April Reporting Roundup

Here's a compilation of what your local press (aka real estate advertisers) had to say about last month's home sales data from the NWMLS. It's depressing to think that these sources are where most people get their news of the market from...

Elizabeth Rhodes, Seattle Times:
King County home prices keep rising, bucking national trend
Buying a home here: You'll pay even more

"Overall, people have been getting worn out paying what in their opinion is an inflated price," Martin said.

Plus there are significantly more properties to choose from compared with a year ago.

Mrs. Rhodes' article is riddled with inaccurate assertions such as a claim that decreasing sales are "explained" by increasing inventory (huh?), and a quote that sales activity is "improving" and "at a faster pace than last year." She also says "Whether April will be the strongest month remains to be seen," when in fact it is already known that March experienced both more sales and larger price increases than April. Take home lesson: When reality isn't as rosey as you'd prefer, just pretend that it is!

Aubrey Cohen, Seattle P-I:
Home sales in city shoot up 14% in April

Anshul and Christine Pandhi were in their second week of seeing what they could get for $500,000 to $700,000 if they moved from Tacoma to Seattle.

"It's expensive," Anshul Pandhi said. "In our price range, the pickings are pretty slim."

John and Sahrah Marcantonio sold their Woodinville house in November and have been renting in Seattle while looking for a house in the city.
...
Sahrah Marcantonio was pessimistic about the market, but didn't care.

"I think it's a bubble, we're at the peak of the bubble, and yet, I want a house now," she said. "It's for the long term."

Aubrey's article was much more even-handed than we've come to expect. I was floored by the quotes he managed to get out of recent home buyers.

Devona Wells, Tacoma News Tribune:
Housing market still shows signs of slowing

The jump in the number of Pierce County houses and condos for sale puts the county at a six-month supply, generally considered the point a market moves from one favoring sellers to one favoring buyers, said Dick Beeson, a Windermere real estate broker and MLS director.

"The news is, pay attention, sellers, you’re not going to have the spring and summer you usually have," he said.

Apparently the market just south of us is a bit harder to spin in a positive light. Of course, that doesn't mean they aren't trying...

...though sales have slowed, [John L. Scott agent David Gala] said Tacoma homes under $400,000 remain hot. Two of his listings priced at $250,000 and $210,000 sold in the last week after multiple offers, Gala said.

But agents say three to six months tends to be the time it takes to sell a home today. As recently as two years ago, homes often sold in a few days.

Mike Benbow, Everett Herald:
Buyers drive up condo sales

While Snohomish County houses are less expensive than in King County, they're still out of reach for many people in the market, especially with the tightening of loan qualifications that has followed the recent increase in home foreclosures.

That has attracted more people to condos and their much lower price range.

Those buyers had better get into any type of home they can possibly afford, because as everyone knows, if they don't buy now, they'll be (you guessed it) priced out FOREVER!

Rolf Boone, The Olympian:
Condos sustain housing market

The pace of new South Sound loan applications has so far been strong this year, said Jeff Devlin, a Wells Fargo Home Mortgage consultant. Devlin said he doesn't sense the "doom and gloom" today that hung over the real estate market a year ago.

Hmm. Year over year pending (res + condo) sales down 15%, listings up 50%. SFH median up 9% vs 23% (April '05-'06). But the market is in better shape today than a year ago. Yeah.

Just for kicks, here are a couple of stories from a little further out in Western Washington than we usually focus on.

Dave Gallagher, Bellingham Herald:
Home sales slowing as supply rises

Evan Caldwell, Longview Daily News:
Region's home sales bucking U.S. trend

(Elizabeth Rhodes, Seattle Times, 05.08.2007)
(Aubrey Cohen, Seattle P-I, 05.08.2007)
(Devona Wells, Tacoma News Tribune, 05.08.2007)
(Mike Benbow, Everett Herald, 05.08.2007)
(Rolf Boone, The Olympian, 05.08.2007)

Vacation Link Roundup

Looks like I didn't miss too much Seattle housing news while I was gone. I'm looking forward to seeing the April numbers next week. Here's a summary of what I noticed while clearing my inbox:

• Seattle, Portland, and Dallas are the only cities of the 20 tracked by the Case-Shiller / S&P Index in which prices are still rising.
• Mr. Cohen discusses the latest Case-Shiller / S&P Index data in an article with more balance than usual. Don't worry though, it still includes the requisite quotes from realtors about "bidding wars" and "soaring prices."
• Foreclosures in the first quarter of 2007 in King County were up 37.6% from Q4 2006, and up 0.7% YOY.
• Ms. Rhodes does her part to pump up the local home salesmen's egos with another installment of add some rah-rah fluff to an AP article.
• Apparently there's a bit of a kerfuffle going on up in Snohomish County over the creeping spread of something that resembles the resulting offspring of an unholy union between condos and SFHs.

I'm also pleased to report that my nefarious scheme of going on vacation appears to have had the desired effect on the forums. Membership swelled by nearly 30%, and posting activity skyrocketed. Here are a few of the more popular and/or interesting threads:

• Boom on the eastside fueled by recent immigrants?
• What are the indicators signaling the end of the boom?
• To buy or not to buy????
• A Home prices versus inventory comparison

Therefore, I believe it is time to say goodbye to the open threads. For the foreseeable future, all user-driven discussion will take place on the forums. Thanks for your participation. I really enjoy reading what everyone comes up with.

Misdirection Master Strikes Again

In what is becoming a bit of a regular occurrence, Seattle's #1 real estate cheerleader yet again wields her powers of misdirection in response to a probing reader question.

Q: There is an entire group of people today who've never gone through a major recession. How will home prices be affected if we do have a recession like the pullback of 1974?

A: The recession of 1974, caused by high inflation and an oil crisis, took the wind out of the housing market. Homebuilding dropped 33 percent, according to Time magazine's Dec. 9, 1974 cover story. The Federal Reserve clamped down on the money supply. Mortgages became harder to afford.

But if we were to have a repeat of 1974, much more would happen because recessions cause widespread economic damage.
...
Exactly what that meant for house prices is hard to know because data from that decade is sketchy.

We can say, however, what the local fallout was from two milder, more recent recessions: 1990-91 and 2001-2003. The rate of appreciation fell, but house prices in general didn't. Here are the numbers:

After rising 28.9 percent in 1990, King County single-family home prices basically flat-lined for the next three years, rising just 1.2 percent in 1991, 0.1 percent in 1992 and 1.7 percent in 1993. Then they began rebounding, culminating with 10.1 percent appreciation in 1999.

It would appear that whenever the answer to a question is a bit too difficult for Ms. Rhodes to swallow, she decides to answer a completely different question that wasn't even asked. In this case, the question she appeared to be answering was actually "what is a recession, and how would Seattle be affected in a very mild one?"

Of course, the answer to that question is reassuring and ultimately useless.

(Elizabeth Rhodes, Seattle Times, 04.14.2007)

March Reporting Roundup

Back from my busy week of travel and recharged over the Easter weekend, it's time to post the March roundup.

As usual, let's kick things off with Seattle's #1 real estate cheerleader, Ms. Rhodes, with her fawning article about all about how great and wonderful it is that median prices increased last month.

After stalling for two months, home prices in King and Snohomish counties perked up last month, disappointing potential buyers who thought slowing price appreciation had presented an opportunity.

