The only actual “news” in the report is the latest update to the WCRER’s affordability index, which now stands at 76.6 in King County, up from 72.4 in the fourth quarter of 2007, and up over 10 points from the third quarter trough of 64.7. Of course that’s still far short of the 100+ average of 1994-2004.

The Times and P-I both printed stories on the report today. Here are a few quotes.

Seattle Times
“During softer markets, those households purchasing homes are finding bargains in the marketplace, which allows them to buy more home for the money,” said Glenn Crellin, research-center director.

“The total amount spent may be increasing, but the quality is also increasing, and the median masks some potential price weakness.”

Affordability is still a problem. The average King County buyer had just 76.6 percent of the income necessary to buy the average house, the center found. First-time buyers had just 42.7 percent.

Seattle P-I
“Despite national reports which suggest that no homes are being sold, a sales rate of nearly 98,000 units (statewide) is similar to the number of sales that prevailed 10 years ago,” a statement accompanying the report said. Although Washington’s year-to-year sales drop was a bit bigger than the nationwide decline, “the state’s markets remained more robust than many areas in the West.”

Let me reiterate a point we’ve tried to make here in the past: falling home prices is a good thing. When the reports have data that show dropping prices and a slowing market, that is the exact opposite of “doom and gloom.”

(Housing Market Snapshot, WCRER, 05.2008)
(Elizabeth Rhodes, Seattle Times, 05.14.2008)
(Aubrey Cohen, Seattle P-I, 05.13.2008)

Can Seattle really claim to be a livable city when the median home value is half a million dollars and so many who live here feel they may not be able to anymore?
…
When asked about affordability in Seattle, the first thing Georgetown Records saleswoman Tina Forbes says is the story of so many who are disoriented and frustrated by the fast pace of change here: “I’m getting ready to leave — Portland, man!”

“We just keep getting pushed farther and farther south,” Forbes says of people like her who’ve dealt with rising rents and apartments going condo, which has happened to her twice already.
…
But many of Seattle’s most die-hard devotees say they aren’t riding the prosperity trolley so much as adapting to it, holding on for dear life. That’s no way to live in a “livable” city.

Here’s a sobering thought: While Seattle and King County’s technology companies continued to infuse the area with high-paid workers last year, the majority of job vacancies overall were for positions paying less than $25 an hour, barely enough for an adult with two children to achieve economic “self-sufficiency,” according to a study by the nonprofit Workforce Development Council of Seattle-King County.

Unfortunately, if you think you can escape to affordability by heading to the surrounding rural areas, a piece in Saturday’s Times might disappoint you.

“We’ve seen farmland values rise dramatically, particularly over the last couple of years,” said Mike Shelby, executive director of the Western Washington Agricultural Association, which represents local farmers.

Shelby estimates that cropland prices have jumped 30 to 50 percent over the past three years in Skagit, Snohomish and Lewis counties, a result both of a drift of people from the cities and of other social and economic changes.

You may notice that neither of these two articles talk about what’s been happening with home and land prices in the outlying areas in the last nine months. I guess prices falling back down to earth didn’t fit into the bleak picture they wanted to paint. I’m not saying Seattle is going to become as cheap as Eastern Washington, but we’re definitely on a trend back to affordability, and that’s good news worth reporting in my book.

(Tyrone Beason, Seattle Times, 05.12.2008)
(Shirley Skeel, Seattle Times, 05.10.2008)

After a year of occasionally posting comments on this blog, it’s only fair to disclose that my wife and I just bought a house in Woodinville! My rationale about the overall market hasn’t changed — I still think we would have gotten a better deal by waiting. There were many factors that influenced our decision:

• The house is only a few years old and in good condition.
• The price was good for the neighborhood and recent comps.
• The commute to Redmond/Bellevue is about the same as our current apartment.
• Our (downtown Seattle) apartment is too small.
• We find significant sentimental value in owning our home. We wanted to be able to redecorate, make improvements, and not have to worry about being forced to move if our unit goes condo.
• We were only willing to look at houses we could reasonably stay in for 10 years or more.
• We were only willing to consider arrangements where my wife could stop working once we start a family.
• Our plan is to pay off all loans except a $417k 1st mortgage within 3 years. For the first 3 years, our net expenses will be quite a bit more than our apartment. After that, it’ll be less than our apartment by several hundred. Of course, our house costs much less than our apartment would sell for, so this is apples to oranges. In any case, our expenses are well within our means, but we won’t be saving as much for stocks/bonds as before.
• We were not willing to move to rent somewhere in the burbs with enough space, and then move again when the dust settles from the bust.
• Our loan package is as follows: $417k 1st mortgage, with a note rate of 6.25%. 10% and change for a HELOC at PRIME+1.5, with a teaser rate. 10% down.

