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December stats are available from the NWMLS. Here's a summary of the "residential" figures:
Active Listings: up 23% YOY
Pending Sales: down 9% YOY
Median Closed Price: $440,000, up 12% YOY.
I'll update this post later today with the usual graph and links to the updated spreadsheet and the NWMLS pdfs.
Update: Sorry about the delay. Here's the Seattle Bubble Spreadsheet, and here is the latest inventory & sales graph:
Here's a guest editorial from today's Seattle Times that says something I've been saying all along: The "home prices are high because we're running out of land because of Growth Management" argument doesn't hold water.
The cost of housing is spiraling out of control in many parts of the Puget Sound region. King County is redefining sticker shock for homebuyers as the median price of housing approaches $440,000. Years of double-digit increases are a serious threat to many people's dreams of home ownership, and to our region's livability."Market demand... is the primary determinant of housing prices." You don't say. Like maybe, market demand created by loose lending and low interest rates? The article mentions "increased income and purchasing power," but then goes on to over-emphasizes "our relatively high local wages" (without providing any actual comparative data), and essentially ignores the fact that the "increased purchasing power" comes from loose lending and rock-bottom interest rates.
As the problem escalates, the search for real solutions has become increasingly high-stakes. To tackle this challenge effectively, we must work together with accurate information. We must also move beyond misleading and misdirected attacks on environmental and growth-management laws. The evidence suggests these attacks are misleading and unwarranted.
Opening rural areas to sprawl development doesn't increase housing affordability, nor does protecting rural areas from irresponsible development make housing unaffordable. The state's Growth Management Act actually requires local governments to take steps to improve housing afford-ability and choice.
The Brookings Institution has found that market demand, not land constraints, is the primary determinant of housing prices. Its study, "The Link Between Growth Management and Housing Affordability: The Academic Evidence," reported that "housing prices are actually determined by a host of interacting factors, such as the price of land, the supply and types of housing, the demand for housing, and the amount of residential choice and mobility in the area." In other words, the impact of growth management on housing prices is only a part of the equation, and a relatively small one here.
In our popular area, demand is the big driver of housing cost; people want to move here and stay here. Increased income and purchasing power also are major factors in the rising cost of housing in our region.
In the end, our message is simple. We must do more to tackle the housing affordability problem in our region. But, we cannot succeed unless we focus on the facts about what is really driving our housing costs.I agree completely. Which is why I am so disappointed that in the entire 56-page study, the hand that lending standards and interest rates have had in creating the excessive demand of recent years is essentially completely ignored. Go ahead, search the pdf for "interest rate" or "financing" or "lending." Nada. They also chose to ignore the mass psychology that comes into play when appreciation of an asset is believed to be a "sure thing." In my opinion those are the two biggest reasons that the price of housing has shot up so much in the last few years.
This is the last post in this impromptu series. There were just so many articles out there full of "expert" quotes and predictions about the Puget Sound's economic outlook for 2007. Here are three more articles that discuss the interaction of the local housing market with the greater local economic picture. Surprisingly, the housing affordability elephant in the room is actually not completely ignored:
The Good Ride Continues in 2007
Because of relatively high rates of in-migration and household formation, the regional housing market will continue to do better than its national counterpart in 2007 and 2008.Dick Conway, (Washington CEO)
2007: A Sound economic picture
The one sector no one sees much of a lift from is housing, either in new-home construction or resale activity and prices. Pedersen says in-migration and employment growth are counterbalanced by the deterioration of affordability.Bill Virgin, (Seattle P-I)
Area's solid economy vulnerable to cracks showing up elsewhere
So even if the local real-estate market holds up better than its national counterpart, "if the U.S. housing market pulls the country into a recession, then we have a problem," Conway said.Drew DeSilver, (Seattle Times)
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.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.
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.
With the national economy expected to continue decelerating in 2007, how will Washington state fare?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...
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.
"It will still take a while before things start to really slow down," 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.
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.
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.
If you have spent some time looking at homes for sale around here, you have probably noticed that finished basements are frequently used as a major selling point, with some listings even counting a finished basement in the advertised total square footage of a home. However, as an article in today's Seattle P-I points out, finished spaces are not all created equal.
These days, children play, parents work and mothers-in-law sleep in basements. Homeowners move in big-screen televisions and overstuffed chairs with cup holders to create basement theaters.With so many homes out there being remodeled "under the table," improperly finished basements aren't the only issue. It's not uncommon for homeowners (or real estate "investors") to cut corners when DIY'ing their remodel work, and once the pretty trim and the granite countertops are down, a potential buyer has no easy way of knowing if the work was done to code.
But many never consider how they would get out of the basement if there were a fire, earthquake or torrential storm.