Brian and Jennifer Rutherford are experiencing King County's strengthening real-estate market firsthand as they shop for a Bellevue home in the $500,000 range.
...
"We were just hoping things would cool off. It might have cooled off from its highest point, but not too far," he said. "Now we're making more of an effort to step up our looking."
...
Thursday's news that Microsoft is leasing 1.3 million square feet of Bellevue office space, enough to house 4,000 employees, is a near guarantee that Brian Rutherford is correct about home-buying prospects.
...
Lennox Scott, chairman of John L. Scott Real Estate, said a shortage of affordably priced homes will keep the local market strong.

Wait, what? Am I the only one that sounds like utter nonsense to? Less affordable = strong market? Hmm.

Surprisingly, Mr. Cohen of the P-I chose to focus primarily on Seattle proper, where the picture is somewhat more grim.

There are more homes on the market in Seattle these days -- and their prices slowly are creeping up.

The number of homes increased by nearly half in March from March 2006, according to data the Northwest Multiple Listing Service released Thursday. The median home price was $418,000 — up 2.7 percent from a year earlier and 3.2 percent from February 2007.

The median price for a Seattle single-family house went up 4.5 percent from a year earlier, to $460,000, while the median condo price was up 5.8 percent, to $316,950.

Of course, a Cohen article wouldn't be complete if it didn't end on an upbeat with the same-old "strong market" arguments repeated yet again:

In a statement accompanying the Northwest MLS numbers, Mike Skahen, owner of Lake & Co. Real Estate, called the market for close-in Seattle neighborhoods "hotter right now than it was at this time last year," with homes in virtually every price range attracting multiple offers.

Dick Beeson, owner of Windermere Real Estate/Commencement Associates in Tacoma, said, "It just feels like a normal market with well-priced homes seeing offers in 30 days or less and sellers of overpriced properties having a gut check and a motivation check to see if they really are serious about selling."

Recent revelations about failing loans in the subprime market, which serves those with poorer credit, have caused trepidation about the national housing market.

But the Puget Sound region is fairly well protected from this because of its healthy economy, continued home price appreciation and fewer subprime loans compared with other parts of the country, said Erik Hand, president of John L. Scott Real Estate subsidiary Response Mortgage Service, in the MLS statement.

Ahh, that's better.

Down in Tacoma, it's getting harder to ignore the picture that the numbers are painting:

The median price was $274,950, up 5.8 percent over the same month a year ago, though down from February, according to figures released today by the Northwest Multiple Listing Service.

Sales, however, continued to fall as the number of listings skyrocketed to 6,554 – up 48.6 percent from March 2006.
...
Bob Niehl, an agent for Crescent Realty, said Thursday that it’s not uncommon for the kind of house that once would draw multiple offers to sit for more than 100 days.

The Everett Herald appears to be doing somewhat of a victory dance, proudly proclaiming Snohomish County as immune to supply and demand.

Prices for homes and condominiums in Snohomish County continue to soar, even as sales of both in March continued to be down compared with a year ago.

The median price for single-family homes hit $382,550 countywide last month, according to the Northwest Multiple Listing Service report issued Thursday. That's nearly 16 percent higher than the median of $330,000 in March 2006.

Prices rose despite a 44 percent increase in the number of homes listed for sale from year to year and a nearly 18 percent drop in pending sales.

Finally, down in Olympia, slowing sales are all too obvious.

Thurston County single- family home and condominium sales dropped 7.5 percent in March, though last month’s results were softened by a surge in the condo market, the Northwest Multiple Listing Service reported Thursday.
...
Other year-to-year March home sales data for Thurston County:

• Total active listings for single-family homes increased 38 percent to 1,802, up from 1,303.
• The median price of a single-family home rose 4 percent to $254,950, up from $244,900.
• Total active listings for condos increased 133 percent to 49 units, up from 21.
• The median price of a condo dropped nearly 6 percent to $171,203, down from $182,000.

Sounds like a stellar spring bounce all around the Sound, wouldn't you say?

(Elizabeth Rhodes, Seattle Times, 04.06.2007)
(Aubrey Cohen, Seattle P-I, 04.06.2007)
(Devona Wells, Tacoma News Tribune, 04.05.2007)
(Eric Fetters, Everett Herald, 04.06.2007)
(Rolf Boone, The Olympian, 04.05.2007)

Seattle Immune to Financing Woes?

When the question is "how will the current home lending meltdown affect the housing market in Seattle," the answer depends on who you ask. For instance, if you ask #1 Seattle real estate cheerleader Elizabeth Rhodes, the answer is something to the effect of: "Seattle is special. Don't worry your pretty little head about it."

Q: Local real-estate experts keep saying Seattle's housing market will stay strong because the local economy is strong. But I think all the subprime loans going bad will mean a lot more houses on the market and prices here will sink. Why don't you report that?

A: Let's start with an interesting fact from Douglas Duncan, chief economist for the Mortgage Bankers Association: More than one-third of all homeowners have paid off their mortgages (or paid cash). This significantly decreases the potential for overall risk.

However, the growing crisis in the subprime mortgage industry, fueled by an increasing number of mortgage defaults, is real.

How much of an effect it may have is very location-sensitive, said Bob Visini, a spokesman for LoanPerformance, a California company that tracks nationwide mortgage activity.

The Seattle/Bellevue/Everett area "is exposed," but way down the list, Visini said.

The Seattle area is in the bottom 20 percent for subprime mortgages among 331 major metropolitan areas — far below other parts of the country, particularly parts of Texas and California's Central Valley where subprime accounts for nearly a fifth or more of all mortgages. At the top of the list was McAllen, Texas, where some 26 percent of loans are subprime.

By comparison, only 7.9 percent of all Seattle-area mortgages were subprime at the end of 2006 (ranking 278th out of 331), down from 8.7 percent the previous year.

And only a fraction of those loans were in trouble — some 7.6 percent at the end of 2006 were 60 days late or more, a sign foreclosure is looming. This put Seattle in the bottom 10 percent.

Those are certainly some convincing statistics Ms. Rhodes has pulled out. Unfortunately, she still employs her mad misdirection skillz in composing the answer. The reader didn't ask "how does Seattle's rate of subprime mortgages compare to other cities?" Nor did they say "the subprime lending implosion is already affecting Seattle." Rather, they pointed out the high likelihood that the subprime mess will adversely affect Seattle's housing market. Granted, it may not affect Seattle as much as other areas with higher percentages of subprime loans, but there is no reason to believe that it will not have any affect.

On the other side of the media spectrum, ask Mike Benbow of the Everett Herald the same question, and he might say: "Foreclosures are already on the rise, and will likely increase. If the country heads into a recession, the housing market will almost certainly suffer even more."

Others are using risky loans, such as those where they're paying only interest for a while, to get into homes they can't afford. That can only lead to trouble.

In fact, it already has.

A recent article in the Puget Sound Business Journal quoted RealtyTrac Inc. as saying there were 2,377 foreclosures on homes in Snohomish County last year, a 35 percent increase over 2005.

That was lower than King County, where foreclosures rose 41 percent, and Pierce County, which showed a 58 percent hike. But it was higher that the 25 percent increase for the state as a whole.

Such a sharp increase in foreclosures tells us there are problems in the industry.

A local or national recession could trigger even more.

What am I trying to say here?

I guess that a rising local economy has kept the housing market relatively strong locally, but that things could change rapidly if economic circumstances change. Now, more than ever, home buyers should be careful about the types of loans they're using and not expect home appreciation to bail them out of a purchase they never should have made.

Wow, it's refreshing to read something that honest in the media once in a while. Foreclosures up 41 percent in King County? Funny, I must have missed the article in the Times where Ms. Rhodes covered that. I thought our housing market was the picture of perfect health. How could foreclosures be rising so quickly? Hmm.

