Housing consultant Ivy Zelman via the New York Times:

…home prices are going back down.

Moody’s chief economist Mark Zandi via Bloomberg:

I think we’re going to see another leg down.

And Goldman Sachs chief economist Jan Hatzius:

Our current working assumption is a 5%-10% drop in home prices through the middle of 2010.

Note that these forecasts are all nationwide. In most parts of the country home prices began falling a good year before Seattle, and had fallen further than Seattle before the inefficient, expensive, and economically stupid tax credit put the brakes on the full return to affordable housing.

If nationwide average home prices do indeed drop another 5-10% in the coming year, I suspect that Seattle area home prices will probably be down 10-15%.

Oh and by the way, in case you didn’t see the news; as expected, a couple weeks ago Congress passed an extension and expansion of the idiotic tax credit. The move was tacked onto a completely unrelated extension of unemployment benefits to assure that no congressman could vote against it (crap like that should be illegal), and is estimated to cost another $10 billion that we don’t have (so you can expect it to cost at least $20 billion). Oh, and just for kicks they threw $33 billion in tax refunds to homebuilders into the bill, too. Because the national debt just wasn’t big enough already. Super!

“Tired of setting your money on fire every month?”

“Stop throwing away your money renting!”

Maybe you thought that the dramatic and decisive collapse of the housing bubble would have rid us of this type of nonsense marketing. Well, you thought wrong. The twist this time though, is that the advertiser in question isn’t pushing residential real estate, but 800-1,500 sqft garage bays in a sort of garage condo type building.

Setting Your Money on Fire

[See post to listen to audio]

Tired of setting your money on fire every month, renting storage?
…
Lots of you… have stuff you love or hobbies you love with no good place to put it or do it! GarageTown solves that problem forever, while you make a smart investment in commercial real estate.
…
Stop paying rent!

You Don’t Even Have to do the Math

[See post to listen to audio]

If… you’re renting commercial space, your cash flow is taking an unnecessary beating.
…
Stop throwing away your money renting, and start saving by owning.
…
Check out the five-year financing plans available. You don’t even have to do the math! We did it for you!

I thought you all might get a good afternoon laugh out of those ads.

According to their data, the Seattle area has shed 66,600 jobs in the last year, while adding 42,320 people to the labor force.

…in the hardest-hit region of the country, the Western states, homeowners continued to be overly optimistic when evaluating the value of their own homes.

Nationwide, when asked about their own home’s value over the past year:

• 25% think their home’s value has increased
• 26% think their home’s value has stayed the same
• 49% think their home’s value has decreased

In reality, 72 percent of U.S. homes lost value over the past year, and 22 percent of homes increased in value.

Drilling down into the more detailed release (pdf), you can see that out here in the west, homeowners still seem to be the most overly optimistic bunch in the country.

53% of homeowners in the west believe their home has declined in value in the last year, while 28% believe their homes have increased in value. In reality (according to Zillow), 78% of homes have declined in value, and only 17% have increased.

Meanwhile, only 15% of homeowners in the west expect their home’s value to decrease during the next six months, which is not too surprising given that nearly half the people surveyed base their belief in a housing market bottom on “general good news about the economy.”

With the stock market continuing to surge (quite likely due to a growing dollar carry trade) and the mainstream press giddily pumping an alleged recovery while all but completely ignoring the fact that none of the underlying poisons in the economy have been addressed (and in fact many of the problems have been amplified), of course most people would believe that housing has bottomed.

As usual, the sweet interactive data visualizations (new and improved!) in today’s post come to you courtesy Tableau Software.

In the charts below I have taken the calculated value for SAAS and subtracted 2, in order to better visualize the difference between a buyer’s market and a seller’s market. Using this method, negative SAAS values indicate a seller’s market, while positive values indicate a buyer’s market.

Summary

King County’s overall SAAS continued to drop below the “balanced” level, coming in at 1.59 for October (September was 1.80). 18 of 30 areas came in below 1.75 as seller’s markets (over half for the first time in recent years), Only 1 of 30 came in above 2.25 as a buyer’s market, and the remaining 11 were more or less balanced between 1.75 and 2.25.

Hit the jump for the rest of this month’s interactive charts and commentary.

Here’s a year-over-year comparison for each NWMLS neighborhood.

Year-Over-Year Comparison

120 (Des Moines) is the only region that came in as a convincing buyer’s market, with an SAAS of 2.9.

Regional History

Not surprisingly, the recent decline in SAAS has been felt pretty much all across King County.

The three toughest markets for sellers were Des Moines / Redondo (120) at 2.9, Kirkland / Bridle Trails (560) at 2.1, and Black Diamond / Maple Valley (320) at 2.1.

The three best markets for sellers as of last month were Juanita / Woodinville (600) at 1.2, Jovita / West Hill Auburn (100) at 1.3, and Redmond / Carnation (550) at 1.3.

It’s called a “directed thread,” and it goes like this:

• I’ll pose a question for discussion.
• Everyone hashes it out in the comments.
• Later this week I’ll parse the discussion.
• The most useful or interesting posts will be mixed into a post of their own sometime next week, hopefully harnessing the collective knowledge of the community for the betterment of the whole.

So, here’s today’s discussion topic: How do you find properties that are the best value in today’s market?

Do you mostly look at specific neighborhoods? Are there certain property characteristics that often signal good value? What tools do you use, etc… Anything and everything related to finding the best value is fair game. Let’s hear it.

As something of a consolation prize for the lack of a more meaty post (and because I just think it’s cool and I want to share it), here’s a picture I shot last night of Times Square from the Empire State Building. See you all tomorrow.

This poll will be active and displayed on the sidebar through 11.22.2009.

Powered by Twitter Tools

Feel free to download the old charts in Excel 2007 and Excel 2003 format. To get specific info about a certain point on any graph in the post below, float your mouse pointer over the data.

Before we get to the cool stuff, here’s the usual table of YOY stats for each of our seven covered counties as of October 2009.

October 2009	King	Snohomish	Pierce	Kitsap	Thurston	Island	Skagit	Whatcom
Median Price	3.7%	12.3%	10.3%	0.4%	10.7%	7.0%	10.1%	5.0%
Listings	19.7%	23.8%	22.8%	26.1%	14.5%	7.3%	4.2%	10.1%
Closed Sales	33.3%	42.5%	24.0%	5.5%	5.7%	26.8%	9.0%	19.0%
Seasonally Adjusted Active Supply	1.6	1.8	1.7	1.6	1.6	1.7	2.0	1.8

Summary

Hit the jump for the rest of this month’s interactive charts.

The visualization below is comparable to our previous chart of closed sales in each county in October 2008 and October 2009:

Closed Sales

Kitsap, Skagit, and Thurston counties all still seem to be mostly missing out on the sales spike action.

Here’s our comparison of median prices in each county at their respective peaks and in October 2009:

Change from Peak

Still pretty much in a holding pattern.

Seasonally Adjusted Active Supply

Only Skagit County came in on the “buyer’s market” side with October’s SAAS, and only Skagit and Thurston saw higher SAAS than last year.

The complete lack of a strong surge in sales in Kitsap, Skagit, and Thurston counties is interesting. Given that these counties have some of the lowest home prices around the sound, it is surprising to see that the tax credit incentive doesn’t seem to be having more of an effect.

October 2009
King: 666 NTS, up 4% YOY
Snohomish: 323 NTS, down 2% YOY
Pierce: 385 NTS, down 36% YOY

Foreclosure notices dipped a bit in all three counties last month. Unfortunately the foreclosure rate seems to historically be an extremely noisy measure, alternating up and down month-to-month nearly every month, so we can’t really read much into this particular one-month dip. And, thanks to SB 5810 (more on that here), the year-over-year numbers aren’t particularly useful right now, either..

Here’s a simple look at how October’s foreclosures compare to the same month last year in each of the three counties:

Next let’s look at the percentage of households that received a Notice of Trustee Sale (based on household data for each county from the American Community Survey, assuming linear household growth between surveys):

King County came in at 1 NTS per 1,185 households, Snohomish County had 1 NTS per 816 households, and Pierce had 1 NTS for every 774 households (higher is better).

According to foreclosure tracking company RealtyTrac, Washington’s statewide foreclosure rate of one foreclosure for every 822 households was 29rd worst among the 50 states and the District of Columbia (down from 23rd last month, possibly still due to SB 5810). Note that RealtyTrac’s definition of “in foreclosure” is much broader than what we are using, and includes Notice of Default, Lis Pendens, Notice of Trustee Sale, and Real Estate Owned.

Here’s a look at King County’s Notices of Trustee Sales along with Trustee Deeds (which represent one way that a bank can actually complete the foreclosure process and repossess a house).

496 Trustee Deeds in King County set a new record, and was higher than the volume of Notices of Trustee Sales seen anytime prior to Q2 2008.

In case you’re curious, here’s one reason that I believe the current downtick in foreclosures is the result of the state legislation rather than an underlying fundamental trend of easing pressure on mortgage holders:

Since 2000, the unemployment rate and the foreclosure rate have tracked fairly close to each other. It seems doubtful that we will see a significant reduction in the rate of distressed mortgage holders while still experiencing a rising unemployment rate.

Following are the usual charts of King, Pierce, and Snohomish County foreclosures from January 2000 through October 2009. Click below to continue…

Only July of last year was higher than October’s reading of 666.

July and October of last year came in higher than October of this year in Snohomish.

Pierce County actually dropped below the levels set in every single month of 2008.

Note: The graphs above are derived from monthly Notice of Trustee Sale counts gathered at King, Snohomish, and Pierce County records. For a longer-term picture of King County foreclosures back to 1979, refer to the final chart in this post. For the full legal definition of what a Notice of Trustee Sale is and how it fits into the foreclosure process, check out RCW 61.24.040. The short version is that it is the notice sent to delinquent borrowers that their home will be repossessed in 90 days.