"I hadn't even thought about that. Now that we spend so much time down there, we should probably think of an escape plan," said Mike Kimelberg, whose bedroom is in the basement of his new Montlake house.
...
However, for decades now, Seattle codes have required emergency escape windows or doors from bedrooms in new or remodeled basements.
And, for about 15 years, Seattle codes have required new or remodeled basements to have a door leading outside. Regulations also mandate a window with a sill less than 44 inches from the floor and a clear 2-by-3-foot opening so people can climb out easily, said Rick Lupton, engineering and technical codes manager for the Seattle Department of Planning and Development.
But those rules rarely are enforced unless a permit is sought or there is a complaint.
"We have no way of enforcing it unless someone complains," Lupton said. "The rule applies more to rentals than private homes. If the tenant calls us, we will go look at it."
Realtor Jane Orvis, of ReMax Northwest Realtors, said she has seen illegal basement bedrooms used as a selling point, either included in a house's bedroom count or acknowledged with phrases such as "2+ bedrooms."
"It's kind of weird to go into a house and see a bedroom with no windows or a tiny, little window," she said. "There's nobody policing sales of houses that are not to code."
Orvis said she'll talk with buyers about any such issues if they're serious about a house, but largely relies on inspectors to point out code issues.
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.
First, let me introduce the "experts".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.
"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.What did we have in 2006?
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."
"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."Sure, no problem affording that $699,000 charmer with your conventional loan: $140K down payment and $4,800 monthly payment!
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.
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.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.
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.
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.We're different. Special. A breed apart.
"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."
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.OMG that is so affordable! Isn't it nice to have all these objective opinions?
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.
San Francisco has always been a favorite place of mine to visit. I even lived there during a brief time in 1999 when the vacancy rate was less than half a percent!
One thing that always struck me about San Francisco was the homeless. Not simply the sheer volume of homeless but the lengths at which they'd go to siphon a dollar out of you. It wasn't enough to have a gimmick, but your gimmick had to be different or more creative than those of any other panhandlers in the downtown area.
There were singers, poets, rappers, jugglers, one-man marching bands, balancing and other forms of sidewalk gymnastics as well as some of the most creative signage anywhere (maybe the dot-comers could have hired these guys as marketing executives).
This story from the Seattle PI illustrates to what length some local realtors have gone to attract new clients.
Puck is upfront about his job.What the dog is really saying: "Ruff!" (What the next five to ten years of homeownership may be like as equity fades and people struggle to make their ballooning toxic loan mortgage payments)
"Let's face it, I'm a marketing ploy," the 5-year-old English bulldog writes on his page of Realtor Phoenix Rudner's Web site, seattlehousehound.com.
The Seattle-King County Association of Realtors has about 8,800 active members -- up more than 80 percent from 1999. The state Department of Licensing reports there are 13,747 licensed real estate salespeople in King County.
Many agents carve out a niche by focusing on a location, home type or a group of buyers and sellers. Others wear costumes, serve pie or distribute handy gifts.
"There are so many dog owners who need someone who understands their needs," he explained.
RE/Max Northwest Realtor Ross Adams aims for a more exclusive group of buyers on his Web site, realestateforcops.com, which touts itself as the No. 1 Web site for law enforcement-friendly real estate services.Is it even possible for someone in law enforcement (or nearly everyone else for that matter) to purchase a home these days in this environment? How many police cars do you see parked outside Ballard 3/2's these days?
There's a picture of Adams, a reserve police officer, in his blue uniform, wearing his badge.
"In my years working as an officer, I've had the opportunity to get to know the men and women of law enforcement," the site says. "In addition to the great experiences I've shared, I've also grown to understand and appreciate the needs of the people in this profession."
Realtor Melanie Meyer of Century 21 North Homes Realty puts a different slant on the cop angle at her site: specialagentrealtor.com.I see a trend developing here. I wonder if King County is struggling to keep deputies that have been lured away by the "lucrative" Seattle real estate market.
Meyer, a former sheriff's deputy in Charleston County, S.C., also has pictures of herself in uniform. But rather than aim for any particular group of clients, she proclaims on her site that she's "solving the real estate mystery" for the general public.
Meyer gave up her law-enforcement career and moved to Seattle in 2003 to marry a man she met playing "Dark Age of Camelot" online. She started working in real estate two years ago.
Meyer's business card shows her wearing a fedora and trench coat and carrying a magnifying glass.
Her Web site also notes that she has a pit bull named Megan and is a freelance writer for "Today's Astrologer" magazine.
Meyer claims to be Seattle's "first and only Special Agent Realtor." It seems she didn't have the scoop on Serena Heslop.One thing is for sure - in the coming months and years it's going to take a real sleuth to find more Greater Fools willing to buy at these prices. Maybe these three are on to something.