(Elizabeth Rhodes, Seattle Times, 03.17.2007)
(Mike Benbow, Everett Herald, 03.19.2007)

$400,000 is Not "Affordable"

A couple of interesting letters to the editor floated to the surface today in response to Ms. Rhodes' latest article.

Here's my favorite:

I guess I don't understand how anyone would think that a $400,000 to $500,000 price tag on a town house is considered to be affordable housing. Not for folks who work for the city of Seattle making less than $35,000 a year. Not all of us are City Council members or managers.

— Diana Rodriguez, Lacey

Indeed, what a bizarro world we live in.

(Letters to the Editor, Seattle Times, 03.13.2007)

February Reporting Roundup

I'm going to do the monthly reporting roundup a little differently today. I'm going to keep it simple. What you see below is a list of my favorite line from each of the local writeups.

• It's too early to say if this spring's home sales will be a repeat of last spring's frenetic activity, but February's home sales point to it...
• Northwest MLS officials said the increase in pending sales and sales prices were "signs of a rejuvenating market."
• This sets the stage for a hot spring market throughout Western Washington.
• NWMLS officials said that low interest rates, coupled with the area's job growth, will "sustain a healthy housing economy throughout the Puget Sound region."
• The newest numbers, released Wednesday, put the median cost of a single-family home within Seattle proper at $440,250 — out of the reach of most workers...
• [Northwest MLS officials] blamed February's lower number of closed sales on bad weather in preceding months and dismissed concerns about the increasing number of homes on the market
• [J. Lennox Scott] expects activity [near job centers] to cause a "chain reaction of sales up the price points in the coming months."

Wow, everything's just coming up roses, isn't it?

Bubble Link Roundup

It's time to clear out all the news alerts in my inbox again. Here's another round of local real estate links from the past few weeks:

• Seattle definitely appears to be "special" in one area: real estate websites. Ms. Rhodes reports on ForeclosurePoint; the latest to join the fray.
• Bremerton: up and coming? If you say so...
• Steve Tytler of the Everett Herald repeats his prediction that appreciation will be flat this year.
• Mark Trahant points out that the Pacific Northwest isn't all that special when it comes to consumer spending and the economy.
• Mr. Cohen at the P-I:
  • kicks off a series following a newly-minted real estate agent,
  • reminds us that "Seattle-area houses still are appreciating faster than most,"
  • and gives a few local condo projects some free advertising.
• Up in Bellingham, the housing market may continue to cool.

Did I miss anything else worth noting?

Our Doom and Gloom Media

It seems that every time the local press prints a story that is slightly less than 100% "rah-rah, go home prices" people come crawling out of the woodwork to accuse them of using "doom and gloom" or "sensationalism" to sell papers. Accusations like that really amuse me, since (as regular readers of these pages know well) the vast majority of real estate stories printed by Seattle's two dailies are overwhelmingly positive about the market, despite looming signs of a slowdown.

Case in point. Take a recent AP story about the nation-wide housing slowdown. The P-I reprinted the story in its original form: Housing sales drop in 40 states. However, over at the Times, they couldn't let a headline like that slip by. No, that just won't do. So they whipped up their own version (additions in bold): Housing sales fall in 40 states; but not in Northwest

The slump in housing deepened in the final three months of last year with sales falling in 40 states and median home prices dropping in nearly half the metropolitan areas surveyed.

The Pacific Northwest bucked that trend, with the Seattle-Tacoma-Bellevue area prices rising 11.3 percent in the fourth quarter, the National Association of Realtors reported today. Spokane prices were reported up 12.2 percent, and Portland up 11.2 percent.

At this point I imagine the Times was pretty proud of themselves. But apparently after going to print, someone thought: "You know, adding just one paragraph might not be enough to get the message across. The Puget Sound housing market is so blisteringly red-hot that it deserves more than that. Let's add a bit more and print it again."

The slump in housing deepened in the final three months of last year, with sales of existing homes falling in 40 states and median prices dropping in nearly half the metropolitan areas surveyed.

Although Washington state's sales of houses and condominiums declined 16 percent, prices continued to climb, thanks to a generally strong economy.

In the Seattle-Tacoma-Bellevue area, prices rose 11.3 percent in the fourth quarter compared with a year earlier, the National Association of Realtors reported Thursday. Spokane prices were up 12.2 percent, and Portland up 11.2 percent.

Formerly red-hot areas were among the hardest hit as the five-year housing boom cooled considerably in 2006.

While some economists think the worst may be over for housing, others predicted more price declines to come in some areas until near-record levels of unsold homes are reduced.

The Puget Sound area is not now reporting an excess housing supply.

At the end of January, King County had a three-month supply of unsold homes, according to the Northwest Multiple Listing Service.

There, that's better.

You want another example of the sensationalist doom and gloom reporting we are subjected to by the local press? Okay, how about Aubrey Cohen's twist on the AP story, appearing in today's P-I: Area's housing prices still strong

Whatever is happening to the region's housing market, its home prices held up better than in much of the nation.

The price of a typical house in the Seattle-Tacoma-Bellevue area was $372,900 in the final three months of 2006 -- up 11.3 percent from the same period in 2005, according to data the National Association of Realtors released Thursday.

The association did not release figures just for Seattle, but the Northwest Multiple Listing Service reported the city's median price for houses and condos increased by more than 9 percent in each of the final three months in 2006, compared with the same months the year before.

I do have to give Mr. Cohen some credit though, as he did manage to bury a little bit of a warning in there between the sub-headline "Homes here buck national trend" and all the starry-eyed cheerleading:

Seattle isn't in the clear, however. The number of homes on the market increased for seven straight months, compared with the same months in the prior year, while year-over-year sales declined for six straight months before going up in January, according to the Northwest MLS.

The rate of price appreciation slowed in recent months, with a year-over-year increase of just 0.8 percent in January. January's median was down 9.5 percent from December. Some analysts have speculated that Seattle will see year-over-year price declines.

What can you say. They've got to throw in a little "doom and gloom" to sell the 'papes, right?

(Martin Crutsinger, Natasha Metzler, Elizabeth Rhodes, Seattle Times, 02.16.2007)
(Aubrey Cohen, Seattle P-I, 02.16.2007)

January Reporting Roundup

Let's have a look at the local press reaction to the market's continued slowdown, shall we?

First up, the poster child for slowdown denial in the media, Elizabeth Rhodes. This month she actually managed to sandwich a morsel of reality in between the excuses and the unbridled optimism:

A nasty dose of winter last month meant sales of single-family houses and condominiums were down 4 to 14 percent throughout the four-county central Puget Sound region, according to the Northwest Multiple Listing Service's monthly report released Wednesday.
...
"People were not buying in January; it was the weather," said [Jack] Cosby, an agent in Prudential Northwest Realty's Kent office.
...
Besides the weather, two other factors — the number of properties on the market and the rate of home appreciation — point to a continued sluggishness of the market.
...
Compared with a year ago, countywide listings were up 25 percent in King, 31 percent in Snohomish, 42 percent in Pierce and 46 percent in Kitsap.
...
Near the month's end the market started to pick up, said Judy Hay, an agent in Coldwell Banker Bain's Bellevue office.
...
Likewise [RE/MAX Broker Pat] Reagan also sensed a month-end rally with "more appointments being set up to see the interiors of homes, as opposed to just shopping on the Internet."

If that continues this month, spring sales will be strong, Reagan said.

"But if we have a very bad February," added Cosby, "it doesn't look like it will be that good of a year. Still, I'm an optimist, and I do believe in our area the market will be fine."

Keep the faith brother, keep the faith.

The silver medal for bubble boosterism goes to our good friend Aubrey Cohen, who points out some interesting statistics and then does his darndest to explain them away:

Seattle's median home price in January was the lowest it has been in a year, according to statistics released Wednesday.