State	Percent
Washington	26.3%
Utah	25.0%
Arizona	21.3%
Nevada	20.0%
Oregon	19.5%
Georgia	19.2%
California	17.8%
Florida	16.3%
Michigan	13.2%
Maryland	10.8%
Colorado	10.6%

This week we looked over the numbers to determine which states have the most stress in their banking sector. For the ranking, we added together the number of institutions that are on the Unofficial Problem Bank List and failures since 2008 and divided by the number of institutions headquartered in the state and failures since 2008. Interestingly, Georgia is not the top ranked state. Here is the top 10 list; actually top 11 as Maryland and Colorado are in a virtual tie. Please note that we only ranked states with at least 15 institutions headquartered within their borders, as we did not want the ranking influenced by a small banking market.

Washington State leads the way with more than 26 percent of its banking industry either under formal enforcement action or having failed. No wonder the esteemed governor wrote a letter to the state’s congressional delegation complaining about bank regulators (see Wall Street Journal article).

Here’s a map of Washington’s 23 troubled banks, according to Calculated Risk’s unofficial list, as well as Washington’s three recently-failed banks (via the FDIC), and WaMu, which the FDIC lists as a Nevada bank.

View Washington’s Troubled Banks in a larger map

Hat tip: Puget Sound Business Journal

Today’s theme is King County SFH October stats in bar charts compared to each October since 2000.

Note that the definition of “Active Listings” was revised in July 2008 to exclude certain listings.

In the comments, a reader claimed that I was “reading this graph wrongly,” and that plotting the data in this manner “will always see a giant gap.”

Since there is typically a delay between when a sale goes pending and when it actually closes, this would make sense logically. Unfortunately, the data does not bear this theory out. In general, the gap tends to appear only in the spring, with pending and closed sales generally evening out in the summer and fall.

Here’s another way to visualize the difference between this year and previous years:

Six of the ten months so far this year have blown past the lowest average monthly difference in 2000-2008 (-635 in February).

If you’re interested, I have also plotted the pre-bubble years 2000-2003 individually:

• 2000
• 2001
• 2002
• 2003

No matter which way you slice it, this year is incredibly out of whack when it comes to the number of pending sales that actually turn into closed deals.

Powered by Twitter Tools

Here’s a link to this month’s NWMLS press release: Tax credit spurs big surge in Western Washington home sales

Before we get into the roundup, I’d like to take a moment to quote an excerpt from the monthly NWMLS data post from May, which was titled Huge Gap Opening Between Pending and Closed Sales (a subject that I first brought to your attention in August of last year).

The disconnect between pending sales and closed sales grows ever larger. … Something is becoming extremely fishy about the pending sales data.

…it is good to keep in mind when you start reading news reports in the coming weeks about the market supposedly picking back up. It’s an illusion.

Here’s a graphical representation of the 2009 sales illusion:

Pending sales peaked at 2,447 in June, while so far closed sales have not made it higher than 1,758—a nearly 30% discrepancy. So far this year there have been at total of 20,025 pending SFH sales in King County, but only 12,986 actual closed sales. In other words, more than a third (35%) of pending sales have yet to materialize into closed sales. That difference is typically well under 10%.

Find me a newspaper that reported this growing issue last August.

Click below for this month’s roundup of gawking at the tax credit.

Eric Pryne, Seattle Times: Tax credit brings house buyers out in October in King, Snohomish counties

Home sales in the Seattle area reached new highs for the year in October, a burst real-estate professionals attributed in large part to the $8,000 federal tax credit for first-time buyers.
…
On the Eastside, the tax credit has helped spur sales in neighborhoods south of Interstate 90, said Thadine Bak, broker in Windermere’s Bellevue South office.

It also has created what she called “trickle-up” buyers: Homeowners looking for new, often more expensive homes once they sell their houses to first-timers. There has been a burst of interest recently in houses in South Bellevue in the $600,000-$700,000 price range, Bak said.

Eastside sales increased partly because sellers are getting more realistic in pricing their homes, said Mona Spencer, broker in John L. Scott’s Redmond office: “They’re finally getting it.”

But the impact of the federal tax credit can’t be understated, she added: “It gives [buyers] an incentive to go out and look.”

Once again, Eric’s reporting does a good job of sticking to the facts. Home sales are up thanks to the tax credit.

Gerry Spratt, Seattle P-I: Pending home sales spike, MLS report says

Pending homes sales were up more than 64 percent in Seattle and almost 71 percent in King County in October over the same period a year ago as first-time homebuyers rushed to beat the Nov. 30 expiration of an $8,000 federal tax credit, according to the latest numbers released by the Northwest Multiple Listing Service.

In the entire 19-county MLS coverage area, pending sales were up nearly 63 percent year-over-year and the median home price was down 7.2 percent to $269,995 — the smallest drop since June 2008. Inventory fell 17.39 percent from last year to 38,159 — the lowest level since December 2008.

Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University said the pending sales number is good indicator of market activity, but can be misleading.

“We need to understand that some, and perhaps many, of those pending will never close, and if they are pendings on short-sale properties they may close, but not for a long time,” Crellin said in an e-mail. “That said, the surge in pending sales in October was clearly driven by buyers claiming the tax credit who wanted to be able to close by the end of November. It’s probably even more spectacular than it looks, because I suspect that most of those contracts were written in the first half of the month, giving the buyers at least 45 days to close.”

Okay, first off, there was no “surge in pending sales in October.” Pending sales were virtually flat for the month. They “surged” year-over-year because typically pending sales tend to decline slightly from September to October, and last year they dropped off dramatically:

Secondly, as mentioned above, pending sales are about as useful a measure of actual market action these days as “open house traffic.”

Mike Benbow, Everett Herald: Snohomish County home sales shoot up 35%

Home sales in Snohomish County exploded last month as buyers rushed to beat a deadline that they thought might end an $8,000 tax credit.

Home sales in the county rose 35 percent from a year ago and pending sales ballooned 91 percent as first-time buyers hurried to close their deals by the end of this month, the Northwest Multiple Listing Service reported Thursday.

“I had my best month in 20 months,” said Meribeth Hutchings, a Windermere broker in Lake Stevens who is also on the board of the listing service.

She added that Thursday’s House vote to extend the first-time buyer credit and expand it to other people was great news.

It’s always “great news” when the federal government blows tens of billions of dollars that we don’t have to boost your special little industry. Maybe I can get Congress to pass a giant handout to bloggers, next.

Kelly Kearsley, Tacoma News Tribune: Closed sales of homes rise in Pierce County

Pending and closed home sales increased significantly in Pierce County last month as first-time homebuyers scrambled to take advantage of a tax credit that was set to expire this month, according to Northwest Multiple Listing Service figures released Thursday.

Pierce County’s pending home sales – where an offer has been accepted – spiked 55 percent from the same time last year to 1,174. It’s not the most pending sales in a month for this year, but it’s a significant uptick from last October.
…
The threat of an expiring tax credit did create some urgency for buyers who wanted to get a deal closed before the end of November, said Kevin Mullin, incoming president of the Tacoma-Pierce County Association of Realtors.

“It’s first-time homebuyers, definitely. They are still making up the lion’s share of the market,” Mullin said.
…
The national real estate industry pushed to expand and extend the housing tax credit. Locally real estate professionals hoped it would help spur more sales.

“It can’t hurt anything,” said Larry Bergstrom, president of Crescent Realty in Spanaway.

Well hell, if “it can’t hurt anything,” I still say we should bump it up to $1 million, and make it permanent. Start lobbying your senators and representatives now.

Rolf Boone, The Olympian: Home sales, median prices decline

Thurston County’s median home price fell more than 11 percent from October 2008 to October 2009, the second time this year that prices in the county have dropped by more than 10 percent, according to Northwest Multiple Listing Service data released Thursday.
…
Burger Professionals owner and broker Doug Burger said median prices fell because of the number of houses going through foreclosure or the short-sale process. A short-sale occurs when the lender agrees to accept less for the house than the value of the mortgage. It is that downward pressure on prices that has forced some sellers who are not in default to also lower their prices, Burger said.

“The average Joe had to compete with these prices,” he said.

How sad for the average Joe seller. Funny how I don’t recall reading this kind of pity for the average Joe buyer back in the days of bidding wars and waived inspections.

(Eric Pryne, Seattle Times, 11.05.2009)
(Eric Pryne, Seattle Times, 11.06.2009)
(Gerry Spratt, Seattle P-I, 11.05.2009)
(Mike Benbow, Everett Herald, 11.06.2009)
(Kelly Kearsley, Tacoma News Tribune, 11.06.2009)
(Rolf Boone, Olympian, 11.06.2009)

Here’s your King County SFH summary, with the arrows to show whether the year-over-year direction of each indicator is positive or negative news for buyers and sellers:

October 2009	Number	MOM	YOY	Buyers	Sellers
Active Listings	8,869	-5.2%	-19.7%
Closed Sales	1,758	+8.7%	+33.3%
SAAS (?)	1.61	-11.4%	-27.9%
Pending Sales	2,295	+0.3%	+72.9%
Months of Supply	3.86	-5.5%	-53.6%
Median Price*	$377,500	-1.2%	-3.7%

In a great big surprise to absolutely nobody, closed sales bumped up in a seasonally unnatural pattern in October, no doubt due to the belief many buyers had that the $8,000 tax credit would be expiring at the end of November (it is now foolishly being renewed and extended, pushed through Congress on the back of an unrelated extension of unemployment benefits).

At this point it still looks unlikely that closed sales will manage to break through the 2,000 mark this year. In the past, closed sales have fallen an average of 15% from October to November. I suspect that this year we may see sales hold steady or possibly even post a slight increase, but a 14% increase would be surprising, especially with the tax credit now having been extended.

Here’s how the closed sales situation is shaping up compared to previous years:

Thanks to an apparent abundance of eager homebuyers that aren’t very good at math, closed sales made a clear break from the trend seen every other year since 2000, ticking up from September to October. I expect a similar market distortion to appear next month as well.

Feel free to download the updated Seattle Bubble Spreadsheet, and here’s a copy in Excel 2003 format. Click below for the rest of the usual monthly graphs.

Here’s the graph of inventory with each year overlaid on the same chart.

The tax credit isn’t having much of an effect on inventory, which pretty much followed the usual seasonal pattern.

Here’s the supply/demand YOY graph. In place of the now-unreliable measure of pending sales, the “demand” in the following two charts is now represented by closed sales, which have had a consistent definition throughout the decade.

