At our weekly office meeting this morning agents were reporting an overall uptick in activity, especially in the first-time buyer price range of the low $300Ks.
One agent received five offers on a home in the $310K range in Bothell, while another had a similarly priced home sell in just a couple of days. Perhaps more surprisingly, an agent sold a home near Microsoft in the mid $700K price range in just five days. I’m also hearing about quite a few all-cash offers, which usually means investors are making their presence felt.
The key to selling a home quickly in this market is to prepare it to the nines, keep a pulse on the current market and price to compare favorably to the competition. Buyers expect a great deal in this market, but they also know a great deal when they see one.
Where are prices heading? (Does anyone really know?) I’ve had clients call me because they’re hearing that we’ve hit bottom. I have to tell them that in my opinion it’s more likely we haven’t, because of current economic events that I don’t think we’ve seen the effects of yet. However, with prices down nearly 20% from their peak and interest rates extremely low it’s definitely a friendly market for Seattle area home buyers.
The March 2009 Case-Shiller housing statistics show that the Seattle area had a 15% year-to-year decline in home prices, and just under 20% since the peak in mid-2007. Nationally home prices slipped an average of 19% over the last year.
Here’s a link to a Wall Street Journal chart with data about the 20 cities tracked by the study. Clicking at the top of each column ranks the cities by the criterion for that column (i.e. year over year change, change since December 2008, etc.)
Just a reminder, as I’ve mentioned before, the Case-Shiller data is slightly weighted towards higher end homes.
At today’s office meeting the word was that buyer activity has picked up dramatically, which ties in with what we heard from title last week about a lot of new title orders for purchases coming in.
Three agents today reported multiple offers, including one agent whose home in the low $300′s in the Redmond/Kirkland area got something like 13 offers, and apparently could have had more if they had decided to wait.
The key there seems to have been that she made it clear in the remarks that it was not a short sale, while all of the competing homes in that price range were. It’s likely that people are tired of making long-shot offers on short sales, waiting the weeks and weeks to get word from the bank and spending a lot of energy on what often turns out to be an iffy close.
Consensus waas that magical price range is under $600K, and especially under $400K.
With all of the downbeat economic news raining down on us recently, here’s something that might surprise you:
At my weekly office meeting last Tuesday several agents reported having been in multiple offer situations during the previous week, and one had even lost out on a home to a competing agent.
The ‘hot’ price ranges were in the $300K to 500K range, although one agent was in two multiple offers in the $650K range in Kirkland. The market above $700K appears to be a different story, which is again why the Case-Shiller housing numbers need to be taken in context, since that study places a larger weight on higher priced homes.
Based on what I see and hear, there’s quite a bit of interest in buying now that prices have gone down and interest rates are low – it’s just counterbalanced by enormous caution and the fact that fewer people have the cash on hand to make a move right now. There are strong factors at play on both sides.
It’s still realistic to think that home prices are probably going to continue to go down for a while, considering the economic climate. However, the multiple offers are also a reality, and not one you’re likely to read in the local paper. So remember, you heard it here first. 
The headlines are buzzing with the release yesterday of the Case-Shiller Home Price Index numbers, which show a year-to-year overall drop of 18% in home prices in 20 major metropolitan areas.
The local flurry is over Seattle prices, which for the first time show a double-digit yearly drop (10.2% from October ’07 to October ’08.)
Here are some things to consider when looking at these (or any) numbers:
- Everybody’s got some spin factor.
In my opinion that includes the regular newspapers, NAR (the National Association of Realtors) and yes, subconsciously, probably even me.
Example 1 – The Media:
The headline yesterday in the Atlanta Business Chronicle was “Home price indexes drop 18 percent in October.” They no more dropped 18% in October than in April or any other month since October ’07 . Each month of the year contributed one month’s worth of data to a total yearly drop of 18%.
A more correct headline would have been “Home price indices show an 18% year-to-year drop in October.” (But would that have gotten as many clicks? Probably not.)
Example 2 – The Industry:
In May 2008 NAR Chief Economist Lawrence Yun predicted that most of the country was due for an upward turnaround in the latter half of 2008. According to the Inman News article, he also predicted that markets like Miami, Las Vegas and Phoenix could see prices go up as much as 50 percent over the next five years.
While that last ship has not yet sailed, we know the 2008 prediction was totally optimistic.
- There’s usually a story behind the numbers.
Here’s some information from the NAR website that I think is worth noting. They say:
Case-Shiller coverage is limited to 20 major markets, many of which have experienced the nation’s worst housing sales and housing price declines. In contrast, the NAR monthly index provides nationwide coverage of all housing markets, and is supplemented by quarterly coverage of 150 markets.
and,
Case-Shiller places a larger weight on higher priced homes in each of the 20 cities covered, skewing the results toward the upper end of the market. The NAR index covers all markets with computations based on actual market experience.
