Fewer April home sales, higher sale prices in King County
Puget Sound Business Journal
Date: Thursday, May 5, 2011, 10:42am PDT

There were fewer April home sales in King County compared with a year ago, but the average home sale price rose dramatically.

In King County, there were 1,896 home closings last month, compared with 2,096 a year ago, but the average home sale in April was $410,289, up from $408,715 in 2010 and $394,918 in March 2011.

Brokers surveyed by the Northwest Multiple Listing Service (NWMLS) said the lower number of homes on the market is leading to a competitive market, with sellers receiving multiple offers from buyers on their homes.

One optimistic broker is J. Lennox Scott, chairman and CEO of John L. Scott Real Estate, who said in a statement that “with healthy sales activity over the last several months, a shortage of homes coming on the market and low foreclosure activity, the stage has been set for a multiple offer market.”

NWMLS data from the 21 Western Washington counties it surveys indicate that there were 10,083 new listings in April, compared with 12,664 a year earlier. Total inventory in the NWMLS-surveyed area is down 13 percent from a year earlier.

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Seattle Real Estate Tyler Freed

Tax credit fuels home-sales bounce, but will it be just a blip?
The first-time homebuyers’ tax credit helped resuscitate the Seattle real-estate market in 2009. The market remains fragile, most insiders say, and the outlook for late 2010, after the credits are scheduled to expire, is especially murky.

By Eric Pryne

Seattle Times business reporter

In residential real-estate annals, 2009 probably will be recorded as the Year of the Credit.

In February, Congress approved an $8,000 tax credit for first-time homebuyers in hopes of kick-starting moribund home sales.

“It worked,” Lennox Scott, chairman and CEO of John L. Scott Real Estate, said at a recent industry forum. “That’s what completely activated the market.”

It sprang to life in the spring. After nearly two years of declining sales, buyers bought 20 percent more houses in King County between June and November than during the same six months in 2008.

Was that a blip, or the start of a trend? That’s what real-estate insiders are asking as they gear up for 2010.

Last month, Congress extended the credit, which was due to expire Nov. 30, for seven months, and adopted a new, $6,500 credit for many repeat buyers. Partly because of those incentives, many observers anticipate more houses will be sold during at least the first part of 2010 than in the same months of 2009.

But that’s not necessarily saying much: sales volumes last winter were dismal. The market remains fragile, most insiders say, and the outlook for late 2010, after the credits are scheduled to expire, is especially murky.

“We still have a bit of a ways to go to figure out how to get out of the pickle we’re in,” said George Rolfe, director of the University of Washington’s Runstad Center for Real Estate Studies.

Here’s a look back and ahead:

Home prices

After plummeting 20 percent in 18 months from its summer 2007 peak, the median price of a single-family home sold in King County slipped only slightly more in 2009.

It was $382,500 in January and dropped to $370,000 in November, according to the broker-owned Northwest Multiple Listing Service.

And next year? “They’re not going to go up,” Jill Wood, Windermere Real Estate president, said of home prices. “They’ve probably leveled off for now.”

Even that assessment may be optimistic, others say. Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University, said it’s more likely that prices will continue to decline through midyear.

The asking prices for some more expensive homes will start to drop, he said, as owners hit hard by the recession anticipate resets of their option adjustable-rate mortgages and inch closer to delinquency.

But houses above $400,000 such in close-in, desirable neighborhoods as Ballard and Green Lake should fare well because there’s little available inventory on the market there, said Steve Tolliver of Yucon Appraisal Service

Tim Ellis, editor of the Seattle Bubble real-estate blog, said median prices in Seattle could slip another 3 to 8 percent next year. But all bets are off if the federal government steps in again, he added.

“More and more, it’s becoming evident that the government is really interested in keeping home prices from falling farther,” Ellis said.

And 2010 is an election year. “Who knows what they may try to pull out of the hat,” he said.

Home sales

The first-time buyers’ credit wasn’t the only reason sales surged in 2009. Even without it, lower prices and record low interest rates probably would have led to an increase, Ellis said.

But the credit clearly was a catalyst. Crellin said his center’s research suggests it was responsible for nearly one-third of all the sales in the state in July, August and September.

The question now is, how many prospective buyers remain? “Were we stealing future demand?” Seattle land-use economist Matthew Gardner asked at a recent forum.

Crellin doesn’t expect the surge the credit induced to continue unabated. Before the tax break was extended and expanded at the last minute, the real-estate industry did an effective job before then of persuading prospective buyers they had to close by the end of November to claim it, he said.

So most first-timers who intended to buy probably already have, Crellin said. And the chain reaction you’d normally expect from the surge, with sellers of entry-level homes looking to move up, could be weaker than usual, he added.