Only 2003 had YOY sales increases in excess of what we saw for October. I’m starting to sense a Cash-for-Clunkers-esque hangover coming this winter…

Here’s the chart of supply and demand raw numbers:

Here’s the median home price YOY change graph:

And lastly, here is the chart comparing King County SFH prices each month for every year back to 1994.

Still floating along around 2005 pricing. July 2005: $375,000. October 2009: $377,500.

Here’s a few news blurbs to hold you over until tomorrow’s reporting roundup.

Seattle Times: King County home sales climb to ‘09 high in October
Seattle P-I: Pending home sales spike, MLS report says

In this particular case, “spike” actually means “stayed flat, but last year plummeted.”

In commemoration of this geeky occasion, here are a few statistics relating to the comments on Seattle Bubble.

As of the 0×10000th comment, 65,536 comments had been posted across a total of 1,852 posts, for an average of 35 comments per post. Seattle Bubble was launched on August 5, 2005, so that’s an average of 42 comments per day.

Stupid spam robots have attempted (and failed) to post 89,069 (0×15BED) spam comments, outnumbering comments by real people 1.4 to 1. And that’s just since Seattle Bubble’s move to its own domain in May 2007, meaning that the spambots (failed to) post an average of 99 comments per day. Yikes!

Top 10 most-commented posts:

1. 2008.06 – May Reporting Roundup (330 comments)
2. 2009.06 – May Foreclosures Up 69% from 2008 in King County (295 comments)
3. 2008.08 – House Valuation Workshop (232 comments)
4. 2009.01 – Official Word on Microsoft Layoffs: 1,400 Now, 5,000 Total (218 comments)
5. 2009.07 – Are Home Price Drops Around Seattle Mostly Over? (218 comments)
6. 2008.07 – June Reporting Roundup (206 comments)
7. 2009.08 – Comment of the Week: Impulsive Behavior Disorder (198 comments)
8. 2008.01 – Predictions: 2007 Revisited, 2008 Prognosticated (186 comments)
9. 2008.09 – Breaking: House Votes Down $700B Bailout (179 comments)
10. 2009.07 – NWMLS: Sales Edge Above ‘08, Median Up 5% MOM, Down 12% YOY (177 comments)

Top 10 12 most prolific commenters:

1. Kary L. Krismer (2,548 comments)
2. The Tim (2,085 comments)
3. david losh (1,596 comments)
4. deejayoh (1,504 comments)
5. Scotsman (1,472 comments)
6. patient (1,190 comments)
7. Eleua (1,177 comments)
8. softwarengineer (1,150 comments)
9. meshugy (929 comments)
10. Matthew (925 comments)
11. Ray Pepper (869 comments)
12. Jon (782 comments)

[Update: There was a glitch in the auto-generated top ten that caused some commenters' count to be split. I have updated the list to correct for this error.]

Technically, “Anonymous” was #1 with 2,651 comments (a throwback to Seattle Bubble’s old days at Blogger.com), but since that’s not really a single person, it doesn’t count. What’s really impressive about Kary’s spot at #1 is that he only just started commenting on Seattle Bubble in July of last year, so in less than 16 months he has managed to rack up nearly twice as many comments as the next-closest competitor (not counting myself), averaging 5.4 comments per day.

And let’s not leave out the forum!

Top 10 forum posters:

1. rose-colored-coolaid (1,976 posts)
2. deejayoh (1,154 posts)
3. TJ_98370 (837 posts)
4. The Tim (790 posts)
5. Alan (780 posts)
6. Robroy (681 posts)
7. sniglet (679 posts)
8. Markor (602 posts)
9. biliruben (573 posts)
10. WestSideBilly (550 posts)

A giant THANK YOU goes out to everyone that participates in the discussion here at Seattle Bubble. I have learned a lot from you, and I think on the whole we have made a positive contribution to the understanding and demystifying of real estate and related economic issues in the Seattle area. I hope that we can continue the conversation for many 0×1000s of comments to come. ;^)

Here’s an update to the post-WWII job loss chart, courtesy of Calculated Risk, in which I’ve added a mark so you can see where the “stimulus” was passed.

Wow, good thing we changed direction to the tune of $787 billion*, huh?

*(Actual cost: much, much more)

If there is any doubt about who the stimulus was really directed at saving, just take a look at an update to the stock market crash comparison:

Woo, go Wall Street!

Finally, speaking of bailouts for Wall Street and the banks: Congress Poised to Keep Homebuyers’ Tax Credit

The Senate and House are poised to agree on a compromise measure to extend unemployment benefits that also would expand a popular $8,000 tax credit for homebuyers, despite a recent government report on extensive mistakes and suspected fraud in the program.

The Senate might pass its version as early as Wednesday, and aides to Congressional leaders say the House could accept it this week, sending the bill to President Obama to sign into law. After weeks of partisan delay in the Senate, Democrats are eager to show progress before Friday, when the October jobless report is again expected to show high unemployment.

Super! So while people continue to lose their jobs, and absolutely zero of the underlying problems in the economy have been fixed, let’s pour another ten or twenty billion dollars into the housing market to try to keep prices propped up (i.e. – keep homes as unaffordable as possible) a little longer so our buddies in the big banks that got us into this mess can avoid taking losses.

Sounds like a plan to me!

Here’s your preview of October’s foreclosure and home sale stats:

First up, total home sales as measured by the number of “Warranty Deeds” filed with the county:

County sales as measured by warranty deeds were up significantly (16.7%) from last year in October, and marked another month-to-month increase (5.2%). This is no surprise, since as I mentioned last month, the impending expiration of the $8,000 mortgage subsidy is definitely having an effect on the people who have been duped into thinking we have already hit bottom.

Next, here’s Notices of Trustee sale, which are an indication of the number of homes currently in the foreclosure process:

Foreclosure notices actually declined from September, which could signal either an easing in the foreclosure “crisis” or possibly just a continued lag as the pipeline from SB 5810 continues to fill. We probably won’t really know for sure which one it is until sometime next year.

Here’s another measure of foreclosures, looking at Trustee Deeds, which is the type of document filed with the county when the bank actually repossesses a house through the trustee auction process. Note that there are other ways for the bank to repossess a house that result in different documents being filed, such as when a borrower “turns in the keys” and files a “Deed in Lieu of Foreclosure.”

A new record high in October, lagging the peak month for Trustee Sale notices by four months.

Lastly, here’s an approximate guess at where the month-end inventory was, based on our sidebar inventory tracker (powered by Estately):

Looks like listings will be down around 13% year-over-year, and 6% month-to-month.

Stay tuned later this month a for more detailed look at each of these metrics as the “official” data is released from various sources.

Feel free to download the old charts in Excel 2007 and Excel 2003 format. To get specific info about a certain point on any graph in the post below, float your mouse pointer over the data.

Before we get to the cool stuff, here’s the usual table of YOY stats for each of our seven covered counties as of September 2009.

September 2009	King	Snohomish	Pierce	Kitsap	Thurston	Island	Skagit	Whatcom
Median Price	7.9%	11.1%	8.2%	4.6%	2.8%	1.8%	2.0%	8.7%
Listings	19.4%	23.6%	25.8%	25.1%	15.8%	2.0%	4.9%	9.7%
Closed Sales	14.3%	14.6%	12.4%	14.5%	1.5%	11.5%	20.9%	19.3%
Seasonally Adjusted Active Supply	2.0	2.1	1.8	2.0	1.9	2.5	3.0	1.5

Hit the jump for this month’s interactive charts.

Summary

The visualization below is comparable to our previous chart of closed sales in each county in September 2008 and September 2009:

Closed Sales

Some of the outlying counties appear to be missing out on this summer’s sales spike. I guess the tax credits and low interest rates aren’t enough to overcome the commute anymore. Is “drive till you qualify” finally dead?

Here’s our comparison of median prices in each county at their respective peaks and in September 2009:

Change from Peak

Nothing really new here, since most prices have been holding steady all summer.

Seasonally Adjusted Active Supply

Kitsap, Island, and Skagit all actually turned in larger SAAS than a year ago, with Skagit’s market still coming in firmly on the buyer’s side. Interestingly, Whatcom was the worst market for buyers, with an SAAS of just 1.5.

As summer draws to a close we still haven’t seen a big spike in closed sales of the same magnitude that we saw in pending sales earlier in the year. More and more I’m starting to think we never will…

Powered by Twitter Tools

The Real Estate Heat Index (a proprietary index I created that uses supply, demand, and home prices to calculate the general “heat” of the housing market) rose in all seven Puget Sound Counties in the third quarter, but still remains below pre-bubble levels.

Meanwhile, affordability dropped in every county but Snohomish, despite interest rates in the 5s.

The full version of Sound Housing Quarterly includes detailed data and analysis for King, Snohomish, Pierce, Kitsap, Thurston, Island, and Skagit counties.

Head over to HousingQuarterly.com to subscribe to Sound Housing Quarterly. You can also download a free single-page summary of this quarter’s report, or head over to the free archive to check out last year’s Q3 report in full.

Note from The Tim: The following is a guest post from Charlie Walsh, the Founder and CEO of ValueAppeal, a new startup based in Seattle. ValueAppeal is a simple online tool that homeowners can use to help them appeal their property tax assessments.

King County Property Tax Appeal Deadline Is Soon!

Each year counties around the country send out notices in the mail letting homeowners know what the new assessed value of their home is for property tax purposes. Unlike most counties around the country, King County doesn’t send out all of their assessment notices at the same time. Over the course of the summer, the King County Assessor sends out assessment notices for a different neighborhood each week. Homeowners have sixty (60) days from the postmark date on their mailing notice to file their appeal (a.k.a. Real Property Petition Form) with the King County Board of Equalization. That means each neighborhood’s appeal deadline is a little different.

When homeowners receive their notice in the mail that their property tax assessment has gone up above the market value of the home, the gut reaction is “there’s no way I could sell my house for that much.” That’s exactly what happened recently to the Thompson family in Seattle. They received a notice in the mail that their four bedroom, 3 bathroom home was assessed for over $675,000, way more than they could possibly sell it for on the open market.

Unfortunately, most homeowners leave it at that. They pay their bill grudgingly and try to forget about it. A lot of homeowners may not even realize how much they’re overpaying because their mortgage company pays the property taxes on their behalf and then adds it to their statement each month. Fortunately the Thompsons didn’t just accept their unfair assessment, they figured out the rules for filing and appeal and lowered their assessment by just over $110,000, saving them over $1,300 on their property tax bill.