Copyright National Association of REALTORS®, Reprinted from REALTOR.org with permission.
I realize that NAR is real estate industry-friendly, but those seem like valid points to me. The NAR Existing Home Sale report shows an 11.3% drop in home prices nationwide from October ’07 to October ’08.
And remember:
- October 2008 numbers reflect closings of many homes that went off market during September’s stock market chaos.
Sure, there are many other factors at play, but that certainly had some effect. One of my own home buyers got a hefty discount on a home (in addition to a big discount during the original negotiations) simply because the stock market tanked before the home inspection and he was able to push for a big monetary concession that the seller felt was still preferable to putting the home back on the market.
For the record, I’m not saying that NAR is necessarily right. But I know how easy it is to massage statistics, and frankly nearly everyone does what they can to promote their own angle.
Let’s at least be aware of that, read past the headlines, and try to get the most objective information possible.
The number one emailed article in the New York Times a few days ago was called “It May Be Time to Think About Buying a House.”
The article was a mix of positive and negative regarding the housing market. On one end it cited lower home prices, low interest rates and homebuyer incentives, while at the other end of the spectrum was the potential for home values to decrease.
Interestingly, it quoted a study (opens as a pdf) which included Seattle as a market that was projected to potentially see home values decline significantly by 2012. (The study came out before the government took steps to reduce borrowing costs.)
This prediction was in direct contradiction to the PMI Group’s ‘Economic and Real Estate Trends’ report (opens as pdf, go to page 6), which has Seattle as a market with minimal chance of seeing home value depreciate over the next two years.
So it’s an interesting take, and maybe mainly a reminder to take economic studies with a grain of salt.
My own totally personal prediction based on what I’m feeling from my client base is that next year is not going to be as dismal as most people are currently predicting. Yes, economic times are tough, but many people have faith in the long term health of our market and are looking to move up from their current home while they have a chance to buy when prices are lower.
Again, this is not company spiel, just my thoughts based on the vibes I’m getting. Seeing as this is now in the public domain you’re welcome to call me on it later.
Today’s Wall Street Journal had an interesting article about predictions for future home price trends in the U.S. Some of the takeaways are:
- Some of the experts they spoke with expect the housing market to begin rebounding in late 2009, others believe it will be 2010 or later.
- Consumers, on the other hand, are more optimistic, according to three October 2008 surveys that showed 61% of homeowners believe the price of their home will stabilize or increase in the next 6 months, 91% believe real estate is still a good long term investment, and 51% believe it’s a good time to invest in real estate (compared to 32% for stocks.)
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Here are some stats showing Seattle and Eastside real estate activity through July 2008. The following graph shows the total days on market (CDOM) for houses and condos in King County, beginning in May 2007. As you can see, average listing time before a sale has nearly doubled during that time.
The triangles show that the percentage of sales price compared to original listing price has dropped from 99% to 94%.
The following graph shows the months of housing inventory remaining during the same time period.
The change from 3.3 in May 2007 to 8.6 in July 2008 doesn’t mean that there are 2.5 more homes on the market, since the remaining months of housing inventory evaluator is based also on the number of pending and closed sales in any given month.
For example, in May of 2007 there were 11,188 homes for sale, 3670 pending sales and 3420 closed sales. In July 2008 there were 16,643 homes for sale, 2248 pending sales and 1931 closed sales.
Prediction: We’ve had the typical summer slowdown along with some downbeat housing news over the past six weeks, so I expect the August numbers (which reflect closings of homes that went off market in July) to be even weaker. However, I’d love to be wrong. Those stats are due out in mid-September.
Here are two graphs that show some interesting trends in King County home sales over the past year, from April 2007 through June 2008. It’s also an example of how easy it is for a graph to not tell the whole story.
Both are for King County houses and condos, new and resale. Pink columns show the average days on market. The triangles show the percentage of the original listing price that the home actually sold for.
As you can see, the number of days a home stays on market before selling has increased significantly since summer of 2007, when the Seattle and Eastside housing markets started to shift downward. The percent of asking price received also dropped from 99% to 95%.
Compare that to the graph below, which uses exactly the same data except that it shows cumulative days on market. This includes time on market due to re-lists (I believe it’s a 90 day window before previous listings no longer count), and therefore is a more accurate reflection of the time it took a home to sell.
Both show the same overall trend, but the second graph gives a better representation of the market.
Those are the latest numbers available through Trendgraphix for now. I expect the August closing numbers to reflect a pretty slow July market. That being said, I’ve still seen a few homes go off market in a day or two, but they’ve been priced extremely aggressively in order to sell quickly.