The RedFin experience was perfect for us — we did the research that we would be doing anyway and got 2% back. The field agent that actually accompanied us to the property did a good job looking out for us, but it wasn’t the same person as the agent in their office that helped us negotiate the paperwork. It really didn’t matter; they stayed in touch. Our loan agent got very confused when we wanted the rebate to be applied to our closing costs. She kept trying to bully us into using the rest on points instead of taking a check after closing, saying we weren’t allowed to take a credit more than closing costs, etc.

The biggest problem by far was the seller and their agent being completely dishonest with us (and each other) about the repairs and their (in)ability to move out on time. Ended up closing one day late after a standoff between us, the seller, and our loan agent. Yuck!

But the deal is done as of yesterday and we are officially homeowners!

Some people seem to be under the impression that Seattle Bubble is a site for people that think buying a home is never a good idea. On the contrary, the purpose of Seattle Bubble is to educate people about the realities of the housing market, and equip them with the facts so they can make a decision based on reality instead of some real estate agent’s slick sales pitch.

Hyperbola and his wife went into the home buying process with both eyes open, weighed the risks and benefits, and decided to buy. He got a loan he could afford, and bought a house he will be happy staying in for at least 10 years. This is exactly what Seattle Bubble has been promoting here since day one (here’s an example post from April 2006).

Congratulations to Hyperbola. He and his wife get that you buy a home as a place to live, not as some sort of can’t lose investment account. I agree with what Hyperbola said in his post, that they most likely could have gotten a better deal by waiting, but they were comfortable with the price and the risk, and they bought smart. Good for them.

This poll will be active and displayed on the sidebar through 05.17.2008.

I also highly recommend checking out the forums, where lots of interesting discussions take place daily.

Here’s where the YOY stats stand for each of the six counties as of March 2008:

King - Price: -3.6% | Listings: +49.4% | Sales: -27.8% | MOS: 6.2
Snohomish - Price: -6.7% | Listings: +27.7% | Sales: -42.9% | MOS: 7.9
Pierce - Price: -3.6% | Listings: +13.1% | Sales: -26.3% | MOS: 7.9
Kitsap - Price: -4.4% | Listings: +24.0% | Sales: -34.8% | MOS: 9.8
Thurston - Price: -2.7% | Listings: +0.9% | Sales: -17.1% | MOS: 5.9
Island - Price: -13.5% | Listings: +24.4% | Sales: -30.6% | MOS: 12.1
Skagit - Price: -6.5% | Listings: +20.8% | Sales: -31.7% | MOS: 9.3

Following below are the graphs you’ve come to expect. Click below to continue reading.

These graphs only represent the market action since January 2006. If you want to see the long-term trends, feel free to download the spreadsheet (or in Excel 2003 format) that all of these graphs come from, and adjust the x-axis to your liking. Also included in the spreadsheet is data for Whatcom County, for anyone up north that might be interested.

First up, it’s raw median prices.

Click to enlarge

Prices were up month-over-month in King, Pierce, Thurston, and Island, and down in Snohomish, Kitsap, and Skagit. This is more likely to be a little seasonal bump than an indication that prices in these counties have hit bottom.

Here’s how each of the counties look compared to their peak:

King - Peak: July 2007 | Down 7%
Snohomish - Peak: March 2007 | Down 9%
Pierce - Peak: August 2007 | Down 7%
Kitsap - Peak: September 2007 | Down 11%
Thurston - Peak: July 2007 | Down 3%
Island - Peak: August 2007 | Down 20%
Skagit - Peak: June 2007 | Down 14%

The total declines are diverging a bit, as some counties experience the spring bump, and others continue to decline. Island County is getting totally hammered, with April’s median at $279k vs. the August ‘07 peak of $350k. Of course, it’s difficult to draw any strong conclusions from that data, since they have had less than 100 closed sales each of the last seven months.