The first thing the Thompson’s did correctly was to make sure they filed their Real Property Petition Form before the end of their 60 day appeal window. (The Real Property Petition Form is available on the King County Assessor’s website, or by calling 206-296-7300) All King County homeowners receive an assessment notice in the mail between April and September of each year. The mailings are intentionally staggered over the course of the summer and homeowners have 60 days from the date of their mailing notice to file a notice of intent to appeal their assessment. The Thompsons received their assessment notice in the mail on September 10th so they had to file their appeal by November 9th at the latest.

In their research, the Thompsons learned that in order to prove their case for a lower assessment to the Board of Equalization, they needed to present 3-5 comparables homes “comps” along with the Real Property Petition Form they downloaded from the assessor’s website. This meant finding nearby homes similar in square feet, lot size, bedrooms, bathrooms, etc, that sold for less than their home was assessed for. This was the Thompson’s first big hurdle; where were they going to get the comps?

Finding the correct comps is harder than you might think.

Many homeowners will start by typing their address into a service like Zillow to get a long list of about 40 comps and picking the ones that seem best at first glance. Unfortunately, this often leads to their comps being disqualified and their appeal case being unceremoniously thrown out.

Why? There are a number of reasons comps are disqualified during an appeal hearing. For starters, the King County Assessor evaluates your home’s value as of the January 1st assessment date each year by looking at comps that sold PRIOR to that assessment date. Therefore, in order to successfully appeal, the homeowner must also submit comps that sold PRIOR to the assessment date as well. Zillow’s data is constantly updated to attempt to determine a real time market value, so most of the comps you see displayed for your property sold AFTER January 1st, 2009 and would be disqualified by the assessor.

And that’s not all. Homeowners are not allowed to submit comps that sold as part of a foreclosure, short sale, inheritance or divorce transaction, donation to charity, or any other non arm’s length transaction. Yet all of these transactions are technically “sales” and show up in official records. Unfortunately if you look up comps on Zillow, many of these important details get lost.

As you can see there are some hurdles that homeowners have to deal with when appealing their property taxes. Finding the correct comps to use in a property tax appeal is difficult. Fortunately for the Thompsons, today there are online property tax appeal resources available to help homeowners select the correct comps that didn’t even exist as recently as 2008.

On August 27th, 2009 the King County Assessor mailed assessment notices for the following neighborhoods: Queen Anne, Western West Seattle, Rainier Beach, Broadview, Blue Ridge, and Shilshole. That means the sixty (60) day window for these neighborhoods closes on Monday October 26th, 2009. If you’re only a week or two late filing your Real Property Petition Form they’ll usually let it slide, but don’t push it. If you never received your assessment notice in the mail you can sign an affidavit saying you never received it and they’ll allow you to file your petition after the deadline.

Click below for the remaining upcoming appeal King County property tax appeal deadlines.

Neighborhood	Mailing Date	Appeal Deadline
Laurelhurst / Windermere	9/3/09	11/2/09
Mercer Island	9/3/09	11/2/09
Enumclaw Plateau	9/3/09	11/2/09
Ravenna / University District	9/3/09	11/2/09
Blk Diamond / E Maple Valley	9/3/09	11/2/09
East Auburn / SE Kent	9/3/09	11/2/09
Kennydale / Newport Shores	9/3/09	11/2/09
Kingsgate & Queensgate	9/3/09	11/2/09
Fall City/Preston / Issaquah Highlands / Snoqualmie Ridge	9/3/09	11/2/09
West Kent	9/17/09	11/16/09
Issaquah to May Valley	9/17/09	11/16/09
Covington	9/17/09	11/16/09
Lake Youngs	9/17/09	11/16/09
Kent & Renton Suburbs	9/17/09	11/16/09
Vashon Island	9/17/09	11/16/09

]]> http://seattlebubble.com/blog/2009/10/29/avoid-pitfalls-when-appealing-your-property-tax-valuation/feed/ 15 http://seattlebubble.com/blog/2009/10/29/september-seasonally-adjusted-active-supply-by-neighborhood/ http://seattlebubble.com/blog/2009/10/29/september-seasonally-adjusted-active-supply-by-neighborhood/#comments Thu, 29 Oct 2009 13:00:19 +0000 The Tim http://seattlebubble.com/blog/?p=7717 Let’s check in again on our regular monthly neighborhood update to Seasonally-Adjusted Active Supply (SAAS). For an explanation of what seasonally-adjusted active supply is, please refer to this post. Also, you may view a map of the areas discussed in this post.

As usual, the sweet interactive data visualizations (new and improved!) in today’s post come to you courtesy Tableau Software.

In the charts below I have taken the calculated value for SAAS and subtracted 2, in order to better visualize the difference between a buyer’s market and a seller’s market. Using this method, negative SAAS values indicate a seller’s market, while positive values indicate a buyer’s market.

Summary

King County’s overall SAAS dropped further below the “balanced” level, coming in at 1.80 for September (August was 1.88). 11 of 30 areas came in below 1.75 as seller’s markets, 5 of 30 came in above 2.25 as buyer’s markets, and the remaining 14 were more or less balanced between 1.75 and 2.25.

Hit the jump for the rest of this month’s interactive charts and commentary.

Here’s a year-over-year comparison for each NWMLS neighborhood.

Year-Over-Year Comparison

Downtown Seattle condos still stick out like a bit of a sore thumb, coming in with an SAAS above 3.

Regional History

Most regions again saw declining SAAS values from August to September, probably due to the increasing number of sales that are being spurred by the tax credit. Further evidence that the tax credit may be heating up the market can be found in the fact that some of the cheapest parts of the county (down in the south) are seeing the largest drops in their SAAS.

The three toughest markets for sellers were Downtown Seattle condos (701) at 3.1, Enumclaw (300) at 2.4, and Central Seattle (380) at 2.4.

The three best markets for sellers as of last month were Vashon Island (800) at 1.3, East Bellevue (530) at 1.4, and East Lake Sammamish (540), at 1.5.

The Seattle-area economy is definitely more diverse than it was in the ’70s, but Boeing still dominates the employment base by the numbers.

A 2003 table from the Greater Seattle Chamber of Commerce shows Boeing employing more people than the next six-largest Puget Sound companies combined (Port of Seattle, Alaska Air, Microsoft, UW, Safeway, and the VA).

Here’s a crude visual of the size of Puget Sound’s top 10 employers based on the Chamber’s 2003 data linked above:

Here is some more recent data on Boeing, Microsoft, and Amazon (which was listed by the Chamber of Commerce as the 9th-largest local employer as of 2003).

Total Puget Sound Jobs
Boeing: 73,357 (46% of total headcount)
Microsoft: 40,224 (44% of total headcount)
Amazon: 10,850 (assuming 50% of total headcount)

And keep in mind that the numbers listed above are only those directly employed by Boeing itself. Many thousands more local jobs are directly tied to Boeing in companies that supply Boeing with parts and services.

In short, there’s clearly a lot at stake for the local economy (and by extension the local housing market) when it comes to Boeing’s long-term plans.

Note that the tiers are determined by sale volume. In other words, 1/3 of all sales fall into each tier. For more details on the tier methodologies, hit the full methodology pdf. Here are the current tier breakpoints:

• Low Tier: < $274,582
• Mid Tier: $274,582 – $404,443
• Hi Tier: > $404,443

The tier breakpoints continued to shift upward ever so slightly in August, rising 0.3% to 0.4% while the overall index rose just 0.1%. This would seem to point to a continuing shift in the sales mix of homes away from the low end toward the high end, which would also help explain why the overall index rose only 0.1% when the low tier rose 0.5%.

First up is the straight graph of the index from January 2000 through August 2009.

The low tier rose 0.5% month-to-month, while the middle tier fell 0.3%, and the high tier was virtually flat. The “rewind” situation held steady again, with low tier sitting about where it was in April 2005 and the middle and the high tiers at May 2005 levels.

Here’s a chart of the year-over-year change in the index from January 2003 through August 2009.

With a month-to-month increase, the low tier’s year-over-year picture improved the most in August. Here’s where the tiers sit YOY as of August – Low: -16.2%, Med: -13.6%, Hi: -14.9%.

Lastly, here’s a decline-from-peak graph like the one posted yesterday, but looking only at the Seattle tiers.

So far I am still pretty unimpressed with this “recovery.” With nearly half a year of flatline prices in Seattle, it is still unclear whether this is the bottom, or merely an extended lull on the way to the real bottom. Personally, my money’s on the latter.

(Home Price Indices, Standard & Poor’s, 10.27.2009)

Up 0.1% July to August.
Down 0.2% July to August (seasonally adjusted)
Down 14.7% YOY.
Down 22.2% from the July 2007 peak

Last year prices fell 0.7% from July to August (not seasonally adjusted) and year-over-year prices were down 8.8%.

Once again, here’s a little dose of sanity to contrast with what is no doubt set to be a day full of crowing and hoopla over the month-to-month increases seen in most of the 20 cities tracked by the Case-Shiller index.

It still looks as though Seattle is being somewhat left out of this party.

Here’s our offset graph, with L.A. & San Diego time-shifted from Seattle & Portland by 17 months. Look at SoCal’s year-over-year skyrocketing back up to zero. Portland came in at -12.5%, and now both Los Angeles at -12.0%, and San Diego at -8.9% came in better than Seattle.

Note: This graph is not intended to be predictive. It is for entertainment purposes only.

Here’s the graph of all twenty Case-Shiller-tracked cities:

In July, fourteen of the twenty Case-Shiller-tracked cities experienced smaller year-over-year drops than Seattle (vs. twelve last month). Dallas at -1.2%, Denver at -1.9%, Cleveland at -2.8%, Boston at -4.2%, Washington, DC at -7.9%, Charlotte at -8.6%, San Diego at -8.9%, New York at -9.6%, Atlanta at -10.6%, Los Angeles at -12.0%, Portland at -12.5%, San Fancisco at -12.5, Chicago at -12.7%, and Minneapolis at -13.7%. Vegas took the #1 spot again for the largest year-over-year drop, with prices still falling over 30% in a single year down there—stimulus? What stimulus?