The median price of $379,990 was down from $420,000 in December, according to the Northwest Multiple Listing Service.

A seasonal decline is consistent with recent years, but Seattle's January median home price also was lower than King County's median — a first since at least 2001. King County's median home price in January was up 8 percent from a year earlier, while the median for all 19 counties in the Northwest MLS was up 10.6 percent.

"That's odd," Bob Melvey, assistant manager at Windermere Real Estate's Ballard office, said of the Seattle numbers. "My personal experience doesn't jibe with the stats."
...
The median price could be dragged down by the sale of condominiums...
...
Melvey speculated that town homes ... might have made up a larger chunk of Seattle's sales in January.

"I've noticed a lot of town homes in what I would consider not desirable neighborhoods coming on the market, and they're at pretty low prices," Melvey said.
...
Shifts in how home sales are distributed among Seattle neighborhoods also could be to blame, said Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University.
...
Crellin said he expects prices to go up in general, but said they would not go up as fast as they did in the past couple of years and they could decline in higher-end areas or those with many speculators.

Absolutely delightful. You know, I am really starting to enjoy reading this kind of stuff. It just gets more and more ridiculous with every passing month. Moving on...

Lastly, we check in with Mike Benbow at the Everett Herald, who seems to believe that prices will continue to rise no matter how low sales drop or how high inventory gets.

Home sales in Snohomish County continued to slow significantly in January, but that didn't stop a double-digit increase in the median price, according to the Northwest Multiple Listing Service.

Following a trend that emerged last summer, inventories rose substantially and sales dropped from prior-year levels. Prices rose more slowly than they had a year ago.

But the combined median price for single-family homes and condos still hit $348,000 in January, a 16 percent rise from a year ago, when the median was $299,950.
...
Listing service officials said January sales started slowly because of the bad weather but picked up significantly later in the month.

"Pent-up, frustrated people who, due to snow, wind and rain, postponed looking, found their way out of the house and into open houses," said Kathy Estey, managing broker at John L. Scott in Bellevue.

That's the ticket. The market only appears slow because, you know, we had three days of snow last month. Yeah.

Addendum 02.09: I missed the Devona Wells' article in the Tacoma News-Tribune yesterday, so here it is now. Better late than never.

Pierce County median home prices in January were the lowest in eight months, pointing to a market still better for buyers than sellers.

While trending flat, the median sales price of $266,725 did inch upward from the same month last year by 5.3 percent, according to figures released Wednesday by the Northwest Multiple Listing Service.
...
"I think sellers are realizing that there is a whole lot more competition out there," [real estate agent Mike Larson] said.

A strong economy and relatively low interest rates, however, should make for a healthy 2007, he said.
...
"What's going to be interesting is to see what happens outside the winter months. When spring and summer hit, we’ll have our increase, probably 5 percent or 6 percent," [real estate agent Dick Beeson] said.

Pretty much the same template as the P-I article. Quote the stats, then quote plenty of local real estate "experts" telling us all that it'll be okay, nothing is broken.

Stay tuned for even more lame excuses and blind optimism approximately 28 days from now. It's sure to be an entertaining show.

(Elizabeth Rhodes, Seattle Times, 02.08.2007)
(Aubrey Cohen, Seattle P-I, 02.08.2007)
(Mike Benbow, Everett Herald, 02.08.2007)
(Devona Wells, Tacoma News-Tribune, 02.08.2007)

Foreclosures On The Rise, Even In Seattle

Here's some interesting news. Apparently even double-digit appreciation isn't enough to keep foreclosures from rising around here, much like they are across the country:

Following a national trend, Washington state's mortgage foreclosures increased significantly last year, claiming 18,527 homes.

In the Seattle/Bellevue/Everett area, one in every 136 homeowners was displaced by foreclosure, as was one in every 75 Tacoma owners.

Still, the state and the Seattle area faired better than the nation as a whole, according to RealtyTrac, a California-based foreclosure-information provider. It released its 2006 annual report late last week.

Washington state foreclosures grew 25 percent last year compared with a year earlier — far below the national increase of 42 percent.

Phew! Thankfully we're safe because we're "far below the national increase."

However, since Ms. Rhodes mentioned that we are "following a national trend," and given the assumption that the Seattle housing market lags most of the nation by six months to a year, I wonder how much foreclosures increased nationally in 2005?

Let's see... Ah, here we go:

January 23, 2006 – RealtyTrac™ ... today released year-end data from its 2005 U.S. Foreclosure Market Report, which showed that 846,982 properties nationwide entered some stage of foreclosure in 2005, and a 25 percent increase in the number of new foreclosures from the first quarter to the fourth quarter.

Hmm, interesting.

(Elizabeth Rhodes, Seattle Times, 01.27.2007)

Prices Unleavened in 2007?

So what's in store for the Seattle housing market in 2007? Everyone's got an opinion, and yours truly is no exception. But before I get into my guesses, let's review the predictions of local "experts" that have been trumpeted in the media in the last few weeks.

From a December 22nd P-I article:

"I think very easily by spring this could be an extremely strong real estate market," said Bill Riss, chief executive of Coldwell Banker Bain, in Seattle. He said he was planning on home prices going up an average of about 10 percent in the coming year and about the same number of homes to be sold next year as in 2006.

Analysts say strong job growth will continue to drive demand in the area.

"Really, the driver of the housing costs is demand, which is fueled by jobs," said Randy Bannecker, a consultant housing specialist for the Seattle-King County Association of Realtors. He predicted year-over-year price increases would be 6 percent to 10 percent in 2007.

[WCRER Director Glenn] Crellin predicted slight declines in activity in 2007 and year-over-year price increases that would be down around 3 percent to 5 percent by the end of next year.

Matthew Gardner, a local land-use economist, predicted activity would slow from recent highs and price increases would settle to 7 percent to 9 percent in Seattle and 5 percent to 7 percent in rural areas farther from jobs.

Don't forget Ms. Rhodes' preferred vision, discussed here earlier.

What will 2007 bring? Here's what Seattle real-estate experts are saying.
...
[Seattle real-estate economist Matthew Gardner] expects closer-in areas to appreciate about 10 percent over the coming year; farther out, 7 percent appreciation will be more the norm for single-family homes and for condominiums.

And of course I have to mention the outlier in the bunch, from Saturday's P-I:

Michael Simonsen, chief executive of Altos Research, in Palo Alto, Calif., has noticed cooling in the Seattle home market.
...
Simonsen predicted that Seattle would start seeing slight year-over-year price declines this spring or summer, although he said the city had a strong economy, and its housing market would fare better than outlying areas.

So the general consensus among the media's preferred "experts" seems to be a fairly optimistic +7—10% to the median price in 2007, thanks to "jobs." Granted, median price doesn't give us a very complete market picture, but it's the best metric we've got.

As far as the jobs argument goes, I believe it is a false hope to think that as long as the sheer number of jobs is increasing, housing prices will also increase. It is true that a large drop in employment will usually lead to a housing downturn, but housing can decline despite a strong job market. For evidence of this, see Rich Toscano's investigation of San Diego's housing market in the 1990s. Of course I'm sure that the local housing bulls would retort that San Diego didn't have Boeing and Microsoft.

Before I tell you what I think is in store for 2007, let's take a look at what I guessed back in April about the remainder of 2006:

In most parts of King County appreciation slows to a crawl through the end of the year. The closer to Seattle you get, the more stagnant the appreciation. Near the end of summer and into fall, inventory begins to build slightly. Realtors and newspapers proudly proclaim a "soft landing."