Photos illustrating various sections of her Web site show her in a trench coat, fedora and dark sunglasses; a safari hat (holding binoculars); a hard hat, fake mustache and overalls; and a wetsuit.
Heslop said she's been a "Special Agent Realtor" for four or five years but just got her Web site up a few months ago. It's a way to liven up the dry, boring world of real estate advertising and give prospective clients an idea of who they'd be dealing with, she said.
News of a competing special agent Realtor didn't seem to rattle Heslop or Meyer.
"I'm sure I'll run into her someday," Meyer said. "I hope she's as silly as I am."
"I'm gonna scratch her eyes out," Heslop joked.
When Mary Schile switched to real estate two years ago, the former House of Blues contracts negotiator called herself the "Rock-and-Roll Realtor."Mmmmm. Pie.
Schile, of RE/MAX Mutual Realty, now claims the title of "Pie and Coffee Realtor," as illustrated by the apple and cherry pies she served at a Phinney Ridge open house Sunday, and the espresso cart.
"I love pie," she said
Does it work?(Aubrey Cohen, Seattle PI, 12-26-2006)
Dominic Canterbury, owner of the Seattle marketing and public relations firm D/C Strategic, said niche real estate marketing can work, if done right.
"Most agents are awful with their marketing," he said. "That's why they've sort of become the used car salesmen of our time."
Here's a series of questions from a reader that was posted in a recent thread. (The questions were originally posted under the name "Sash," but due to a strange bug in the transition to the new Blogger the comments now show as "anonymous".)
Folks, you seem to have a lot of data on the housing prospects in 2007 and forward. I would like to request your advice for/against considering buying a new home (new construction) in the Redmond area.First off, I want to make it clear that I am not particularly an "expert." I'm just a guy that has been following the market closely, digging up some data, and making some graphs. I know more (possibly a lot more?) about the local real estate scene than your average stranger on the street, but I don't call myself an expert.
Over the past year I have seen prices climb to astronomical levels in properties being built on 116th St in Redmond (Education Hill area). In your expert opinion are those prices going to "stay" the same in the years to come?
I see that the real estate marked is 'slowing'. Prices for 30 year old homes are now showing signs of reduced price. But in my opinion even after price reduction, some these homes are so over priced. What's your take here?
Last but not least what would you price a new construction of 2500 sqft in the Education Hill area at today?
Associated Grocers is selling a 55-acre plot of land in south Seattle, and apparently the commercial real estate world is all riled up. It's the biggest slice of Seattle land to come on the market in "recent years," and it's coming on the market because the owners want to "cash in on the significant appreciation."
It may be hard to overstate the significance local real estate professionals put on a 55-acre South Seattle industrial site that hit the market Friday.This is probably a good move on Associated Grocers' part. I imagine there's nothing going on there that can't be done just as efficiently in a cheaper location, and I'm sure they can come up with plenty of good ways to invest a cool $90 million that provide a better return than sitting on big piece of land that might well lose value in the coming years.
"It's a once-in-a-lifetime opportunity in the city of Seattle," said John Sullivan, a vice president in the Seattle office of CB Richard Ellis.
"It's larger than anything else that's sold in recent years," said John Vernon, Seattle-based broker with Colliers International.
Associated Grocers Inc. announced Friday that it was selling its site to cash in on the significant appreciation since the company set up its wholesale food distribution operations there in 1952.
...
Sullivan and Vernon expected the site to fetch more than $90 million.
I'm sure that those of you who have been reading Seattle Bubble since at least April recall the AP study that heralded Seattle as the "most educated" city in the USA (or "smartest," depending on whether the article author made the false assumption that more education == smarter). According to the April study:
Forty-seven percent of Seattle's adults hold bachelor's degrees, the strongest proportion of college-educated residents in any big city.However, a new study by Forbes lists America's ten most educated cities (again mis-titled as the "smartest cities"), and Seattle is nowhere to be found. Here's the complete list:
#1 Boulder, COThe methodologies of the two studies sound fairly similar, so I'm left wondering how Seattle went from #1 to below #10.
#2 Bethesda, MD
#3 Ann Arbor, MI
#4 Cambridge, MA
#5 San Francisco, CA
#6 Durham, NC
#7 Fort Collins-Loveland, CO
#8 Washington, DC
#9 Bridgeport, Stamford, and Norwalk, CT
#10 San Jose, Sunnyvale, and Santa Clara, CA
Using data from Sperling’s BestPlaces, we looked at data from the 200 biggest metropolitan areas in the U.S. and ranked them based on the percentage of the population age 25 and over with at least a bachelor’s degree.Whatever our percentage of degreed adults truly is, I don't think that an "educated" populace is some kind of magic bullet that will keep housing prices rising. I only really bothered mentioning this because some people made such a big deal about Seattle's #1 position in the April study.
Just some guy, living and letting live.