Here’s an update to the peak-decline graph, inspired by a graph created by reader CrystalBall. This chart takes the twelve cities whose peak index was greater than 175, and tracks how far they have fallen so far from their peak. The horizontal axis shows the total number of months since each individual city peaked.

In the two years and a month since the price peak in Seattle prices have declined 22.2%. Definitely seems to be stuck moving sideways.

Here’s a complimentary chart to that last one. This one shows the

With just a 0.3% increase since March, the summer of stimulus seems to be having little effect on Seattle home prices. But hey, at least we’re not as immune to stimulus as Vegas apparently is. Down 9% in just the last five months. Ouch!

The following chart takes the post-bubble years of 2007, 2008, and 2009 and indexes each January’s Case-Shiller HPI to 100 so we can get a picture of how this year’s declines compare to last year:

Thanks to the tax credits, abnormally / artificially low interest rates, and lots of hype about a so-called recovery, it would seem that we have pulled 2009 into slightly better territory than 2008.

Lastly, here’s an update to the Case-Shiller vs. NWMLS median chart. The following chart shows Seattle-area 2009 home prices, indexed to January = 100, as reported by the NWMLS (using a 3-month rolling average) and by Case-Shiller.

Check back tomorrow for a post on the Case-Shiller data for Seattle’s price tiers.

(Home Price Indices, Standard & Poor’s, 10.27.2009)

Winter is hands down the best time to go house hunting in Seattle, for three major reasons.

1. Less Competition

If home sales were spread evenly throughout the year, each month would see roughly 8.3% of the yearly total. Of course, anyone who has spent even a little bit of time following the real estate market knows that this is not the case. Over the last nine years, four months have consistently accounted for less than their fair share of closed sales each year: November, December, January, and February.

Keep in mind that we’re talking about closed sales, so these represent people who were house-hunting roughly a month or so earlier. In other words, if you want the least amount of competition, you should be out there looking for your next home in December or January. October and November are also good, though not quite to the same degree.

It is true that inventory also tends to decline in the winter months, giving you less selection to choose from, but sales usually decline more, as winter almost always sees the yearly highs for “months of supply” (inventory divided by sales). And less inventory isn’t necessarily a bad thing anyway, as that leads us to the second point…

2. More Motivated Sellers

How many times have you heard a hopeful seller declare as winter approaches: “I’ll just pull my house off the market for the winter and try again in the spring.” These are the kinds of houses you don’t want to buy, because the sellers are obviously not very motivated.

Typically, sellers who leave their homes on the market through the long, dark winter are those that need to sell for some reason or another, and will therefore be more likely to be willing to bargain with you.

Look for homes that have been on the market for 4-5 months in the middle of December, and you’ll probably find a highly motivated seller.

3. Easier to Spot Major Problems

In the summer, Seattle homes look great with a fresh coat of paint, the blue sky in the background providing a delightful contrast to the gleaming reflection of the sun on the bright white trim. But what you don’t see is the host of problems that may be lurking under the surface, ready to spring out the first time the rains return.

When it’s wet and rainy outside, it is far easier to spot lots of common Seattle-area house problems:

• leaky roof
• leaky basement / crawl space
• mold
• flooding / muddy yard
• poor insulation
• bad window or door seals

Buying a house is a major financial commitment beyond the mortgage, and it’s best to go into it knowing about these kinds of issues before they rear their ugly heads. House shopping in the pouring rain is a great way to help make sure you don’t miss something.

Seize the winter.
Obviously if everyone took this advice, some of the benefits of house-hunting in the winter would be lost. Fortunately for you, most people will continue to let things like school schedules and sunny skies dictate their house shopping plans, making the winter the perfect time for you to get the best house for the least amount of money.

Powered by Twitter Tools

First up, here’s a two-year chart (stolen from my subscription journal Sound Housing Quarterly) of the year-over-year change in some of the broad job categories related to housing:

As of September, construction was still bleeding jobs at a rate of nearly 20% per year, though the rate of change has at least leveled off since March. Finance and real estate jobs have shown a similar pattern, leveling off at around 7-8% year-over-year drops. No particular signs of improvement in the year-over-year numbers just yet though.

The following chart shows the volume of job gains or losses in the last 12 months in some of the largest Seattle-area industries:

The same three sectors that were hurting in our June update are still suffering as of September: manufacturing, construction, and professional / business services. Between the three, a total of 50,600 jobs have been lost in the last year. Health care was the only major sector that added jobs in the period.

Here’s a look at the same data, broken down by the year-over-year percentage change, to give a better picture of the relative health of various industries:

Construction sticks out like a sore thumb in this view, with finance / real estate joining the general range of losses seen in manufacturing and professional / business services.

Lastly, here’s a big pie chart showing all major industries that make up Seattle’s job market, to give you some additional perspective to the above data:

Source: Washington State Employment Security Department

From the real estate news source Inman News: Final push for tax credit

Real estate industry trade groups are mounting a final push for an extension of the first-time homebuyer tax credit, with Sen. Johnny Isakson planning to tie the issue to an extension of unemployment benefits.
…
In testimony before the Senate Banking Committee today, Isakson, R-Ga., said he plans to introduce an amendment to legislation extending unemployment benefits that would make the current $8,000 tax credit available until June 30.

Isakson’s amendment would raise the income limits for the credit to $150,000 for individuals and $300,000 for a couples. The existing tax credit can’t be claimed by individuals making more than $95,000 or couples with adjusted incomes of more than $170,000.
…
The estimated cost of his latest proposal would be $16.7 billion over five years, Isakson said, citing the Joint Committee on Taxation.

So apparently the latest plan is to pull a common DC trick and tack the bill onto something else that would be political suicide to vote against. This disgusting ploy usually works, and if they pull off adding it to the unemployment bill, it is almost guaranteed to be passed. Also, considering that the current credit is probably going to cost in excess of $15 billion versus an original estimate of $6.6 billion, it seems likely that if passed, this proposal would cost us another $30 billion or more that we don’t have.

Next up we have a different outlook on the credit, via Calculated Risk: Home Buyer Tax Credit DOA?

From Reuters: White House skeptical on renewing home buyers credit
…
And more from Reuters on the widespread fraud: IRS warned again of U.S. homebuyer credit fraud
…
From Diana Olick at CNBC: HUD Hints on Home Buyer Tax Credit . Olick reviews Donovan’s testimony and writes:

[T]hat sounded more like a “No” to me than a “Yes.”

And Rex Nutting at MarketWatch reviews many of the arguments against the tax credit: Kill the wasteful home-buyer tax credit

Note in the second story CR points out that the IRS “has opened 107,000 civil cases related to the credit.” If we go by the NAR estimate that around 1.9 million buyers “will take advantage of the $8,000 tax credit this year,” the 107,000 civil cases represent a potential fraud rate of over 5%. Who could have guessed that when the government starts handing out free money, people would race to game the system?

I apologize for the overload of posts recently regarding the $8,000 tax credit, but I feel strongly this is an important issue related to real estate. The tax credit is wasting money, harming potential buyers by hampering the natural correction of the market, and helping to push the rental vacancy rate higher, which causes further pain for local and regional banks. The government needs to stop trying to prop up a broken market and let home prices fully correct.

Here is the contact info for our senators. I encourage you to call or fax them and encourage them to vote against any form of extension, renewal, or expansion of this wasteful and counter-productive spending spree.

Patty Murray
Phone: 202.224.2621
Fax: 202.224.0238

Maria Cantwell
Phone: 202.224.3441
Fax: 202.228.0514

[This story was corrected on 10/20 at 11:00 AM to indicate that the 107,000 civil cases opened by the IRS represent potential fraud, not necessarily actual fraud.]

Another of our reporters is working on a story on commercial real estate investment. I recognize that your blog follows residential real estate more closely, but I know many of the people reading it are doing so for investment purposes.

I would be thrilled if you would once again publish our question form.

I do have something to offer as some sort of a way to square things: our reporter Phyllis Fletcher did a 10-minute feature piece the other day on the fallout when people are evicted in order to make way for new development that never happens.

For those that do not remember, back in June I posted a similar request, which resulted in an interesting story about downtown office space.

This month’s questionnaire concerns commercial real estate investment decisions.

Just a few years ago an investment in commercial real estate looked like a sure thing. Now it’s a different story. What decisions are you making now because of the market downturn?

If you’ve got any recent experience in commercial real estate investment, head over to the KUOW question form and drop them a line. When the story is posted (presumably in a few weeks), I’ll be sure to post an update.

I have $50k in the bank, no debt, make 50k per year and am confident in a position that will pay 75k per year starting 06/10. Let’s assume that if the position doesn’t happen, I will take a second job to make up the difference.

I’ve never owned a home. Rent for me is one room in a house and just $400/mo. A place I buy would need to be on the eastside.

I’ve lived well below my means for years (and also been a Seattle Bubble reader for that amount of time). But in my current situation I’m seriously considering a first home. Your opinion on my situation would be appreciated.

- “Seattle Bill”

Here’s my advice for Bill:

1) Structure your budget around what you already have today, not what you might have sometime in the near future.

You’re making $50,000 today. That’s what you have to work with, not $75,000. If you buy today, setting your budget based on a future expectation of a massive increase in salary, you’re setting yourself up for failure.

Here’s what I recommend to anyone that is considering buying, in any market. First, go to your preferred mortgage broker, bank, or credit union and find out what kind of loans you are qualified for, how much you can borrow, and what your monthly payment would be. Getting a pre-qualification does not require you to commit to a lender or a loan, but will tell you for sure how much you can borrow.

For example, let’s say you were pre-qualified for a $250,000 loan, with a monthly principal + interest payment of $1,100. Add in probable taxes and insurance (we’ll say another $350 / month), and you’ve got a total monthly PITI obligation of $1,450. With a yearly salary of $50,000, that comes out to 34% of your gross income.

Here’s a simple affordability calculator I posted earlier this year to help you quickly calculate your own personal affordability situation.

Personally, my absolute upper limit would be 30%, but even that would come out to $1,250 a month for you, which is over three times what you’re paying right now. Figure out what you think you’d be comfortable with, and then force yourself to live with that budget for six months, saving the difference between your current rent and your expected monthly house payment.