Here’s another take on Median Prices, looking at the year-to-year changes over the last two years.

Click to enlarge

Island, Snohomish, and Skagit Counties are all racking up losses in excess of 6% YOY, with everyone else dropping between two and four percent.

Here’s the graph of listings for each county, indexed to January 2006.

Click to enlarge

Pretty much the same picture as last month, with King County leading the pack, and Thurston taking up the rear. So far King and Skagit are the only counties that exceeded last year’s peak inventory in April.

Here’s a look at the YOY change in listings.

Click to enlarge

Every county had more inventory than the year before, but the rate of buildup is slowing across the board.

Lastly, let’s check out pending sales, also indexed to January 2006.

Click to enlarge

Sales in Snohomish County continue to be absolutely anemic. What is going on up there?

Lastly, here’s the YOY graph of sales:

Click to enlarge

Every county around the Sound is having serious trouble finding buyers, with pending sales dropping 17% YOY on the low end in Thurston and 43% on the high end in Snohomish.

I’m surprised that Snohomish is getting hammered so hard on sales, worse than Skagit or Thurston even. The data from Island County is pretty much what you’d expect, what with the increasing price of gas and ferry trips. Overall, things seem to still be on the decline across the board.

Meanwhile, Fannie Mae, “the nation’s largest buyer of home mortgages” announced huge losses today, and forecasts “a steeper drop in home prices this year.” Yeah, the crisis is over folks, nothing to see here, move along.

In other news, Les Christie of CNNMoney.com is singing a bit of a different tune than she was in mid-2006, when she was touting our “strong fundamentals” and declaring Washington State to be the “next hot market,” or just last summer, as the local market was hitting its peak, when she declared that in Seattle, “the housing boom goes on.” Her latest headline is not quite as positive: Bulletproof housing markets get hit.

Some of the last, best housing markets - the ones that continued to climb even as the rest of the country cratered - have turned south lately.

Seattle, Portland Ore., Charlotte, NC, and Salt Lake City all posted home price gains during 2007, even as more than half of the 150 markets tracked by the National Association of Realtors registered declines. Now they’ve joined the losers.

Of course, the Seattle market was never “bulletproof,” just late.

Speaking of the local decline, Zillow released their latest Quarterly Home Value Reports this week, which contain some interesting information about our area’s market. Of particular interest is the chart showing the approximate percentage of homeowners who bought each year that now have negative equity:

There’s also a corresponding map on the charts page showing how all that negative equity is distributed around the region. Interesting stuff.

I think that’s enough to digest in one post.

(Cyril Moulle-Berteaux, The Wall Street Journal, 05.06.2008)
(CR, Calculated Risk, 05.06.2008)
(Les Christie, CNNMoney, 05.06.2008)
(Quarterly Home Value Reports, Zillow, 05.05.2008)

I’m starting to get the impression as I read some of these articles that the reporters are just as amused by agents’ blatant denial as I am. My sarcast-o-meter is detecting a slight hint of intentional irony in the juxtaposition of facts and figures that paint an increasingly drab picture of the market with upbeat comments from local agents that continue to insist that things are getting better every day. Maybe I’m reading too much into it. You be the judge.

Click below for the usual roundup of this month’s reporting.

Elizabeth Rhodes, Seattle Times: Home prices in King County continue upward trend

With the release today of April home sales statistics, King County’s single-family home prices now have climbed three months in a row — but still are significantly below a year ago.
…
Still, the countywide trend is upward, a common price movement in springtime when owners buff up their homes for sale and buyers appear.
…
Houses were selling briskly, according to a Windermere analysis, which found that a little less than half of in-city houses sold within a 30 days. A quarter more within two months.

Wow, everything sure was coming up roses when Ms. Rhodes whipped this quick little piece up. However, today’s more in-depth article wasn’t quite as upbeat.

Elizabeth Rhodes, Seattle Times: Buyers drive hard bargains in Puget Sound area real-estate market

With home sales soft, agents like Windermere’s Mark Corcoran say most sellers must make concessions to be competitive.

Corcoran, whose main territory is North Seattle, recently represented the seller of a $700,000 home that quickly attracted two offers. Both were at least 10 percent below asking price, and his client declined them.