"Appreciation slows to a crawl" was clearly incorrect. Appreciation did indeed slow to 12% YOY county-wide and 10% in Seattle (pdf, page 2), but that's hardly "to a crawl." I think prices were held a bit higher than I expected thanks to the unexpected drop in mortgage interest rates. My call on inventory was spot on, with active listings up 20-30% YOY the last three months of the year, and as evidenced by the newspaper quotes above, the press is definitely still pretty optimistic about the market.

Here's my 2007 prediction from April:

Inventory stacks up at an increasing pace, prices are level in some areas, slightly declining in others. By the end of the year, prices in some areas are approaching 2004 levels. Realtors still in denial.

With inventory already increasing over 20% YOY, it will be hard to increase the pace, but certainly possible. I expect to see active listings at least 15% over 2006 levels for the first half of the year. During the same time, I expect sales will decline at least 5-10% from 2006, dropping back to levels last seen in 2002 or 2003.

As far as the median price goes, I doubt that it will be "approaching 2004 levels." That would be a roughly 25% drop from today's price, which is highly unlikely save for some sort of scenario that includes a major natural disaster. More realistically, I guess that the King County "residential" median price at the end of this year will be between five percent down ($418,000) and three percent up ($453,200).

I expect we'll see more toward the low end if interest rates begin to edge upward again, lending standards are actually tightened a bit, and the local economy moderates. If interest rates hold steady or drop, new even-more "creative" financing is brought to market, and the economy goes gangbusters, we'll probably end up at the high end.

Maybe the "experts" are right and prices will go up another ten percent this year. Maybe I am underestimating the willingness of Seattle homebuyers to jump into greater and greater debt for an unchanging product. No doubt they've already demonstrated themselves to be far more willing than I ever would have guessed. However, as the real estate party winds down around the country, I have yet to hear any good, well-thought-out reasons ("Microsoft and Boeing" doesn't count) that we will escape the slow landslide.

Whatever happens, most of the action will probably take place March through May, so we'll most likely have a pretty good idea by June where we'll be in December.

So what are your predictions (and the reasons behind them) for 2007?

(Aubrey Cohen, Seattle P-I, 12.22.2006)
(Elizabeth Rhodes, Seattle Times, 12.30.2006)
(Aubrey Cohen, Seattle P-I, 01.06.2007)

Lending News: Washington State Cracks Down?

A pair of articles printed Saturday in the Seattle Times show some slight tightening of lending practices in our state.

Nineteen states, including Washington, and the District of Columbia have moved quickly to warn state-regulated lenders about the hazards to consumers from nontraditional mortgages.

Tens of thousands of state-licensed lenders and mortgage brokers are affected by the advisories, also known as a "guidance."

Such loans include interest-only mortgages and other arrangements where the borrower cuts monthly costs by paying back less than full interest and nothing toward principal.

The states are following closely behind federal banking regulators, who issued a sternly worded advisory in late September to the lenders they supervise, telling them they should not make these loans to borrowers who may be unable to repay them.
...
In 2003, just 10.6 percent of new loans tracked by First American LoanPerformance, a San Francisco-based real-estate information service, were nontraditional mortgages. But during the first nine months of 2006, about 34.1 percent of borrowers used these loans to buy or refinance homes.
...
Many economists now say the surge in these loans contributed to the real-estate boom of the past few years. Regions that had the highest rates of nontraditional lending were those areas where housing prices rose most quickly.
...
In Washington State, where the Department of Financial Institutions sent out its warning about three weeks ago, the guidance covers 1,767 mortgage brokers and 356 consumer-loan companies.

Not being in the mortgage lending business myself, I am not qualified to comment on whether the new "warning" will actually slow the spread of suicide lending. Hopefully potential home debtors will at least be better informed about what they're potentially getting themselves into with the more dangerous loans.

The second article deals with who is allowed to work as a loan officer in our state.

Until this month, virtually anyone could work in Washington as a loan officer for a mortgage broker — even convicted felons whose job gave them access to borrowers' most sensitive financial information.

But a new day has dawned, and it's mortgage brokers who pushed for the change.

A new state law, which went into effect Jan. 1, requires the state's 8,000 loan officers employed by mortgage brokers to be licensed. They write more than half of Washington's home loans.

Exempt from the new law are loan officers working for banks, credit unions and savings and loans. Also exempt are those working for consumer-finance companies.

Loan officers at mortgage brokerages must pass a background check meant to weed out those convicted of recent felonies or financially oriented misdemeanors, such as credit-card fraud. Also out are those who've generated a significant number of business-related complaints to state regulatory agencies.

I would think that shady loan officers are more likely to push people to take on more loan than they can truly afford, so this also comes as welcome news. I don't know if either one of these will do much to stem the tide of suicidal financing, but they couldn't make the situation worse. If these new regulations actually do significantly decrease the number of exotic loans that are issued, it would go a long way toward reigning in the runaway appreciation of the last few years.

(Kirstin Downey, Washington Post, 01.06.2007)
(Elizabeth Rhodes, Seattle Times, 01.06.2007)

December Reporting Roundup

After just nine months of increasing YOY home inventory and fourteen months of declining YOY home sales, the local media has apparently taken notice. Even Elizabeth Rhodes at the Seattle Times can't ignore the slowing trend:

In fact, buyers weren't racing to make offers anywhere in the central Puget Sound area last month, according to home-sales numbers released Friday by the Northwest Multiple Listing Service.
...
But nowhere could the drops be attributed to a lack of homes to choose from.

Indeed, last month the number of houses and condos available increased 48 percent in Kitsap County, 42 percent in Pierce, 34 percent in Snohomish and 24 percent in King, compared with the previous December.

I can hardly believe I read such a thing with Ms. Rhodes' name on it, but there it is in black and white. I guess the inevitable slowdown has become impossible to ignore.

Aubrey Cohen chimes in at the P-I with what I think may be the first in-print prediction of actual YOY price declines for the Seattle market.

"It's more of the same," said Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University. "My expectation is that we're moving into a period where sales are going to remain strong, but certainly not as strong as they had been, and where prices are going to be moderating and stabilizing."
...
Michael Simonsen, chief executive of Altos Research, in Palo Alto, Calif., has noticed cooling in the Seattle home market.

"Any comparison with last year is down in terms of demand and numbers of sales," he said. "Not great but certainly not falling through the floor."
...
Simonsen predicted that Seattle would start seeing slight year-over-year price declines this spring or summer, although he said the city had a strong economy, and its housing market would fare better than outlying areas.

"While we see some positive things to keep the bottom falling out, we don't see any big catalyst that will let prices jump upwards," he said.

Price cuts might not reassure already skittish buyers, Simonsen said. "I kind of think that people are attuned enough to the bubble headlines that if we see year-to-year price declines that might even scare people."

Of course, it just wouldn't be a news roundup without an article proudly proclaiming what a "healthy market" we have. This month's optimism comes to us courtesy of Mike Benbow at the Everett Herald:

December home sales dropped in Snohomish County, but prices continued to rise, according to information released Friday by the Northwest Multiple Listing Service.
...
December followed the trend for about the last six months where listings rose dramatically, sales slumped and prices continued to climb. Unlike many areas of the country, prices in the county continue to rise each month.

"The market is really healthy now," [Windermere broker Vern Holden] said. "I think everyone prefers the more balanced market we have today compared to a year ago."