If you succeed in living within that budget for six months, you’ll have a pretty good idea of what other sacrifices you’ll have to make to buy the house, and you’ll have another $5,000+ in the bank to help pay for closing costs or your down payment. If your salary does end up rising by 50%, either stick to what you could afford with $50k, or get pre-qualified again with the new salary, and “test drive” your budget again with the new salary.

2) If you decide to buy, pay a price that you think is fair for the house today (assume that it may stagnate or decrease in value in the future).

One surefire way to set yourself up for financial problems in the future is to rationalize your decision to buy a house by convincing yourself that it is a great financial investment.

There are plenty of great reasons to buy a house. Buy a house because you want a place that you have control over. Buy a house because you want stability. Buy a house because you want to plant a garden. Buy a house because you want to breed Irish Wolfhounds. Just don’t buy a house because you think it will make you money. Maybe it will, maybe it won’t, but that factor should not be a part of your decision-making process.

3) Keep your eye on bank-owned houses, and look for homes that need a little work.

There are definitely some good deals to be found out there today, but they’re not in the owner-occupied homes that have been “upgraded” with hardwood floors, granite countertops, and a fresh coat of paint on the outside. High curb appeal may sell a house fast, but it doesn’t sell a house at a good bargain. If you’re willing to put in a little bit of work, look for bank-owned fixers.

The Bottom Line: Know what you’re getting into.

Nobody can tell you what you should do, since no two people have the same financial situation. My recommendation is just that you do the research, critically evaluate your finances, and should you decide to buy, do so with realistic expectations.

So what’s your advice for Seattle Bill? Let’s hear from the commenters.

Powered by Twitter Tools

How many sales locally have been “stimulated” by this ridiculous giveaway of tens of billions of dollars we don’t even have? Let’s try to see if we can estimate the number of stimulated single-family house sales for King County, using some trend analysis of closed sales data from 2000 through 2008.

At left above is a chart that includes total closed sales each month from 2000 through 2009, with October and November data this year projected based on the May – September performance. At right above is a chart of a hypothetical “worst case” scenario of sales volume we may have seen without the influence of the $8,000 tax credit, generated by taking the average month-to-month change for each month in 2000-2008, and applying that from month to month in 2009, moving forward from the number of actual sales in April.

The “worst case” estimate at right above most likely understates the number of sales that would have taken place without the tax credit, since decreasing prices were already beginning to stimulate sales anyway, but for the sake of argument, let’s go with this estimate. Using the above estimates, we arrive at a total number of 3,850 tax credit “stimulated” sales of single-family houses in King County.

If we assume that 100% of the stimulated sales and 75% of the “worst case” baseline sales (i.e. – sales that would have happened anyway without the tax credit) were qualified first-time homebuyers, we can calculate that 11,911 sales will qualify this year for the tax credit. That’s a total cost to (future) U.S. taxpayers of over $95 million, for 3,850 “stimulated” SFH sales in King County—$25,000 per sale.

This is actually quite a bit lower than the nationwide estimates I have seen elsewhere, which put the cost per “stimulated” sale at around $43,000, which means we’re probably over-estimating the number of “stimulated” sales. With 60% as many “stimulated” sales (2,310), the cost per “stimulated” sale comes out to around $40,000.

If we assume that the lower number (2,310) is more reflective of reality and that roughly 90% of these sales were not pulled from thin air, but were in fact merely borrowed from 2010, we can calculate the approximate effect of the expiring tax credit on 2010 sales. Based on those assumptions, once the tax credit expires, we can expect sales to come in roughly 125 to 200 lower than they otherwise would have each month throughout 2010.

Of course, that assumes that the tax credit will be allowed to expire, which is looking less and less likely. Not that extending it another six months to a year will somehow prevent the market from having to pay back the borrowed sales eventually (at a greater and greater cost the longer it is deferred), but why should pesky little economic realities prevent Congress from spending billions of additional dollars that we don’t have?

September 2009
King: 796 NTS, up 31% YOY
Snohomish: 421 NTS, up 42% YOY
Pierce: 479 NTS, down 11% YOY

Not surprisingly, as the newly-mandated 30-day pipeline begins to fill up, foreclosures seem to be resuming their upward trend across the Sound.

It’s interesting to note that as of the end of the day yesterday, Trustee Deeds (the actual repossession of a house at auction by a bank) in King County were on track to hit five or six hundred in October, well over a hundred higher than the previous high, set in July (and ten times the levels we were seeing in 2007). But we’re getting ahead of ourselves. For now let’s focus on this month.

Here’s a simple look at how September’s foreclosures compare to the same month last year in each of the three counties:

Next let’s look at the percentage of households that received a Notice of Trustee Sale (based on household data for each county from the American Community Survey, assuming linear household growth between surveys):

King County came in at 1 NTS per 990 households, Snohomish County had 1 NTS per 626 households, and Pierce had 1 NTS for every 622 households (higher is better).

According to foreclosure tracking company RealtyTrac, Washington’s statewide foreclosure rate of one foreclosure for every 264 households was 23rd worst among the 50 states and the District of Columbia (up from 30th last month as the short-term effects of SB 5810 begin to wear off). Note that RealtyTrac’s definition of “in foreclosure” is much broader than what we are using.

Following are the usual charts of King, Pierce, and Snohomish County foreclosures from January 2000 through September 2009. Click below to continue…

Back up again in September, hitting a level higher than was seen any time prior to 2009.

Same story up north in Snohomish County. Lowest month in 2009, but higher than any month on record in any previous year.

Foreclosures ticked up the smallest amount in Pierce, which has been sitting below 2008 levels for two months in a row.

Note: The graphs above are derived from monthly Notice of Trustee Sale counts gathered at King, Snohomish, and Pierce County records. For a longer-term picture of King County foreclosures back to 1979, refer to the final chart in this post. For the full legal definition of what a Notice of Trustee Sale is and how it fits into the foreclosure process, check out RCW 61.24.040. The short version is that it is the notice sent to delinquent borrowers that their home will be repossessed in 90 days.

Methodology
The prices quoted below are for a 3-bed, 2-bath single-family homes with 1,750 to 2,000 square feet. For the rentals, these are based on actual houses I found currently on the rental market. For the sales, I used sale records of actual prices that people have paid in the last three months. Where possible, I have located multiple samples that match the description above and taken the average price.

To calculate the monthly payment (principal + interest only), I’ll be using a 5.15% interest rate (roughly the average over the last three months), (generously) assuming 20% down on a 30-year mortgage. Keep in mind that the true cost of buying also includes insurance, taxes, maintenance, and a host of other costs generally not paid by a renter. For a more detailed breakdown of the total costs (and tax benefits) of buying, hit up this 2007 post.

I have also indicated the price to rent ratio, which is simply the home price divided by the total rent paid in a year.

According to a table of data from Fortune Magazine, Seattle’s price-to-rent ratio just before the local peak in prices was at 38.0, compared to a 15-year average of 23.3. In our table above, the average price-to-rent ratio for a 3-bed, 2-bath home in a handful of Seattle-area neighborhoods comes out to 24.3. Unfortunately, the two are not directly comparable since Forbes’ calculation included houses, condos, and apartments all among the rentals (which would drive the rental prices lower and the long-term average price-to-rent ratio higher), while my data was drawn only from single-family homes.

While home prices have come down some since I first researched the rent vs. buy discussion in detail back in 2007, a growing oversupply of repartmenting condos and accidental landlords is also pushing down rents recently, so the price-to-rent ratio hasn’t actually changed as much as one might expect.

Overall, price-to-rent ratios in the low-to-mid 20s still seems a bit high. Not crazy out of control bubble high, but it still looks like there is room for a bit more correction. Especially when you consider that the current prices are being artificially propped up by unnaturally low interest rates and the $8,000 tax credit in the midst of nearly 10% unemployment and a local economic scene that has yet to show any clear signs of turning the corner.

* [Updated, see comment #71 below.]

Despite what some of my readers in the real estate industry may think, I’m a generally upbeat, optimistic kind of guy. I like to believe that things will be better tomorrow than they are today; that American ingenuity and hard work can overcome any obstacle in our path.

That being said, it has been difficult recently to maintain a positive outlook on the future, and not just because of the inevitable mathematical conclusion of ever-increasing debt.

How is it even possible for so many people to be this disgustingly, colossally lazy?

Bear with me for a moment while I attempt to explain where I’m coming from here. Consider the photo at right. What you see pictured here is the shoe section of the Nordstrom Rack on Alderwood Parkway at about 8:30 last night. This is not the aftermath of some sort of blowout sale—it’s is just the end of the day on a regular weekday at this mid-range retail outlet (the shoes I looked at were priced $50-$100). Throughout the course of the day dozens and dozens of people pulled a shoe off the shelf, tried it on, and just left it on the ground.

If your average American is so colossally lazy that they won’t even expend the near-zero effort required to put the shoe back on the shelf where they found it, is it any surprise that so many people failed to read their mortgage documents before signing and are now honestly surprised that their teaser rate interest-only mortgage payment has skyrocketed? Is there any hope that these same Americans that are leaving messes like the one pictured at right in their wake every day will be able to pull together and clean up the mess created by twenty years of drunken economic partying?

Will Americans finally buckle down, stop spending more than they earn, give up on get rich quick pyramid schemes, and learn to live within their means on a sustainable path to long-term prosperity? So far I haven’t seen any evidence to suggest that this is in our future.

Consider the latest data from an annual home-buyer survey administered by Robert Shiller and Karl Case:

In our survey, we ask, “On average over the next 10 years, how much do you expect the value of your property to change each year?” The average answer among 311 respondents in 2009 was an increase of 11.2 percent. The median response — with half above, half below — was 5 percent, also high.
…
In our survey data from one year earlier, when prices were falling at an annual rate of nearly 20 percent, buyers were still expressing long-term optimism. Then, the average answer to the question about expected yearly increases in home values was 9.5 percent a year, with a median of 5 percent — high figures indeed for that time. The bubble thinking is not new.

Even with the biggest housing bust in pretty much anyone’s memory, people still think that buying a home will be a magical path to 10% yearly returns—no effort required. Unbelievable.