But with the real-estate market in the doldrums — April sales and prices were down from last year, according to Northwest Multiple Listing Service figures released Monday — buyers are driving hard bargains. Turning down an offer could leave sellers waiting a long time for another.

After about a month, with no buyers in sight, Corcoran’s seller agreed to drop the price 5 percent. That brought a buyer who wanted the house fumigated and the hardwood floors refinished. Again the seller declined.

Finally, a fourth offer came in. It was for 2 percent below the lower asking price. But that wasn’t all: The buyer also wanted the roof cleaned and repaired, a garage door replaced, a trench dug in the crawl space and several minor repairs.

This time the seller didn’t dicker.

The article mentions the large number of homes on the market several times, but never comes right out and says that the current inventory is at an all-time high (as best as I can measure, going back to 1988), and we’re only in April. One other interesting tidbit from this article is a mention of Zillow’s latest quarterly reports, which claims that “nearly 30 percent of local owners who bought last year owe more on their homes than they’re worth (source).” But, I thought last year was a great time to buy?

Aubrey Cohen, Seattle P-I: Seattle house prices slide in April

The latest statistics, released Monday, showed Seattle house prices continuing to wilt during the first full month of spring, while King County as a whole showed signs of rejuvenation.

Seattle’s median house price was $440,000 in April, down 2.4 percent from March and 8.3 percent from April 2007, the Northwest Multiple Listing Service said. The April median was 12.2 percent lower than the all-time high of $501,000 in August 2007.

The county’s median house price, $448,500, increased 2 percent from March, making it the highest it has been since September. But it fell 3.5 percent from the April 2007 median and 6.8 percent from the record high of $477,345 in August.
…
Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University, said he did not pay much attention to anything other than changes from the same months of previous years, because of typical seasonal variations.

“The fact that it is down a little bit (year over year), I think, is where the real story is,” he said.
…
Buyers had more selection and less competition in April than they did a year earlier, continuing the trend of recent months.

The number of homes on the market in Seattle was up nearly 58 percent in April from a year earlier while pending sales, which are the best indicator of the most-recent activity, were down about 32 percent. The county’s inventory was up nearly 56 percent in April from a year earlier, while pending sales were down 33 percent.

The listing service, in a news release accompanying the numbers, highlighted that April’s pending sales total for the 19 counties it covers was the highest in eight months, mentioning later that the total fell 32 percent from April 2007.

Maybe it’s just me, but that bit about the NWMLS press release seemed to almost be making fun of them (as much as you can get away with in the newspaper anyway), especially in light of the earlier quote from Glenn Crellin about YOY being all that matters. Overall, Aubrey’s article is fairly even-handed. He’s definitely been doing a good job lately of reporting the actual market news, rather than the NWMLS spin.

Herald Staff, Everett Herald: Snohomish County home sales, prices droop

Home sales and prices in Snohomish County continued to slump in April, according to the latest numbers from the Northwest Multiple Listing Service.

The combined median price for local houses and condominiums was $330,000 last month, a 5.7 percent drop from the $349,950 median price posted a year ago.

Inventory increased by nearly 37 percent, rising to 7,456 homes on the county market.

Pending sales dropped by nearly 42 percent, and the 732 completed sales marked a nearly 40 percent drop from a year ago.

I guess Mike Benbow must be on vacation this week, because this little “just the facts” blurb seems to be all we’re going to get out of the Everett Herald.

Devona Wells, Tacoma News Tribune: Tacoma-area home prices continue to fall, but not quite so fast:

Year-over-year home prices in Pierce County continued to fall in April as sales activity also dropped at the start of the typically hot spring selling season. The median price of a home, including stand-alone houses and condominiums, was $263,051 last month, a 4.3 percent drop from the same month in 2007, according to numbers released Monday by the Northwest Multiple Listing Service.

It’s the seventh year-over-year price drop in the last eight months. Median means half of all homes sell for more and half for less.

Sales, meanwhile, fell 18.9 percent.

Spring did start slowly, said Coldwell Banker Bain agent Margo Hass Klein. But she said traffic in the last couple weeks has increased by at least 10 percent at open houses.

Buyers, however, continue to try to time the market by watching houses they like and hoping for price reductions, said Hass Klein, a practice she recommends against.

“I tell buyers, if you like it, what is $10,000 going to mean in a purchase price? If it’s that important, go ahead and wait and chance losing it,” she said.
…
“We’ve had 10 months to adjust to this new normal and the market is moving back to a new normalcy,” said Re/Max agent George Pilant.