Some sellers were banks: Nearly 16 percent of all the homes sold in the King, Snohomish and Pierce counties in October were foreclosure resales, according to Seattle-based Zillow.com.

And, thanks to the downturn in prices since 2007, many sellers had little or no equity to use for anything new, Crellin said. Some are renters now.

But he still expects home sales will exceed last year’s numbers at least through March.

Windermere’s Wood anticipates strong sales through midyear — in part because of the tax credits that expire June 30, in part due to “the sense of confidence people have now.” The typical December slowdown hasn’t materialized this year, she said.

As for the second half of 2010, “I have absolutely no clue,” Wood said. Much depends on interest rates and the stock market’s performance, she said.

“It’s all going to come down to jobs, jobs, jobs,” said James Stroupe, a Windermere condo specialist. “There are a lot of buyers out there that are still scared.”

Foreclosures

They aren’t as commonplace here as in Florida or Las Vegas or Phoenix, and it’s highly unlikely they ever will be. Still, the number of foreclosures in the Seattle area could rise in 2010, sending ripples through the market.

About 2.2 percent of all loans in Washington were in foreclosure in the third quarter, according to a Mortgage Bankers Association survey. That’s about half the national rate.

But another 3.2 percent of Washington loans were 90 days or more past due. They could be foreclosures-in-waiting unless government loan-modification programs reach more homeowners, observers say.

And if those homes are foreclosed and later put up for sale at bargain-basement prices, they could push the entire market lower, Ellis said.

There’s already a substantial “shadow inventory” of homes that lenders have repossessed, but haven’t yet listed, said mortgage banker Jeff Bell of Cobalt Mortgage in Kirkland. Their disposition could affect the broader market as well, he said.

But Wood said she’s more concerned about the impact on prices of “short sales” — sales for less than the owner owes the lender.

Mortgages

Interest rates dropped below 5 percent at times in 2009, and observers don’t see how they can fall any farther. Some expect them to remain where they are; others forecast modest increases.

Bell expects rates will remain relatively flat for at least the first half of 2010, and probably the entire year. The Federal Reserve has given no hint of increases anytime soon, he said, and “we don’t see economic conditions changing to the point where it would warrant higher interest rates.”

Crellin expects rates will rise. But that could be good for sales, he said, because it would spur some prospective buyers to act while they still can.

Renting

It’s a good time to be a tenant, said Tom Cain of Apartment Insights Washington, a research firm.

Vacancies rose and rents slipped in 2009. Expect more of the same in 2010, he said.

On top of the economic downturn and high unemployment, which depress demand, 3,300 new apartments in complexes of 50 units or more are under construction and likely to be completed next year.

That’s in addition to 5,600 units delivered through the end of November this year. “That’s a huge supply relative to what we’ve seen in the past,” Cain said.

Next year would be shaping up as a downer for landlords even without all the new product, he added. While some former homeowners are becoming renters, he said, many renters are buying condos and houses, enticed by lower prices, low interest rates and the new federal tax credits.

But most buyers have learned to approach real estate differently now than they did before the crash, said the UW’s Rolfe.

Before the collapse a “lottery-ticket mentality” prevailed, he said: “Most home buying for five, maybe 10 years was motivated by the anticipation that you were going to get rich.

“That seems to have been wrung out of the market now.”

Eric Pryne: 206-464-2231 or epryne@seattletimes.com

Seattle Real Estate Tyler Freed

Homebuyer credit helps keep area housing market afloat
by MAI HOANG
Yakima Herald-Republic

Buy YHR Photos Enlarge photo

ANDY SAWYER/Yakima Herald-Republic
Real estate agent Thomas Parker shows a home to Maria Valdez Wednesday, Nov. 11, 2009.

YAKIMA, Wash. — Since he was a young boy, Ricardo Velasco was told by his parents that he needed to own a home.

For Velasco, a 25-year-old Toppenish resident, it was tough to find an affordable home in the right area.

But when he heard about the federal tax credit for first-time homebuyers, he decided to start looking.

Velasco and his wife, America, and their three daughters, expect to close on their first home later this month and move in just in time for the holidays.

A federal tax credit of up to $8,000 for first-time homebuyers, along with record-low interest rates, has given the local real estate industry extra business.

“It’s given us a talking point to get people interested,” said Rick Fairbrook, broker at John L. Scott Real Estate.

Velasco was one of those interested buyers. He ended up finding a two-bedroom, one bathroom house for $74,000.

Velasco plans to use the money he gained from the tax credit to do some remodeling on the house which include installing a new roof and installing a new heating system.

“The $8,000 did really push us to get the house,” he said. “We’re just thankful this house came along.”