And just to round out the experience, here's John Gillie at the Tacoma News Tribune with your monthly dose of lame excuses:

In a twist in the law of supply and demand, median December home prices in Pierce and 18 other Washington counties were substantially higher than in the same month in 2005 despite a larger supply of homes on the market and fewer sales.
...
December figures released by the Northwest Multiple Listing Service on Friday followed the pattern seen for several months, stubbornly refusing to join the price deflation that has happened in other markets as the supply of homes increases and sales slow.
...
...sales undoubtedly have been affected by the dose of miserable winter weather – record rains, devastating winds and heavy early season snow – Washington has had the past two months.

Things should get really interesting if we do actually see YOY price declines this year. I can't wait to hear the excuses for that.

(Elizabeth Rhodes, Seattle Times, 01.06.2007)
(Aubrey Cohen, Seattle P-I, 01.06.2007)
(Mike Benbow, Everett Herald, 01.06.2007)
(John Gillie, Tacoma News Tribune, 01.06.2007)

Optimism on the Menu for 2007

In addition to the standard E. Rhodes fluff piece that Synthetik posted about on Sunday, there were a couple other articles posted over the weekend that conveyed a general sense of optimism about Seattle's housing market in the coming year. Here are a few choice quotes from Mike Benbow's article in the Everett Herald titled Smiling at the slump:

David Toyer was having Christmas dinner with relatives when one asked him how he felt about the housing market.

Toyer, a vice president for Barclays Northwest, a major developer in Snohomish County, gets that a lot.

Most people expect him to be down in the dumps, or at least very concerned. That, he said, is because they've been listening to national newscasts about areas of the country where home prices have dropped like a rock or sales have plummeted due to overbuilding.

Indeed, The Associated Press named the rocky housing market the top business-related story of 2006 because of worries that it could push the nation into a recession.

Trouble is, the housing market in the Northwest in general and Snohomish County in specific did well this year and is expected to continue to be strong in 2007.
...
Toyer is very positive about the housing market for 2007, partly because he's seen the numbers in a study recently conducted for his firm by New Home Trends, a consulting firm in Mill Creek.

"There's no reason to think we will not have a very healthy housing market," he said. "We've got some things here that are different than everywhere else."

One of the unique elements, he said, is a state Growth Management Act that forces developers to build close to cities or within them, a law that is gradually reducing the amount of available land.

Toyer also noted that with hiring at Microsoft, Boeing and many other businesses large and small, most analysts are predicting a good economy in the Seattle area in 2007.

That's attracting people looking for work, and many would like to buy a house, he said.

Mr. Benbow goes to town, throwing all the classic arguments out there. We've got "Seattle is special," "we're running out of land," and of course the ever-popular "Boeing and Microsoft will save us," all in just the first few paragraphs! Never mind the uncomfortable fact that affordability continues to drop like a rock, and there is no evidence that all of these new jobs are paying any better than existing ones. Methinks Mr. Benbow's article is heavy on claims, but light on supporting evidence or critical examination, as usual.

Justin Matlick takes a more balanced look at Washington's situation in the Puget Sound Business Journal's general state economic outlook for 2007, but the high point of the article is the clever illustration that so delightfully epitomizes the unwavering hope of local housing optimists.

Illustration: James McFarlane
Click to enlarge

With the national economy expected to continue decelerating in 2007, how will Washington state fare?

First, the big worry: housing. Economists generally agree that the state's housing market will continue to slow throughout 2007, especially in the Puget Sound region, and a precipitous decline could drag down consumer spending, slow the construction industry and dampen economic growth.

On the bright side, the state's economy is poised to continue growing even as housing slows. Around Puget Sound, a strong international economy will continue fueling demand for key Washington exports such as Boeing airplanes and Microsoft software. Outside the region, economists expect the economy to continue expanding, albeit at a more moderate pace.
...
While the national housing slowdown has finally hit Washington — in King, Pierce and Snohomish counties, the Northwest Multiple Listing Service has reported falling home sales, rising inventories, and slowing home-price appreciation throughout the second half of 2006 — homes in core Puget Sound areas are still logging double-digit price appreciation.

[Union Bank of California senior economist Keitaro] Matsuda said this indicates that the housing market in the Puget Sound region and throughout the state is a long way from hitting bottom.

I don't know anyone who has claimed that the housing market around here is "hitting bottom," so I don't really know what point Mr. Matlick was trying to make with that statement. Moving on...

"It will still take a while before things start to really slow down," Matsuda said.

While Matsuda could not guess exactly how far housing will fall, he did say that it's now clear the national housing expansion has been founded on solid economics, and has not been the bubble many feared.

"If it was a bubble, the markets that experienced the strongest appreciation should also experience the largest price drops, and that hasn't happened," Matsuda said.

Whoa, hold on a minute there. How is anything "clear" at this point? If anything is clear, it's that the national housing expansion was not "founded on solid economics," because nationwide housing statistics are moving in reverse. Furthermore, Matsuda seems to believe that "hasn't happened," means the same thing as "won't happen," which is something I happen to disagree with.

For Washington, this means any declines will likely be more moderate than severe, especially since the rest of the state's economy will likely continue growing at a healthy pace, according to Matsuda and [local economist Dick] Conway.

So really, the primary argument for optimism comes back to... Microsoft and Boeing. I realize that both of these companies are doing well right now, and I certainly hope it continues to be the case. However, I truly do not believe that the recent positive performance of two companies is enough to hold up our entire region's economy.

I'm not calling for a huge pile of doom and gloom for the Seattle area, but unless the vast majority of the area's new jobs are paying $80k or more, I think that 2007 will see the start of price contractions in Seattle. I think the unaffordability ceiling has been reached.

What about you? Are you generally optimistic about 2007 for the Seattle area housing market? Do you buy the arguments that we're special and will continue to see price gains while more and more cities across the nation experience price declines?

Stay tuned in the next week or so for a more detailed post dedicated to my personal 2007 guesses. Let's keep the comments in this thread focused on these two articles and more general local economic impressions.

(Mike Benbow, Everett Herald, 12.31.2006)
(Justin Matlick, Puget Sound Business Journal, 12.29.2006)

Always Trust The 'Experts'

What's the point about worrying about global warming when we're getting all this hot air from Elizabeth Rhodes?

Please enjoy this year end feel good article about our robust housing market here in Rain City.

One of this year's biggest residential real-estate topics was the anticipated slowdown in sales and appreciation.

Would the Puget Sound market tank?

Would prices deflate?

Neither of those things occurred locally, although other parts of the country have seen moderate-to-severe downturns this year.

What happened here was a gentler transition in housing activity, from its record 2005 levels to a slower pace by this year's end.

What will 2007 bring? Here's what Seattle real-estate experts are saying.

First, let me introduce the "experts".

Elizabeth Rhodes (The Seattle Times and her job depend on a steady stream of advertising dollars from local Real Estate)

Matthew Gardner (Gardner Johnson, a Seattle land-use economics firm; "regularly retained by the region's most prominent developers")

Bill Riss (CEO of Coldwell Banker)

Frank Nothaft (Chief Economist, Freddie Mac)

Mike Scott (Dupre+Scott Apartment Advisors)

Suzanne Britsch (Senior Analyst, New Home Trends)

"This bubble lunacy is still prevalent, but not in Seattle, and I'll keep saying that," said Gardner, of the land-use economics firm Gardner Johnson.

The closer homes are to the major job hubs of Seattle and Bellevue, "the higher appreciation you'll get," Gardner said. "That's because there's intrinsically a value to our time."

What did we have in 2006?

"A more balanced market," said Bill Riss, CEO of Coldwell Banker Bain. That's giving buyers "a little more time to think, plan and write good offers."

Riss wouldn't be surprised if spring sales roar to life, causing another feeding frenzy, albeit not at record levels of past years.