April’s price and sales numbers, Pilant said, came in better than he expected, particularly considering last month’s unusual winterlike weather.

“Spring was late coming this year,” said Pilant, who’s also a member of the state Real Estate Commission. “It’s hard during an open house to look out the window and see snow.”

Michael Handy, a broker/branch manager at a Windermere office, predicted price increases will make a comeback in 2008 as buyers see that today’s market helps them get what they want for less.

Wow, this one has a ton of great nuggets. First we’ve got the scare-mongering “go ahead and try to time the market—I dare you,” and agents’ new favorite market measure: the ever-nebulous “traffic at open houses.” Then we have the “new normalcy” nonsense, whatever that’s supposed to mean. And we cap it all off with a nod to our old standby scapegoat: the weather. Top notch stuff here, really amusing. Show us the statistics, then follow it up with a parade of agents in denial, spouting increasingly ridiculous explanations and excuses.

Jim Szymanski, The Olympian: Sun comes out on home sales

Rebounding pending home sales last month were a sign that there might be new energy in the Northwest real estate market, Realtors said Monday.

Pending single-family house and condominium sales in a 19-county region last month reached the highest level since August, the Northwest Multiple Listing Service reported. Northwest brokers reported 6,208 pending sales (offers made and accepted but not yet closed), the highest monthly amount since 7,751 last August. The region includes western and central Washington counties.

South Sound Realtors said improving weather and buyers with income tax returns in hand are coming off the sidelines to help slowing house and condo sales.

“The sun’s out, and real estate is going fine,” said Paul Klenk, a Realtor for Van Dorm Realty. “I think we’re going to have a good market this spring and summer.”

Though real estate agents are optimistic with the coming of spring, sales remain lower this year than last.

Szymanski disappoints with his first reporting roundup appearance, doing little more than regurgitating the NWMLS press release. That’s not reporting Jim, that’s just repeating.

Here’s a bonus for you: a 4-minute radio report from 710 KIRO.
Tim Haeck, 710 KIRO: Home prices fall, sales rise in Puget Sound

It was August the last time we saw these numbers for pending sales in Western Washington. More than 6,200 offers accepted, but not yet closed. It might be the end of the housing slump, or it might just be the time of year.

I love the picture they include alongside the report, even though it has no caption and doesn’t look like it’s even from around here.

(Elizabeth Rhodes, Seattle Times, 05.05.2008)
(Elizabeth Rhodes, Seattle Times, 05.06.2008)
(Aubrey Cohen, Seattle P-I, 05.05.2008)
(Herald Staff, Everett Herald, 05.06.2008)
(Devona Wells, Tacoma News Tribune, 05.05.2008)
(Jim Szymanski, Olympian, 05.05.2008)
(Tim Haeck, 710 KIRO, 05.06.2008)

Here’s the NWMLS press release: Northwest MLS Brokers Report Highest Volume of Pending Sales in Eight Months. I guess “Lowest Volume of April Pending Sales in Nine (plus) Years” didn’t have the same ring. Better to pretend that seasonal improvements == strong market.

Here is your summary along with the usual graphs and other updates.

Here’s your King County SFH summary:

April 2008
Active Listings: up 49% YOY
Pending Sales: down 28% YOY
Median Closed Price*: $448,500 - down 3.6% YOY

Here is 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. As you can see, in April we already beat last year’s high point from September, and are now breaking higher into record territory daily.

Click to enlarge

Sales keep dropping, though the pace slowed slightly from last month’s record year-to-year drop. Most years do not see sales this sluggish until November through January. Regardless of what real estate agents may say about the present market, there simply aren’t many buyers out there right now.

Months of supply (active listings divided by pending sales) held basically steady for the third month in a row, clocking in at 6.2. April marks the eighth straight month of MOS above 6 (considered a buyer’s market).

Click to enlarge

Again, you can see that the faltering housing market this year is anything but “normal.”

Here’s the supply/demand YOY graph.

Click to enlarge

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

Click to enlarge

Here’s the SFH Median YOY change graph.