I truly hope that we can somehow escape this economic death spiral of ever-increasing debt, destroy the prevailing sense of entitlement, and return to a time when financial responsibility is admired and hard work is rewarded. I just have a hard time finding any evidence that we’re headed in that direction.

There is no delight in watching the budget deficit soar. The $1.4 trillion deficit in the completed 2009 fiscal year to September is the highest ever in the U.S. in sheer dollar figures, and the highest since the Second World War if measured in relation to the overall economic pie. It’s a huge burden to the future generation and could easily cause interest rates to rise much sooner and quite sharply. Washington needs to come out with a credible plan to reduce the deficit over time.

However, one area where federal taxpayer dollars have effectively been utilized is in providing a homebuyer tax credit. The key to any future sustainable economic recovery lies in home values stabilizing or, better yet, a return to a historical appreciation rate of 3 to 5 percent each year. The bubble prices crash landed. All the excesses have already been removed. In fact, one could legitimately argue that home values have overshot downward.
…
It would be an utter pity if the housing market, just at the cusp of self-sustaining recovery, rolls downhill again. That could indeed happen if potential buyers step back and inventory again climbs. Falling home values – independent of whether overcorrecting is happening or not – will bring back all the associated collateral damage.

A much happier scenario would be that the buying momentum continues for few additional quarters such that inventory falls back down to the normal 5 to 7 months, a level consistent with home value stabilization. Once that is accomplished, the consumer “fear factor” of waiting and waiting for a lower price later down the road will no longer be part of home buying decision.
…
For that happy scenario to play out, a time extension on the home buyer tax credit is critically needed.

Unfortunately the full post is available only to registered members of the real estate professional’s social network ActiveRain. If you for some reason have a desire to read the whole thing, drop me an email and I can email it to you.

Powered by Twitter Tools

NWMLS press release, October 5, 2007:

Trying to time the market is “a fool’s game,” remarked one MLS director. “If you are buying a home to live in for more than three years, then buy the one you love, not the one that you can save $25,000 on,” advises Matt Deasy, general manager at Windermere Real Estate/East Inc. in Bellevue.

J. Lennox Scott, chairman and CEO of John L. Scott Real Estate said now is “an ideal time for buyers.”
…
“The time is right for buyers on the sidelines to step forward. They have many more home choices now than in the past few years,” observed [Windermere broker] Marcie Maxwell.

Seattle P-I, October 5, 2007:

One month of lower prices doesn’t mean much, said Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University.

“I think it is suggestive that there is some real softness in the (Seattle) market,” he said. “But at the same time, I think we’ve got a more resilient housing market than in many parts of the country.”
…
Matthew Gardner, a Seattle land-use economist who works with developers, does not put much weight on the Seattle median-home price, particularly because it excludes most sales of new condos, he said Friday.

Actually, year-to-year increases of about 4 percent in the median price across King County and the 19 counties in the listing service were higher than Gardner anticipated, he said. He expects a leveling off — with increases of roughly 3 percent — for a couple of years.

“We need to get through this backlog of inventory,” he said. “Also, we need to start allowing time for wages to catch up.”

Tacoma News Tribune, October 6, 2007:

Agents on Friday, however, largely portrayed Pierce County’s one-month price decline as more anomaly than trend and what’s to be expected in a market normalizing after the boom years of 2004 and 2005.
…
Buyers shouldn’t view one month of lower prices as a sign that more are on the way, said Bill Riley, owner of Gateway Real Estate. Riley is vice president-elect of the Washington Realtors, which plans to launch a campaign this month encouraging buyers to purchase now rather than wait.

“This is not a start of a decline. We’ve never seen a decline in such a strong fundamental market,” he said, pointing to expected job growth…

Everett Herald, October 6, 2007:

“It looks like the market has kind of taken a deep breath and just corrected itself a little bit,” said Nathan Gorton of the Snohomish County Camano Board of Realtors.
…
“It’s a good time to be a buyer right now.” … “I talk to a lot of buyers’ agents whose customers are saying they just want to sit back right now because they don’t think it’s a good time to buy a home,” he said. “They think, ‘Oh my gosh, the market is falling apart.’ Nothing could be further from the truth.”

For comparison, here were my comments about these stories at the time:

It will be interesting to watch the increasingly ridiculous gyrations of local real estate salespeople as the market continues its downward path, and they come up with more and more outrageous statements that fly in the face of reality. It looks like the bubble deflation show has finally rolled into town.

Indeed it has been an entertaining show, and trust me; it ain’t over yet.

Here’s the latest news on the status of a possible extension: Democrats May Extend Tax Credit for Homes

Democratic Congressional leaders are working with the White House to extend an expiring $8,000 tax credit for first-time home buyers, and aides said Wednesday that they were considering making it available to current homeowners who purchase a new residence.
…
The Democratic leaders met with the president to discuss a broad range of options to combat persistent high unemployment, officials say.
…
Keeping the home-buyers credit and broadening it has been a priority for real estate agents and the home builders lobbies, and for [Senator Harry] Reid, who faces a tough re-election race next year in a state [Nevada] that has been among the hardest hit by the housing crisis since mid-2007.

Okay first off, let’s drop the nonsense notion that somehow propping up home prices will “combat persistent high unemployment.” That’s a complete non sequitur. Now, before we really talk about extending the credit for another year, let’s have a look at its effectiveness and cost this year.

In February, when the “$787 billion” stimulus plan was passed into law, the CBO estimated that the $8,000 first-time homebuyer tax credit would cost around $6.6 billion (source, source). That would have been 825,000 first-time buyers claiming the $8,000 credit. As of September, the NAR is estimating that “1.8 to 2.0 million” first-time buyers will claim the credit, with a mere 350,000 of those being sales that “would not have taken place without the credit.” That would be a total cost of about $15.2 billion. Here’s a visual of those numbers:

To me, that looks like a program that has been pretty poor at actually “stimulating” people to do something, and pretty good at giving a nice fat $8,000 handout to people who were planning to buy a house anyway, at a cost well over double the original estimate.

However, apparently to organizations like NAR and NAHB, that looks like a rousing success story that should be both extended and expanded. According to Calculated Risk the NAHB is pushing to up the credit to $15,000, expand it to all homebuyers, and extend it another year. Because, you know, We The People can afford it, right? It’s not like the federal government is facing a massive budget deficit and a mind-blowingly enormous debt.

If we’re going to use the kind of anti-logic that NAR and NAHB are apparently high on, I like the plan that (ironically) was suggested by a Georgia Realtor: Let’s increase the tax credit to $100,000! Heck, why not make it permanent, and up it to $500,000, or even a cool $1 million? Apparently cost and effectiveness are not factors in this decision, we should just do whatever it takes to get those pesky homebuyers “off the fence,” right?

The constant argument that is raised in favor of extending the tax credit is that because home sales are a major driving force in our economy, stimulating the real estate market is a critical ingredient to economic recovery. Is it just me, or does that way looking at the problem seem obviously inherently flawed?

Allow me to explain by way of analogy. Let’s say I decide to quit my job as an engineer and instead get into a full-time Ponzi scheme that has me selling “business secrets” to an ever-growing pyramid of underlings, who themselves re-sell the “business secrets” to their own underlings, passing on a commission to me. Eventually the scheme collapses (as all Ponzi schemes inevitably do), and my income drops to zero. Now, I could go back and get a new engineering job again, but instead I decide to focus all my effort on figuring out ways to get people buying “business secrets” again so I can get my income back to where it was at the peak.

Sounds insane, right? Yet that is exactly what the government is attempting to do with the various “stimulus” plans directed at the real estate market.

Meanwhile, as Calculated Risk points out, “stimulating” people to move out of rentals and buy their own homes has some rather unpleasant unintended consequences:

And that means even more pressure on rents (rents are already falling). This is good news for renters, but this will also lead to more apartment defaults, higher default rates for apartment CMBS, and more losses for small and regional banks.

What I don’t understand is why aren’t major REITs that own rental units across the country (e.g. Equity Residential) lobbying congress just as hard as NAR and NAHB against extending the tax credit? You would think they would have a pretty strong interest in not defaulting on their loans due to too-low occupancy rates.

So basically what we’re looking at in the $8,000 tax credit is an inefficient, massively expensive, and quite probably economically damaging program. I can’t imagine why Congress hasn’t expanded it already.

There is basically this enormous teeming horde of potential home buyers out there lurking on the sidelines for no good reason. All we need to do is come up with the right concoction of incentives to get these pent-up buyers off the fence and the housing market will recover!

Here’s just one example of that kind of reasoning from an article yesterday’s Tacoma News Tribune:

According to Dick Beeson, a Windermere broker and a director of Northwest MLS, the latest numbers reflect “a lot of pent-up demand. A lot more people are realizing closed sales.”

As regular readers of these pages will recall, I do not buy the claim that there is a large mass of “pent-up demand.” In fact, I believe quite the opposite is true: that during the bubble (thanks to virtually non-existant lending standards and a mass get-rich-quick hysteria) and now post-bubble (thanks to various bailouts, tax incentives, and artificially low interest rates) a significant amount of demand has been borrowed from the future.

Let’s take a few moments to visualize the concept of borrowed demand using data on closed sales and population. Here are our working assumptions:

• The number of closed sales in the year 2000 is a reasonable baseline for a healthy market.
• In a normal market, closed sales will grow linearly as a function of households.
• Household size since the 2000 Census has remained steady at 2.39 people per household.
• For 2009, fourth quarter closed sales will come in 10% above 2008.

Based on these assumptions, here’s a view of the cumulative “borrowed demand” by year since 2000.

While sales in 2001 and 2002 were fairly close to what our assumptions would have predicted (slightly lower, probably due to the dot-com bubble fallout), as the housing bubble began to inflate in 2003 the number of borrowed sales started to pile up at an alarming pace, peaking at over 23,000 in 2006.

Since 2005 when closed sales peaked at 31,939 (vs. a forecast “normal” level of 24,118), the number of closed sales has dropped significantly, falling to roughly half the peak level in 2008 at 15,991. To real estate agents, these declining sales numbers indicate that there must be a building volume of “pent-up demand.” However, as the chart above demonstrates, this is merely what it looks like when the market is forced to pay back the demand that was borrowed from the future.