A rise in inflation could drive rates up, but that's not a concern now, Frank Nothaft, chief economist for mortgage-money provider Freddie Mac, recently told the Washington Association of Mortgage Brokers.

"Inflation will be tame, and interest rates will not change much in the next six months," Nothaft said. "They may drop after that. We don't see mortgage rates even getting up to 7 percent [by the end of 2007]."

He also anticipates the number of nontraditional loans, such as negative amortization and interest-only, will drop as borrowers choose other mortgage products instead.

Sure, no problem affording that $699,000 charmer with your conventional loan: $140K down payment and $4,800 monthly payment!

The same strong regional economics sustaining the local home-sales market are also fueling apartment demand, said analyst Mike Scott, of Seattle's Dupre + Scott Apartment Advisors.

Logically, strong demand should ramp up apartment construction, but it hasn't worked out that way, Scott said.

A year ago, he forecast 3,600 new units would be built in King, Pierce and Snohomish counties this year. Instead, just under 3,100 opened.

In 2007 Scott anticipates even fewer: just 2,600 new apartments.

...apartment rents to jump about 8 percent next year, Scott predicted. Vacancies will fall from their current 4.7 percent to roughly 3.5 percent, he said.

Buy now or be priced out forever! I don't know about you, but even if he's correct I would gladly pay an additional 8% in rent rather than 50% more in mortgage costs while facing the inevitable repossession, bankruptcy and anxiety disorder.

My prediction: Rents will remain flat through 2007 and drop in 2008 as additional housing becomes available. Desperate FB's will have no choice but to rent out properties that do not sell. Condos and condo conversions will face a serious slowdown in sales and many will convert into apartments.

The national news has been full of stories about homebuilders cutting production and prices as the real-estate market cools. In November, for example, building permits nationwide fell to a nine-year low, according to a government report.

"But that's the national news, not the local news," said Suzanne Britsch, senior analyst for New Home Trends, a construction-analysis and consulting firm in Mill Creek. "We still have job growth and a shortage of lots here, so we have just not had a problem with standing inventory."

We're different. Special. A breed apart.

In King County, the average price of a new house will be $750,000, she predicted. A big chunk of that expense is the land. The rock-bottom price for a lot in a new King County subdivision is now $250,000.

In Snohomish County, new single-family homes will start at $400,000. And they'll likely be on 3,500-square-foot lots, rather than 6,000 square feet, the norm there until recently.

OMG that is so affordable! Isn't it nice to have all these objective opinions?

Happy New Year ;)

(Elizabeth Rhodes, Seattle Times, 12.30.2006)

Wet November Weather FTW!

Now that November's numbers are out, let's see what the local dead tree press has to say about it.

First up, Ms. Rhodes at the Times delivers just what we've come to expect; a small dose of reality topped with a heaping helping of positive spin, lame excuses, and bubble denial:

More Western Washington homes were for sale last month, but fewer buyers signed deals, according to the Northwest Multiple Listing Service's November report, released Thursday.
...
Wet weather and attention given to the midterm election and the holidays may have affected sales, the MLS said.
...
Greg Hoff, owner and broker of Windermere's Edmond's office, said sales declines should be taken in context. A year ago, sales were at record highs, Hoff said, so last month's falloff is a return to normal — not the bottom falling out of the market.

"The question I get is, 'Where's the bubble?' " he said. "They think it's bursting because it's not going up the way it used to."

A true bubble burst would occur if prices fell, Hoff said. That's happening in some Sun Belt states, but not here.

Of course, the Times wasn't the only paper to mention the weather. Despite the complete lack of any evidence that even one potential home buyer was influenced by the weather, all five local newspapers attempted to relate the weather to the November home sales statistics.

At least Ms. Rhodes was the only one to blindly parrot the NWMLS press release. Other reporters, such as Aubrey Cohen at the P-I, were somewhat more skeptical. Of course she still made sure to end on a positive note:

November's total listings showed a typical seasonal decline from October, which was the only month in the past two years with more homes on the market than November. The year-to-year number of listings has increased in every month since April, while the number of closed sales has been down in every month since June.

In a news release Thursday, Northwest MLS director Dick Beeson said floods, snow and ice contributed to November's sales slowdown.

But wet weather only can soak up so much blame. It did not, for instance, seem to dampen the market in January 2006, whose 11.65 inches of precipitation was not far off the January record of 12.92 inches (set in 1953). That, of course, was in the midst of a frenzy of frequent bidding wars and rapidly rising prices.
...
Real estate agents have said for months that the market is back to normal from its recent frenzy, allowing buyers to take their time. They say buyers are taking even more time because of the changing market and news of a national slowdown.

"I still have a lot of people looking but not as many people making the move, pulling the trigger," said Susan Robinet, an associate with Windermere Real Estate. "I just think it's the uncertainty the national news has created."
...
Jean and David Sauvion, who recently moved to Seattle from London, offered a reminder that everything is relative when it comes to home prices.

"It's a lot better than in London from a buyer's point of view," Jean said after looking at a Greenwood home Sunday.

"We can actually afford houses here."

John Gillie at the Tacoma News Tribune makes only a dismissive passing mention of the weather.

Torrential rains, early season snowfalls and holiday distractions made only a small dent in the pace of Pierce County home sales last month.
...
The continuing price increases were good for home sellers, said Tacoma Realtor Dick Beeson, but an increasing supply is making sales a bit more difficult for sellers whose homes are overpriced.

The inventory of unsold homes in the 19 Washington counties covered by the Northwest MLS rose more than 35 percent from November of 2005, the report said.

That inventory increase, which could foreshadow price softening, was particularly dramatic in Pierce County, where the number of homes on the market in November grew from 4,124 last year to 6,012 in November this year – up 45.78 percent.

One reporter downright rejected the notion that the weather had any affect on the market. Mike Benbow at the Everett Herald seems to think that resistance to bad weather shows just how strong our housing market really is.

With torrential rains, serious floods and an early snowstorm that left thousands of Snohomish County residents without power, you'd think most people would have been too busy last month to think about much else.

But the disastrous weather in November didn't stop people from buying homes. And it didn't keep prices from continuing their climb, according to data released Thursday by the Northwest Multiple Listing Service.

County home sales last month followed the trend that began early this year: The number of homes on the market have increased significantly, sales that were pending or closed dropped significantly and prices rose in double digits in comparison to November 2005 sales.

Coming full circle, Clayton Park at the King County Journal claims that the rain did slow sales, and quotes some random Realtor to back up the assertion.

Last month's record rainfall and snowy weather conditions contributed to a decline in the number of homes sold on the Eastside and in south King County. The weather, though, didn't put a damper on prices, which continued to be significantly higher than a year ago.
...
Sam Pace, a Realtor with Executive Real Estate who specializes in helping clients buy and sell homes in south King County, said the heavy rains and snowstorms last month resulted in a noticeable drop off in business for him.

"We didn't do much in the rain," Pace said.

But Pace, who also serves as the south King County housing specialist for the Seattle-King County Association of Realtors, said year-over-year prices for homes and condos are continuing to rise, despite the slowdown in sales activity, because demand for homes continues to outpace supply in this area.

Pace attributed the heavy demand for homes to the region's robust economy, which has been bolstered by continued hiring locally at both Microsoft and Boeing, two of the area's largest employers.

Never mind the fact that the slowdown in sales is consistent with a trend that's been going on for over three years. It was the rain and snow. That's it. Also, if we keep repeating the "Microsoft and Boeing will save us" argument enough times, maybe that will make it true!

Clearly it's too much to ask that a local reporter actually do some serious investigative work into the true health of our housing market. It's far easier to repeat real estate press releases, quote local Realtors, and interview random home buyers.

