

as for Option ARM, perhaps you guys should look up World Savings and its old holding company. World Savings only does option arms, and they have been one of the most impressive lenders on the market in the past.

kaleetan, if your buddy had an option arm back in 2001 (because most option arms reset in 5 years), and he had not refinanced his house. I guarantee you he's not worrying about his "negam" and certainly he isn't worrying about his mortgage payment. he rode through the index jump, why would he worry now?

can somebody scream "ching ching" for your friend?

Kaleetan said...
This comment has been removed by a blog administrator.
Kaleetan said...

"can somebody scream "ching ching" for your friend? "

I would have to disagree ... he has tapped out all his equity. Plus he has taken out a 40K HELOC which i suspect has been keeping him afloat.

I am expecting him to foreclose but that is his own fault.

He got greedy.

meshugy said...

Yes, active listings are increasing absolutely, one can see this very clear in the field without having to see it on paper.

Did you look at the Oct MLS report? Inventory is down MOM....and continuing to plummet.

MisterBubble said...

Dalas said:

"Another stat to point out, total new listing YOY on both monthly and YTD are lower this year than last."

Ahem. From the first page of the October report -- new residential listings (total / KC only):

10/2005 - 9,724 / 3,364
10/2006 - 10,065 / 3,373

New residential listings, year-to-date (total / KC only):

10/2005 - 103,453 / 36,804
10/2006 - 108,416 / 35,682

And just to drive home the point, total active listings (total / KC only):

10/2005 - 21,652 / 6,014
10/2006 - 31,739 / 7,865

As I said, it is perfectly reasonable to expect that new listings would decline. Meshugy (among others), has made this argument extensively. Instead, active listings have increased, and new listings have increased or held steady.

I suppose I may not know your definition of "YOY," dalas, but I know how to read a table.

MisterBubble said...

Meshugism:

"Did you look at the Oct MLS report? Inventory is down MOM....and continuing to plummet." (emphasis mine)

Meshugy, I'm impressed. Most people don't know how to determine the slope of a line from a single data point!

flopfolder said...

Well, this thread certainly took off. Glad to see that Mr. Bubble posted the facts from the MLS.

Now, on to the commentary, but first a note:

1) All my comments referring to numbers will refer to King Co residential only.

OK.

FACT: As of Oct, King Co. has seen a 6.17% run-up in housing prices.

OPINION: This is quite the cooling from recent appreciation rates and is indicative of a slow-down. If appreciation continues to fall into the following spring (possibly turning into depreciation), we will clearly be able to point to last summer as the top.

FACT: During this same time frame, total time on the market (69 days) and active listings (7865) have increased in lock step.

OPINION: Another indication of a cooling market. Longer time on market and increased inventory means that we are getting closer and closer to oversupply. Traditionally oversupply in housing markets is reached when inventory is 6 or more times greater than monthly demand (i.e. sales).

FACT: Pending sales is for Oct is 2440. Thus, King Co has 3.22 months of supply at the current sales pace.

OPINION: Supply does not seem to be a major drag on the market at this point in time. Months of supply has increased from some all time lows seen a year or two ago, but has a ways to go before it becomes problematic. One should note, however, that months of supply can change dramatically without a large increase in inventory. All that has to happen is for sales to fall of a cliff. This is exactly what has occurred in many markets in Florida and California where months of supply has gone from 3-4 to 24-36 in short order. I am not saying that is exactly what will happen in Seattle, just that it can happen.


So, the market does seem to be a cooler place than one year ago today. Next spring should provide a real test to the market and give a lot of insight into where it is headed over the next year or two.

I encourage everyone to check out the Seattle Bubble spreadsheet. There is a ton of data (and no commentary) there. One can use this raw data to formulate their own opinions.

Kaleetan said...

"we will clearly be able to point to last summer as the top"

It might be a peak among valleys, but last summer will not be the top. In 10-20 years median prices will be in the 500-600k range, if not sooner.

flopfolder said...

"It might be a peak among valleys, but last summer will not be the top. In 10-20 years median prices will be in the 500-600k range, if not sooner."

If you want to split hairs, fine. The Dow is well above market highs set in 1929. I'm sure if you gave a similar retort to investors in 1930 or 1931, they would not be amused.

Like you said, it is all a matter of timeframe. The price of homes in 20 years is not going to help someone that purchased a home last year and has to sell at a loss in the next year or so.

plymster said...

My own personal barometer to how the Seattle housing market is changing is by the increase in Seattel RE cheerleaders that have joined the bubble blog here.
-grivetti


I agree, but for different reasons. More posts by RE cheerleaders (ie: loan originators, speculators, Realtors, etc.) means that these people have more time on their hands to troll the blogs. This means that they're not out their conning buyers out of money they don't have yet.

People are wising up and staying away from the market. You can smell the rancor of desperation from the NAR ad in the New York Times. You can see the desperation in the posts here, where the trolls start talking about MOM comparisons, when YOY has been their watchword since day one.

Keep posting here, trolls. It makes me feel better that you're off the streets.

dalas said...

let me spell this out for you "mr. bubble", YOY means we're comparing the same month of this year to the previous year. explain to me how the slowdown this October is more than last October. Is it the El Nino seasonal change that you are referring to?

kaleetan, now that's a different story. as for rise in foreclosure being the first sign? rise in new listing will be ahead of that, as people will try to dump their house first.

meshugy said...

Meshugy, I'm impressed. Most people don't know how to determine the slope of a line from a single data point!

HI Bubble...you can watch the inventory plummet daily on zip realty. All the gains of Oct are now gone....