If sales had been allowed to continue correcting at the natural rate we were seeing in the first few months of the year, the entire borrowed demand debt would likely have been paid in full in 2009, allowing sales volumes to begin to recover to a more normal level in 2010. Instead, the market has been innundated with misguided attempts to bring out the non-existant “pent-up demand,” and the way things are shaping up right now it looks like last-ditch borrowing of future demand will leave us with a few thousand sales still to be paid back sometime in the future, likely resulting in a continued drag on demand in 2010 and 2011.

“Pent-up demand” is a myth. That’s not to say that there aren’t some legitimate potential buyers out there with the ability to purchase who are sitting on the sidelines waiting for a better market opportunity. However, they are most certainly far outnumbered by the buyers who purchased prematurely in 2003-2006 that would otherwise have waited a few years to buy once their finances were more in order.

First up, an excerpt from the NWMLS press release itself: Northwest MLS brokers agree "there’s a lot to be optimistic about"

“There’s a lot to be optimistic about,” according to one director of the Northwest Multiple Listing Service upon reviewing summary statistics for September’s housing activity. The report shows a big jump in pending sales compared to a year ago (up almost 27 percent), continued drops in inventory (down 17.7 percent versus a year ago) and brisk demand for homes at the lower end of the price spectrum.
…
Joe Spencer, president and COO of John L. Scott Real Estate, estimates up to 10 percent of pending sales do not close because they’re caught in the short sale cycle. Still, he comments, “There is a lot to be optimistic about.” He cites interest rates that are now in the high four percents as bordering “on being epic” and the federal tax credit as stimulants to the market.
…
Activity at open houses is reported to be brisk in many areas…

Sweet! The return of the ever-popular “open house traffic” metric of market health. I love it. Also classic is the heavy focus on the pending sales stat, which has been rendered practically meaningless in the past year. FYI, that 10% estimate is way too low. I’d put it around 20-25%.

Anyway, click below to read the rest of this month’s reporting roundup, in which the incredible surge and uplifting rally is detailed by the enthusiastic local press corps.

Eric Pryne, Seattle Times: King County home sales surge in September, but prices continue to fall year-over-year

Matt and Priscilla Karwoski bought their first house last month: a new, three-bedroom town house in West Seattle. One factor: the $8,000 tax credit the federal government approved for first-time buyers this year.
…
The $8,000 credit has helped fuel a surge in home sales, nationally and locally. Closed sales of single-family homes in King County were up 14.3 percent in September from the same month last year, the Northwest Multiple Listing Service reported Monday.

It was the fourth consecutive month of year-over-year gains.

But the tax credit is scheduled to expire Nov. 30. After that, some observers say, home sales could drop again, just as auto sales plummeted after the federal “cash-for-clunkers” program ran its course.
…
As for the $8,000 tax credit, it wasn’t the decisive factor, he [Matt Karwoski] added — but it was a factor.

Eric quoted a few thoughts from me on the current state of the market in today’s article. If you’re interested I have posted the full text of my comments to Eric. It is interesting to note that the buyer profiled in today’s article admits that $8,000 tax giveaway was not “the decisive factor.” Here’s another potential buyer in the comments on the Times’ site:

The $8,000 tax credit is one of the big reasons I’m trying to buy a home before November 30. … Without the tax credit I’d be willing to watch things for another year decline.
…
I even had some friends who bought a house a month before his wedding because of the tax credit. The bride already had a condo, but the groom bought a house, got the $8,000 and they have the condo rented out on a 2 year lease.

Another example of today’s $8,000 tax credit-inspired buyers being either borrowed demand or purchases that would have happened anyway. What a complete waste of a program.

John Stang, Seattle P-I: King County home sales surge, but pitfalls remain

Seattle-area house sales continued to show signs of life in September. But the magic economic window to encourage homes sales is closing.
…
Coldwell Banker Bain Managing Vice President Ron Sparks crowed about the report in the listing service news release.

“Our market has certainly come a long way since this time last year,” Sparks said. “For all the challenges that remain, it would be difficult to not appreciate the reemerging market vitality that continues to build even as the summer buying season closes.”

Crellin said it remains to be seen whether all of the currently pending sales will translate into closed sales. He said the turnaround time for short sales — in which a banks agrees to accept less than its owed as part of a sale to avoid the costs of foreclosure — has jumped from 4.5 weeks a year ago to 9.5 weeks today, according to Campbell Communications of Washington, D.C.

Short sales also have helped keep down prices, Dick Beeson, a director of the Northwest Multiple Listing Service, in the news release.

“Because there are so many short sales and bank owned property sales, it was inevitable that prices would fall slightly,” he said.

I can’t help but feel that Crellin’s being pretty disengenuous here. We’re not just looking at a time delay. We’re looking at a large number of completely failed pending sales. As of September there are now 4,887 “orphaned” single-family pending sales in King County for 2009. There is absolutely no way that those are all going to eventually translate into closed sales. I’ll be surprised if even half of them do.

Mike Benbow, Everett Herald: Prices down, but home sales up 9 percent in county

Snohomish County home sales rose for the fourth straight month in August, aided by falling prices and a rush by first-time buyers to beat the deadline for an $8,000 tax break.

There were 755 homes sold in the county last month, a 9.1 percent increase from a year ago, The Northwest Multiple Listing Service reported today.
…
The tax break was also a big issue, said Bob Maple, an Everett broker for John L. Scott Real Estate.
…
The tax credit, that’s what’s driving sales,” Maple said. “Nearly all of our business has been from first-time buyers.”

…first-time buyers that probably would have bought in 2010 or 2011, had a free money giveaway not pulled them into the market before they were otherwise prepared to take the leap.

C.R. Roberts, Tacoma News Tribune: Real estate rallies, agents say

We’ve already hit the bottom and we are no longer there.

So say real estate professionals who have reviewed the latest numbers, out Monday, from the Northwest Multiple Listing Service.

“It appears that we’ve seen the bottom, and we’re starting to climb out,” said Bill Riley, an owner of GMAC Real Estate in Puyallup and president-elect of Washington Realtors.

“People now know they can buy a house and it will be worth more down the road,” he said Monday. “I wasn’t sure last month, but we are definitely in an upswing. There’s a possibility we can see the price of homes increase in 2009.”
…
According to Dick Beeson, a Windermere broker and a director of Northwest MLS, the latest numbers reflect “a lot of pent-up demand. A lot more people are realizing closed sales.”

The demand for homes, he said Monday, “is there. It’s just getting the darn things to the point where they’re actually closing – and that’s starting to happen. I think it’s pretty close to a trend. More people are getting into the market and off the fence.”

Nice. Another explicit bottom call for the scrapbook.

Rolf Boone, The Olympian: Home sales start Rally, agents say

Pending home sales in Thurston County rose more than 11 percent in September, a sign that first-time homebuyers rushed to take advantage of an $8,000 tax incentive program before it expires next month, South Sound real estate agents said Monday.
…
Windermere Olympia real estate agent Gregory Moe agreed that the tax incentive program has boosted pending sales. Moe said he recently worked with a buyer who wanted to buy specifically to take advantage of the program.
…
Although the housing market is improving, the lack of local employment is holding the market back, he said.

Huh, so people without jobs can’t buy houses? Go figure.

(Eric Pryne, Seattle Times, 10.05.2009)
(Eric Pryne, Seattle Times, 10.06.2009)
(John Stang, Seattle P-I, 10.05.2009)
(Mike Benbow, Everett Herald, 10.06.2009)
(C.R. Roberts, Tacoma News Tribune, 10.06.2009)
(Rolf Boone, Olympian, 10.06.2009)

Here’s your King County SFH summary, with the arrows to show whether the year-over-year direction of each indicator is positive or negative news for buyers and sellers:

September 2009	Number	MOM	YOY	Buyers	Sellers
Active Listings	9,360	-1.4%	-19.4%
Closed Sales	1,618	+0.6%	+14.3%
SAAS (?)	1.82	-5.1%	-19.3%
Pending Sales	2,289	-1.0%	+29.5
Months of Supply	4.09	-0.4%	-37.8%
Median Price*	$382,160	+1.9%	-7.9%

Closed sales were basically in a holding pattern the last four months, trending similarly to the pattern we have seen in pending sales since roughly April. April – September pending sales have ranged between 2,114 and 2,447, while June – September closed sales have ranged between 1,609 and 1,727.

I suspect we will see a much stronger November for closed sales than usual, due to the impending expiration of the free money handout for knife-catchers, but I doubt that it will climb much above the 1,600-1,700 range we have seen through the summer. Historically (2000-2008), November closed sales volume has averaged 71% of June volume. 71% of this year’s June volume would be 1,179 sales this November. I’m guessing it will be higher than that, but I don’t see it going much above 1,500 – 1,600.

Here’s a visual of June volume (usually at or near the peak in the summer) vs. November volume since 2000:

Here’s how the closed sales situation is shaping up compared to previous years:

Feel free to download the updated Seattle Bubble Spreadsheet, and here’s a copy in Excel 2003 format. Click below for the graphs and the rest of the post.

Here’s the graph of inventory with each year overlaid on the same chart.

Inventory still pretty much flat-lining. Just enough people putting their homes on the market to satisfy the monthly demand. Not much more, not much less.

Here’s the supply/demand YOY graph. In place of the now-unreliable measure of pending sales, the “demand” in the following two charts is now represented by closed sales, which have had a consistent definition throughout the decade.

Another bump back up for the YOY closed sales. I suspect this will be in positive territory through November at least, and possibly December, depending on whether the tax credit is extended / expanded or allowed to expire.

Here’s the chart of supply and demand raw numbers:

Here’s the median home price YOY change graph:

And lastly, here is the chart comparing King County SFH prices each month for every year back to 1994.

Pretty much right at 2005 pricing. September 2005: $381,250. September 2009: $382,160.

Here’s a few news blurbs to hold you over until tomorrow’s reporting roundup, which may be posted later in the day than usual to give this post a longer period at the top of the page.

Seattle Times: Home sales in September surge in King County but prices still declining
Seattle P-I: King County home sales surge, but pitfalls remain

Go back up to the second chart in this post for a sec. Would someone mind explaining to me which part of that data constitutes a “surge”?