(Press Release, NWMLS, 12.08.2006)
(Elizabeth Rhodes, Seattle Times, 12.08.2006)
(Aubrey Cohen, Seattle P-I, 12.08.2006)
(John Gillie, Tacoma News Tribune, 12.08.2006)
(Mike Benbow, Everett Herald, 12.08.2006)
(Clayton Park, King County Journal, 12.08.2006)

A Lack of Merit

I've previously mentioned the demise of mortgage company Merit Financial, but as a number of you pointed out in the comments, this weekend Ms. Rhodes wrote a lengthy piece detailing all the saucy details of Merit's rise and fall that's definitely worth mentioning.

Former Washington Huskies football player Scott Greenlaw led the mortgage company he founded to dizzying heights — 400 employees, a sprawling new headquarters and kegs of beer at staff meetings. Now he's selling his house to avoid bankruptcy as creditors line up with lawsuits.
...
It seems a quick turn of events for a former college football star who'd cobbled together $225,000 to start a company in 2001 that grew to more than 400 employees. Merit claimed to write more than $2 billion in loans and Greenlaw basked in its glow as it made him a millionaire publicity magnet.

Now all of that is gone. However, pointed questions about his lack of leadership and poor judgment, including his buying kegs of beer for business meetings, remain.

Some wonder if the company's demise hinged on its practice of hiring jocks and stunning but inexperienced young loan officers and managing them loosely. Still others questioned whether Greenlaw's litigious and financially draining divorce and his romance with another woman distracted him.
...
By early 2004, Merit was such a powerhouse that Greenlaw spent $13.5 million to buy a headquarters, complete with a gym and a waterfall, in a Kirkland office park. In the lobby, a photo mural captured the company's spirit. On one side, under the caption "That was then," was a dowdy couple in a stiff dance embrace. On the other, under the words "This is Merit," were a scantily clad dancer and her partner bending in a sensual tango move.
...
When interest rates rose and the lucrative refinance business slowed significantly, Greenlaw gambled that he could increase revenue by adding loan officers who could complete more complex loans. That didn't work, and the overhead sank him, he said.

Was it really that simple? Pressed, Greenlaw admitted it wasn't.

"Buybacks were high," Greenlaw said, without giving details.

In other words, Merit's loan officers executed mortgages that were so flawed that the investors who bought the loans from Merit forced them to buy them back.

A longtime broker not affiliated with Merit said such buybacks are "extremely rare."

I tend to agree with those commenters yesterday that pointed out the eerie similarity between this story and tales of the dot-com era of the late '90s. Lavish spending, inexperienced employees, super-laid-back environment... Sounds like a recipe for success to me!

After reading about how fast and loose these guys ran their business, I think what is surprising and newsworthy is not so much that Merit Financial went out of business, but that they were able to keep up the charade for as long as they did. If the housing market and mortgage industry were healthy and sane, how could a shady business with this high a profile have gone on for so long?

(Elizabeth Rhodes, Seattle Times, 12.03.2006)

"The Market is Returning to Normal"

Now that the NWMLS numbers have been released, let's check in with our favorite bubble-fighting dynamic duo, Rhodes & Cohen. If you were expecting them to cheer on the inexplicable increase in prices, you will not be disappointed. This month's unified message: Prices are up, but now is the time to buy! From Ms. Rhodes' article; Home sales drop, not prices.

Prospective homebuyers who've been frustrated by too much competition for too few homes — your time is now.

But don't expect to find widespread price breaks, because home prices are up.

In fact, after four months of either steady or slightly declining prices, King County's median single-family house price rose in October to $440,000, up from $425,000 in September.

The number of houses and condominiums for sale in the central Puget Sound region — King, Snohomish, Pierce and Kitsap counties — was up from 27 to 59 percent last month, compared with a year earlier, according to statistics released Tuesday by the Northwest Multiple Listing Service.

Increasing inventory is giving buyers more clout, said Lennox Scott, chairman and chief executive of John L. Scott Real Estate.

"We're adjusting from a frenzied market back down to a strong market," Scott said. "Buyers have selection."

It's pretty much the kind of booster material we've come to expect out of the Times: a strong focus on price gains and little to no mention of statistics that point to a slowdown.

On the other hand, although Ms. Cohen's article has a similar focus, it comes out a lot more balanced. I don't know if it was intended this way, but the sarcastic tone of the headline pretty much says it all: It's a buyer's market, if buyer's loaded.

More and more home sellers are chasing fewer and fewer buyers, but those who did buy in October paid more than buyers did the month or year before that, according to housing statistics released Tuesday.

The Northwest Multiple Listing Service's October report continued a trend of increasing numbers of homes on the market and fewer sales month over month and year over year. The median home price in the city was $420,000, the same as July's price after two consecutive months of declines and represented the largest year-to-year increase since July.

King County as a whole showed a similar trend, with a slightly smaller increase in inventory, a decline in sales from October 2005 and a slightly higher rise in the median home price.

The price statistics reflect what home shoppers such as Dariush Zand are seeing.

"They keep saying it's a buyers market," he said while looking over a Montlake home last month. "Prices haven't changed. I don't see any reduction."

Zand, who is planning to move back to the area from San Jose, Calif., said prices have declined there.

"California's starting to look like a pretty good deal now," he said. "And it's sunny and 75 (degrees) every day."

Of course, she still managed to throw in a heaping helping of real estate booster talking points, including the recent favorite, "the market is returning to normal."

The statistics show the market is returning to normal, said Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University.

"Yes, the inventory is going up," he said. "It's still sitting lower than it was three years ago."

Buyers now can take time to search out the house they really want, rather than jumping at something that will do, Crellin said.

"Because of the period of frenzied activity, we sort of lost sight of what a normal market looks like and feels like."

Is it possible that while the housing market collapses in the rest of the country, Seattle just "returns to normal"? Sure, anything is possible I suppose. However, with the inventory still increasing YOY at a faster rate every month, and sales still on the decline, I have to wonder what mysterious force is going to stop these trends once the market has become "normal"?

(Elizabeth Rhodes, Seattle Times, 11.08.2006)
(Aubrey Cohen, Seattle P-I, 11.08.2006)

Beware the Hidden Costs

Here's a bit of balance for you after that rental horror story. Astoundingly, today's "home buying isn't always a walk in the park" story comes to you courtesy of the Seattle Times (but not E. Rhodes of course).

Katherine and Robert McCartney thought they'd found the perfect first home in a 1,400-square-foot 1950s rambler in Boise, Idaho, a few years back. They thought they were getting a deal.

They actually were getting in way over their heads.

A few months after they bought the house, the couple had to move to Washington for work. But before they put the house on the market again, they spent thousands of dollars on a new roof, garbage disposal, paint job, window screens and sand for the oil furnace.
...
In the process of buying and reselling quickly, they discovered one of the cardinal rules of homeownership: That cool condo or cozy craftsman likely will cost thousands more than you paid for it, most notably for maintenance and repairs, furniture and fixtures — expenses that buyers should plan on but don't.

Which is one of the many reasons that stretching your budget to buy a home is never a good idea. You never know what will come up, and you are pretty much guaranteed that there will be something that you didn't expect. The "rule" that you shouldn't spend more than 30% of your gross income on housing wasn't just pulled out of thin air. If you don't leave a financial buffer in your budget, you're setting yourself up for problems down the road.

Home ownership is great, and I'm all for people buying houses—as long as they can actually afford to. There's more to "affording" a house than the simple [INCOME] > [MONTHLY PAYMENT] equation.

(Heather Rae Darval, Seattle Times, 10.28.2006)