The following is a press release from the Northwest Multiple Listing Service regarding the real estate market in September 2008. I will be adding some more local information to the blog soon.
Pending Sales Up 4.1 Percent From Year Ago, Total Inventory Unchanged
KIRKLAND, Wash. (Oct. 6, 2008) – Home sales around Western Washington during September rose 4.1 percent from a year ago, reversing a 19-month pattern of declines. Members of Northwest Multiple Listing Service reported 5,982 pending sales (offers made and accepted, but not yet closed), a gain of 234 transactions from a year ago. The totals cover 19 counties in the MLS service area.
NWMLS data show the last system-wide uptick in pending sales was February 2007 when members reported a 4.8 percent gain from the previous year.
In other key indicators of housing activity, Northwest MLS reported tightening inventory with a double-digit drop in the number of new listings added during September compared to 12 months ago, and total inventory at month end that matched year-ago numbers. Figures also show area-wide softening of prices compared to a year ago,
The median price for last month’s closed sales of single family homes and condominiums (combined) was $295,000, a drop of 8.3 percent from a year-ago when the median price was $321,600. King County prices fell about 3.7 percent from a year ago, from $395,000 to $380,315. For the four-county Puget Sound region (King, Snohomish, Pierce and Kitsap), the median price for last month’s closed sales dropped from $349,950 to $324,000, a decline of 7.4 percent.
Brokers and lenders say the recent economic turmoil is taking a toll on activity, but also suggest negative news reports are keeping buyers on the fence and creating misunderstandings about the availability of home loans.
“Forget the news. Mortgage loans are readily available, at excellent rates and you can still get 97 percent loan to value,” said Mike Welty of Liberty Financial Group in Bellevue. “There is a lot of flexibility in programs, qualification and opportunity,” he emphasized, while acknowledging (with a chuckle), “Underwriting is tougher – you need a down payment and you need a job!”
REALTOR Dennis Brown, a residential and investment specialist at Windermere’s Fauntleroy office, echoed Welty. “I’m loving FHA,” he exclaimed, calling the largest mortgage insurer in the world “the answer to a lot of people’s credit problems.” Brown has used the program for first-home and move-up buyers, as well as with investors. “Investors use the program to buy everything from fixer-uppers to 4-unit buildings,” he said. Among features Brown said his clients find to be most appealing about FHA loans are easy credit qualifications (typically one year of “clean credit”), low closing costs and low down payment requirements (as low as 3 percent of the purchase price).
In today’s market the vast majority of buyers are first time buyers, move-up buyers, and investors, according to J. Lennox Scott, chairman and CEO of John L. Scott Real Estate. “These three groups of buyers are moving forward with the opportunities that exist thanks to low interest rates, increased affordability, and a strong selection of homes to choose from.”
Buyers still have plenty of choices, according to NWMLS data. Members added 10,889 new listings of single family homes and condominiums to inventory during September – about 1,500 fewer than a year ago for a 12 percent drop. When added to existing inventory, the number of active listings at month end totaled 48,665, slightly fewer than the year-ago number of 48,969 listings.
“We are definitely starting to see more buyers that have been waiting months to get off the fence,” said NWMLS director Mike Skahen, owner/broker of Lake & Company Real Estate, Inc. in Seattle. As for the dip in prices, he attributes that in part to limited availability of jumbo loans for high-end homes, “Not surprisingly, with fewer high priced homes selling, the median price would be lower,” he noted. “I’m convinced that as the national financial crisis subsides and with Seattle’s good economy, buyers who have been waiting for the bottom will return and wish they had bought now.” Commenting on the relatively low sales numbers over the past year, he remarked, “There must be substantial pent-up demand.”
“The latest NWMLS numbers validate what our agents report from the field — sellers that are truly motivated to move are dropping their prices, and many buyers are recognizing the opportunity this creates,” said Ron Sparks, managing vice president at Coldwell Banker Bain in Bellevue. Increases in pending sales are a “good indication that our market is adjusting to current buyer attitude and demand.”
Sparks acknowledged price declines aren’t particularly good news for sellers, but said most sellers can be thankful the drops are really quite modest compared to other markets, where prices have recently dropped 30 percent or more. “It’s apparent that home prices, both locally and nationally, are becoming irresistible in some instances,” he remarked. As a result, he noted markets such as San Diego, Los Angeles and Las Vegas are seeing the same increased buyer activity as our local market.
Erik Hand, president of Response Mortgage Services (John L. Scott’s in-house lender) expects some improvement in financing options, but cautioned consumers about the potential cost of procrastinating.
“With the passage of the bailout bill, I expect we will gradually see an improvement to the conditions in the Non-Conforming market in the form of a narrowing of the spreads between Conforming and Non-Conforming loan products, and in some cases, an easing of guidelines that will open up financing options to a larger pool of buyers,” Hand stated.
“As for interest rates, they are expected to remain low, but like every other aspect of the economy they’re subject to the volatility of the market,” Hand commented, adding, “It’s important for homebuyers to understand that interest rates are currently at historic lows and there’s no guarantee they’ll fall further with the passage of the bailout bill.”
“While things in the real estate world may not be perfect right now, things are, and will continue to get better and better. The medicine tastes terrible but the cure will be worth it,” NWMLS director Dick Beeson believes. Beeson, the broker/owner of Windermere/Commencement Associates in Tacoma saw a 21.8 percent surge of pending sales in Pierce County last month compared to a year ago and a notable shrinkage in inventory (down 11.2 percent from twelve months ago).
“We’re moving toward a market place with fewer properties for sale — and fewer and fewer choices for buyers. What a time to buy, low rates, low prices, low costs, and decreasing inventory — all ready for those smart buyers who act now,” he noted.
NWMLS director Kathy Estey, managing broker at the Bellevue Downtown office of John L. Scott said “September felt like we were gathering steam and back on track,” but as economic news worsened during the month buyer confidence tumbled. “The news made it sound as if buyers need 20 percent down to get a loan — and fear become our worst enemy again,” she remarked.
On a more optimistic note she added, “The Puget Sound remains a great place to own property and there are opportunities to buy low and ride the rising prices that are around the corner in a year or two.”
Northwest Multiple Listing Service, owned by its member brokers, is the largest full-service MLS in the Northwest. Its membership includes approximately 31,000 brokers and agents. The organization, based in Kirkland, currently serves 19 counties, mostly in western Washington, plus Grant, Kittitas and Okanogan counties in the central part of the state.