Click to enlarge

I’m certain that the local media outlets will focus in on the $9,000 month-to-month increase in the median price, and there will be no shortage of quotes from peppy agents declaring that we have hit the bottom. I will only point out again that with such a small number of sales, the median price is going to be screwed up. When the Case-Shiller data for April comes out in late June, I doubt we’ll see increasing prices. For a more detailed exploration of this phenomenon, read the post Median Price Not Telling the Whole Truth.

Facing fewer buyers and many, many homes for sale, South Sound builders are pulling back and getting extra promotional.

Builders have slowed construction schedules in recent months, cut prices, offered their biggest-ever incentives and even rented out finished homes that couldn’t find a buyer.

…builders are looking to unload even more of what’s built and empty. In March, 1,485 new homes, excluding condos, were listed for sale.

It used to be that half of the homes sold by Soundbuilt, one of the area’s largest builders, were properties with homes either under construction or yet to be built, said Gary Racca, owner of the Puyallup company.

Uncertainty about the economy, however, means consumers are holding off, and now 90 percent of the company’s sales are on ready-to-move-in homes. But completing homes without a committed buyer can be risky, because the builder fronts the cost and often has to secure and pay to finance the construction.

The company has launched a first-time promotion: a price guarantee, which allows someone to buy a not-yet-constructed home at a locked-in price and ensures that if Soundbuilt lowers prices on other similar houses in the subdivision, the buyer will get the same discount.

Of course, they’re still confident that all they need to do is “get the momentum back” with a few discounts and incentives here and there, then they can get back to jacking up the prices.

(Devona Wells, Tacoma News Tribune, 05.04.2008)

This poll will be active and displayed on the sidebar through 05.10.2008.

Erin and Andy Mathias started looking for a new house around the start of the year on the north side of Seattle because it was convenient to work, shopping, parks and other amenities.

They found a good selection, but at least as much competition for anything decent in their price range, up to $350,000.

“We would see a listing the day it came out, try and see the house either that day or the following day, have our Realtor check into it and there were already multiple offers on the table,” Erin Mathias said. “It became a little frustrating after a while.”

Although the Seattle-area real estate market has slowed, buyers still don’t have the advantage over sellers in such areas as North Seattle, West Seattle, Capitol Hill, Lake Forest Park and East Bellevue.

This phenomenon can be seen in the stories from home-seeking commenters here, as well as in our monthly neighborhood months of supply updates.

The article mostly focuses on the few areas around Seattle where sellers still have the slight upper hand, but it does admit that this has become the exception rather than the rule.

Some homes still are selling above asking price with multiple offers, without contingencies for financing or inspection. But those with less-ideal prices and conditions are sitting much longer than they would have a year ago, even in popular neighborhoods.

Despite their relative strength, North Seattle neighborhood inventories over the past seven months have doubled, on average, from the same months a year earlier.

If that sounds familiar, it might be because I said the same exact thing two weeks ago in the March Neighborhood Months of Supply Update. Of course, I didn’t have a spiffy color-coded map to illustrate my point. But don’t worry, we will soon.

(Aubrey Cohen, Seattle P-I, 05.01.2008)

This is an interesting line of reasoning, but while it is true that no one can know with certainty what the future holds, blindly making a gut decision based on our lack of knowledge would be foolish. Instead, we can and should consider the different possibilities and base our decision on a rational analysis of what we do know.

So let’s look at three different possibilities for where prices might go from here, and look at what it would mean if you buy now versus if you continue to rent a while longer, waiting for either two years, or six consecutive months of price increases before you decide to buy, whichever comes first.

Scenario A: We’re not at the bottom yet. Prices continue to decline, eventually bottoming out at summer 2005 levels in the summer of 2010. Prices begin to inch up slightly through the end of 2010.
Scenario B: We’re at the bottom, but we’ll be here for a while. Prices stay more or less flat through 2010, increasing no more than about 1% per year.
Scenario C: We’re at the bottom. Prices begin to increase again, rising 5-7% YOY through 2010 and beyond.

Click to enlarge

In our hypothetical scenario, let’s say that you are looking at a $450,000 house, you have the 20% down ($90,000), can afford a fixed-rate 30-year loan, and your alternative is to rent for a monthly cost of $1,500 (increasing 5% per year). There are comparable houses for sale and rent right now in Ballard that fall within these specifications, so I think they’re reasonable.