You can also see the decline in inventory here:

HousingTracker.net

Matthew said...

Shug,

Repeat after me:

YOY
YOY
YOY
YOY

meshugy said...

Just looking over some of the Seattle neighborhoods. Some absolutely huge gains in price last month.

Ballard (705)

Sep res Median:$450,000
Oct res Median:$529,950

Queen Anne/Magnolia (700)

Sep res Median:$588,500
Oct res Median:$725,000

Laurelhurst (710)

Sep res Median:$480,000
Oct res Median:$499,950

Bellevue (530)

Sep res Median:$546,950
Oct res Median:$599,950

Nearly every area experienced big gains....I think it's pretty clear that the Seattle market is still pretty hot. I don't know how else you could explain such huge MOM appreciation.

meshugy said...

I should also mention that Res sales are also up YOY in most of these areas....more sales then 2005, amazing.

Ballard (705)

Oct 2006 Sales: 291
Oct 2005 Sales: 271

Queen Anne/Magnolia (700)

Oct 2006 Sales: 94
Oct 2005 Sales: 81

Laurelhurst (710)

Oct 2006 Sales: 173
Oct 2005 Sales: 176

Bellevue (530)

Oct 2006 Sales: 80
Oct 2005 Sales: 92

Matthew said...

Meshugy,

I think you missed your calling as a political spin consultant. I like how you cherry pick 4 areas of King County. Lets talk YOY for the entire county, otherwise you are wasting our time. Anyone can cherry pick the 4 best or worst areas to try and prove a point.

Lake Hills Renter said...

Either I'm reading his data wrong, or only two of his cherrypicked data acually support his premise.

meshugy said...

Hi Matt...

the res/con median for all of Seattle shot up to 420K which back to the peak of July. The median res/condo for all of King County shot up to $391K which is just shy of the August peak of $392K. I think that says it all...the market is still very competitive and people are continuing to pay more and inventory is dropping like a rock. Price declines would be highly unlikely in this scenario...there's just too many buyers fighting over too few houses.

plymster said...

matthew and lake hills renter,

If you look at the YOY inventory of these places from the Breakouts that the 'shugster posted, I can see how you'd be confused. Res+Condo inventories are:

Queen Anne/Magnolia(700): +41%
Ballard(705): +43%
Laurelhurst(710): +28%
Bellevue(530): +33%

Clearly people can't get out of these crack-addict-strewn, trailer-trash havens fast enough. And with anemic YOY closed sales figures coming in at:

Queen Anne/Magnolia(700): -10%
Ballard(705): -10%
Laurelhurst(710): -19%
Bellevue(530): -20%

...these FBs are having a hard time selling. When you get miniscule sampling like this, no wonder the median prices are out of whack.

Personally, I think it's the poor floor plans, vacationing RE agents, lack of jobs, and vanishing population that is driving down the desirability of these 'hoods.

But don't be distracted by the facts and data. Meshugy's gotta sell some homes, so cut him some slack.

meshugy said...

Hi Plym...

YOY Increased inventory and lower sales figures only tell us that there is less activity then last year (which was a record breaking year). The market has clearly gone from overdrive to just very active. Historically this is still a very, very good year for Real Estate in Seattle.

So you'll see some negative #s for sales and some increased YOY inventory. But those changes are clearly not enough to send the market into a tailspin. We're still seeing climbing prices and very strong YOY appreciation. We'd need double the inventory and an over 50% drop in sales to see prices come down. We're not even close to that...in fact, inventory is dropping so it's very unlikely we'll see a big drop.

MisterBubble said...

"the res/con median for all of Seattle shot up to 420K which back to the peak of July."

Is this in the report, or is it another Magic Meshugy Number, derived from questionable unknown sources?

"The median res/condo for all of King County shot up to $391K which is just shy of the August peak of $392K. I think that says it all...the market is still very competitive and people are continuing to pay more"

...for now. Inventory is rising, sales rates are falling, and days-on-market is increasing. Yes, prices are also generally increasing, but irrational markets cannot sustain themselves forever.

Also, I would like to take this opportunity to point out that median new condominium sales prices actually dropped YOY in October in King County, despite a significant increase in the number of sales. Can you say "leading indicator", boys and girls? I sure can.

"...inventory is dropping like a rock."

Maybe in Meshugy-world, where perspective is apparently limited to the previous month. In the reality-based universe, nearly all of the inventory numbers have increased, YOY. New listings are up, active listings are way up, and sales (active and pending) are down.

At this point, you have to be shoving your head in the sand not to notice the slowdown.

mydquin said...

Regarding the price increase...

I don't think you can ignore the influence of interest rates. Remember, the national economic data showed a slow down. This caused interest rates to decline even though the fed rate didn't change... presumably an anticipation effect.

I noticed a significant drop in the Windermere inventory the week after the data came out and rates dropped. (from about 424K to about 418K) Of course the month started significantly lower than that.

meshugy said...

In the reality-based universe, nearly all of the inventory numbers have increased, YOY. New listings are up, active listings are way up, and sales (active and pending) are down.

Hi Bubbles....

These stats are only relative to last year...we defintly have a slower market then last year. But that's not saying much, since last year was the best on record.

Our inventory stands at 7865.

That's higher then last year, but below most other years:

Oct 2003: 8127
Oct 2002: 8966
Oct 2001: 8302

As you can see, we have historically low inventory right now. We need to see a much bigger build up for a crash. But, as it always does this time of year, inventory is shrinking. Once Thanksgiving hits there will be hardly anything left.