SEattle Real Estate NEws - SERENE™

Clients and friends keep asking me: what do you think of the Seattle housing market?

From personal observations and experience I know that Seattle area homes are selling if they are:

• competitively priced,
• well prepared for sale
• offered by a motivated seller, and
• marketed aggressively

I’ve listed and sold two Seattle properties in March which met these four criteria. During the same time I’ve also helped two buyers purchase homes.

Buyers have plenty of choice and will buy when the above criteria are met. Obviously, buyers are up against tougher lending standards. Still, first-time buyers with good credit, steady income and savings for a sizable down payment have the pick of the litter - if they can afford it.

The problem with Seattle residential real estate is affordability.

Currently, the average Seattle area home price is $414,518, just about double the national average of $207,272.

Why’s that?

• More people are moving to Seattle than are leaving.
• Seattle companies are still hiring and opening offices here, such as Google.
• The local government curtails land use.
• The local geography fosters exclusivity.

Take a look at a Seattle area map and what you see are bodies of water dissecting the land. What you get is an abundance of highly desirable waterfront properties. Add the undulating hills that rise from these waters and you get desirable view properties. Waterfront and views sell for a premium.

The solution for many first-time buyers is to “go condo” or to buy further out and settle for a longer commute. In the meantime, prices on some Seattle area homes are coming down. One example is Kirkland condos, especially those at the higher end. The highest foreclosure rates are south and north in cities like Burien and Monroe. These foreclosures came about through the combination of easy credit, lofty expectations of appreciation, and perhaps optimistic assessment of increased personal income.

What the Experts say about the Seattle housing market.

PMI Corporation, the company that provides private mortgage insurance, looked at the risk of home prices declining over the next two years (pdf file). Seattle ranks in the least risky group. Speaking to the status quo, The Wall Street Journal shows the Seattle area in 197th place out of 200 when it comes to mortgage payment delinquencies (by value) of 30 days or more.

Another measure of the same table is the current price level when compared to the peak of the US housing market which the WSJ determined to be the fourth quarter of 2005. Compared to that peak (being 100%) the national average price level is now at 91.9 percent - a drop of 8.1 percent. Seattle home prices, however, have still risen further since then to 117 percent.

This would suggest that it’s about time for Seattle home prices to cool down further. Foreclosures excluded, what I see is a stand-off between sellers and buyers. Seattle home sellers can’t believe prices are coming down, buyers are wondering by how much.

Let’s take the 12-month bar graphs of Kirkland condos sold in 2007 and compare them to how many Kirkland condos were for sale on January 2, 2008 at 9 am. Again, we do this separately for zip codes 98033 and 98034.

98033 Zip Code: Condos Sold (2007) and For Sale (01/02/2008)

Starting at twelve-o-clock, the green segment represents the 124 active listings as of January 2, 2008 at 9 am; and the following lavender segment the 28 homes “in Escrow” (Subject to Inspection, Pending) at the same time. Starting with the orange segment begins the year 2007 with 29 homes sold in January.

The idea behind this pie-chart is to examine the “absorption rate,” i.e., how long will it take to absorb (sell) the homes currently for sale. Taking a look back it would take about three months to sell all but 10 of the homes for sale at the beginning of 2008. That’s if we assume the same number of sales as in the first three months of 2007 (114 homes sold).

Declining condo sales in the last three months of any year are normal. Usually condo sales pick up again after the new year. Will 2008 repeat that pattern? What if the drop in sales toward the fall and winter of 2007 continues in to the first months of 2008? Then it will take nearly five months to sell those same 124 condos.

98034 Zip Code: Condos Sold (2007) and For Sale (01/02/2008)

The 2007 Kirkland condo sales pattern for the 98034 zip code is similar to the 98033 zip. And, it represents the same question? Will we see the same January-sold jump as in 2007?

Note: the source for these graphs and related bar graphs is the Northwest Multiple Listing Service (NWLS). The translation of the data to graphs is mine and so are any errors.

As we enter 2008, let’s take a quick peek in the rear view mirror, specifically at Kirkland condos by two zip codes: 98033 (downtown Kirkland and mostly west of I-405) and 98034 (further north, like Juanita area and east of I-405, like Kingsgate area).

98033 Zip Code Kirkland Condo Sales

Sales in this more expensive and, thus more prestigious, of the two zip codes peaked in March and dropped off considerably after July. This is not abnormal but the arrival of the first bad news about the sub-prime mortgage surely played a role in the rate of the drop in sales.

98034 Zip Code Kirkland Condo Sales

In the 98034 zip code, sales show an unusual three 4-month cycle with the first peak in March (normal) and a second peak in Augusts - perhaps the “last hurrah” for the year. After September, the mortgage malaise, real or imagined, put sales in a steeper than usual decline.

More of the same for Kirkland Single Family Homes to follow.