Scenario A
Buy now: Your total monthly costs are around $3,000. The value of your home decreases around 15% by 2010. If you have to sell, agent fees and excise taxes will eat up most of the $30,000 that remains of your down payment. If you don’t have to sell, who cares what it’s worth—enjoy your house and the (mostly) fixed payments.

Rent for now: Your rent increases to $1,650 per month by 2010, and if you save the extra money you would have put into the mortgage every month, and invest your $90,000 down payment at 5%, your savings has increased to $125,000 by that time. You see the prices start to increase again, and after six months of steady increases, you decide that now is the time to buy. Houses that would have formerly sold for $450,000 are now $380,000, allowing you to put down over 30%. Your total monthly costs are around $2,300 at 6% interest, $2,500 at 7%.

Advantage: Rent for now

Scenario B
Buy now: Monthly costs are $3,000. The value of your home stays more or less flat through 2010. If you have to sell, you’ll get back about $70,000 of your down payment after agent fees and excise taxes. If you don’t have to sell, who cares?

Rent for now: Rent goes up to $1,650, savings to $125,000. You decide to finally take the plunge on that house, and you can get one for $455,000 that is just like the one you were considering before. Your total monthly costs are around $2,750 at 6% interest, $2,900 at 7% interest.

Advantage: We’ll call it a wash (depends on future interest rate)

Scenario C
Buy now: Monthly costs are $3,000. The value of your home increases around 12% by 2010. If you have to sell, you get to pocket over $115,000. If you don’t have to sell—well, you know the drill.

Rent for now: You save six month’s worth of payments before realizing that prices are already going up again. Homes that were $450,000 are now $465,000. Your down payment investment has gone up slightly to $99,000. Your monthly costs are around $3,000 at 6% interest, $3,150 at 7%.

Advantage: Again, more or less a wash (also depends on your interest rate)

Of course, I don’t personally believe that all three of those scenarios are equally likely, but even if they were, there still is no real benefit to buying now. Even if we’re currently at the bottom and prices start climbing relatively quickly starting now, you’re really no worse off for waiting six months to find that out.

The biggest factor that makes this a feasible strategy is the continued large discrepancy between rents and home payments. I’m sure a skilled real estate salesperson could concoct some scenario in which waiting out the market right now is a foolish financial move, but based on this analysis of three fairly reasonable possibilities, I’m comfortable recommending that course of action for the time being.

First let me say that while I am flattered that John Curley and Jim Dever referred to me as a “real estate guru,” that is not a title that I have ever or would ever give myself. As I said in the segment, “I’m just a guy doing all this research, and putting it out there for you to see as well.” I hope that you find this resource to be of use.

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Here are some recent stories that summarize what’s going on in today’s real estate market around Seattle:

• Case-Shiller: Seattle Prices Rewound to Summer ‘06
  This link shows that despite John Curley’s apparent skepticism about falling home prices in Seattle, the best available index indicates that as of February, prices have fallen back to levels last seen in July 2006.
• NWMLS: Anybody seen my spring mojo? I can’t find it.
• March Neighborhood Months of Supply Update
• Puget Sound Counties March NWMLS Update

For anyone that is interested but didn’t catch Evening Magazine tonight, you can view the video on the KING 5 website, or right here (if you don’t mind YouTube’s lousy quality).

Update: Sweet, you can view a much higher-quality version on YouTube itself (but I can’t embed it).

Now here come the graphs. First up is the straight graph of the index from January 2000 through February 2008.

Click to enlarge

The low tier looks like it’s having the steepest drop from the peak, but the difference is very slight. Right now all three tiers are falling more or less together.

Here’s a chart of the year-over-year change in the index from June 2002 through January 2008 (I selected that date range to match the time-shifted graph in the standard Case-Shiller posts).

Click to enlarge

Even the high end tier has now dipped into negative YOY territory. Here’s where the YOY price change for the three tiers sit as of February - Low: -3.7%, Med: -3.5%, Hi: -1.1%.

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

Click to enlarge

The drop in all three tapered off a bit last month. As things sit right now, the total decline from peak varies less than 1 percentage point across the three tiers, from a 7.1% drop for the low tier to a 6.5% drop for the high tier.

Not much else to say about this particular set of data. Right now I don’t see any really interesting or unexpected patterns emerging as price declines finally get rolling here in the Pacific Northwest.

(Home Price Indices, Standard & Poor’s, 04.29.2008)