*******

Fairbrook and others in the local and statewide real estate industry believe an influx of first-time homebuyers, lured by the tax credit, has kept the market viable.

Existing home sales in Yakima County during the third quarter had a year-over-year increase of 1.7 percent, according to data from the Washington Center for Real Estate Research released this week. The county also showed a 12.6 percent increase from second-quarter figures.

Statewide, existing home sales increased 2.6 percent, the first year-over-year gain since the fourth quarter of 2005. That figure was up 15.6 percent from the second-quarter data.

The Washington Center for Real Estate Research, which is based at Washington State University, also did a study in late September and early October that shows about half of all home purchases statewide during the third quarter were from first-time homebuyers. About 60 percent of those purchases would not have happened without the tax credit.

“About 30 percent of the (overall) market was attributed to the (first-time buyer credit),” said Glenn Crellin, executive director for the Washington Center for Real Estate Research. “That’s about the same of the overall increase in (sales) activity.”

First-time homebuyers likely made up the majority of buyers in Yakima County. Nearly 72 percent of existing single-family homes purchased in the county during the third quarter cost less than $200,000, according to data from Headwaters-The Source, a Selah-based firm that provides real estate data for the county. About 30 percent of those homes were under $100,000.

There’s no county-level data showing how many of those purchases were a direct result of the tax credit, but local agents believe it was a driving factor.

Mike Kokenge, of Coldwell Banker Associated Realtors, estimates that about 60 percent of the company’s business was from first-time homebuyers.

And it also helped that the tax credit was happening in the summer months.

“People get more motivated to buy,” he said.

*******

While a tax credit may attract first-time homebuyers, other buyers have remained timid, making a dent on the median home price.

The price was likely driven down because first-time homebuyers tend to be in the market for lower-priced homes.

In Yakima County, median prices dropped 1.4 percent from a year ago to $154,200, while statewide numbers dropped 7.8 percent.

According to the Washington Center for Real Estate Research, there are enough homes in the $250,000 to $500,000 price range to supply the local housing market for more than a year if no more homes were placed for sale.

For homes above $500,000, there’s nearly a four-year supply.

And part of the loss in this market is reflective of a tough real estate market outside the area.

For several years, sales activity for Yakima County’s higher-priced homes was partially driven by buyers from areas like Seattle or California. Those buyers could buy higher-end homes in the Yakima area because they sold a modest home for much higher prices at their previous residence.

“That has stopped,” said Chris Nass of Rose & Associates. “Because of the economic climate, (out-of-town buyers) can’t sell those homes for big bucks in the communities where they’re coming from.”

The market has also had an impact on new construction.

Building permits in Yakima County for single-family homes during the third quarter declined 62.5 percent from a year ago, according to the Washington Center for Real Estate Research.

*******

The real estate industry is shifting its attention to an extension to the first-time homebuyer tax credit, which was approved by Congress and signed by President Barack Obama last week.

The tax credit was slated to end in November. Under the extension, homes purchased or under a binding contract by April 30 (and completed by June 30), now qualify for the credit.

That was a relief to Velasco. By the time he closes on his new home, it will be two months since he started the home purchase process.

“We were kind of worried,” he said. “It was one of the first things (our real estate agent) told us — that it was going to take a while.”

With banks taking more time to screen potential borrowers during the loan qualification process, the time it takes to complete the purchase process is longer than in past years, Crellin said.

A few years ago, a home purchase could close as quickly as 30 days, said Tom Trepanier, broker and owner at Windermere Real Estate in Yakima. These days, closing a home could take as long as 45 to 60 days.

A second tax credit is also in place to spur activity from repeat buyers, which may cause increased activity for homes in the $200,000 to $300,000 range.

Under this credit, homebuyers who have owned a home in five of the last eight years may qualify for a tax credit of up to $6,500 for homes that are under a binding contract between now and April 30. Again, home purchases under binding contract must be completed by June 30 to qualify for the credit.

“We’re hopeful that this new tax credit will influence the higher price ranges,” Trepanier said.

But for some existing homeowners, the repeat buyer credit might not be enough to drive them to buy a higher-priced home, especially if they already get tax breaks from paying interest on their current mortgage, said Ron Anderson, an agent with Creekside Realty.

“(The credit) is not going to be enough to make them go further into debt,” he said.

And real estate agents note that other things have to change for the market to have a full recovery, such as increases in employment levels and consumer confidence.

“People have been more cautious in how they spend that money. I’m sure it extends to home buying,” said Fairbrook, of John L. Scott Real Estate. “I think we’re in for a long, slow improvement. We’re not going to see a sudden jump in sales activity in any of the (price) ranges.”

* Mai Hoang can be reached at 509-577-7685 or mhoang@yakimaherald.com.

Seattle Real Estate Tyler Freed