Rich Hamman

WIll April Showers Bring May Buyers?

From my March report I promised some facts and figures and I'm here to deliver.

Before we go straight into the math end of this business, I want to take a moment to explain a couple of the terms.

First, I often use a metric called Absorption Rate. This is a common real estate industry term, expressed as a percentage, defined by the number of homes available for sale in a given area divided into the number of homes in that same area that are pending. A pending status means that the listed home is near closing and past a point of falling out of contract, with perhaps the exception of final lender approval. The absorption rate measures the local markets ability to "absorb" the homes that are for sale.

I calculate these rates for a number of areas each month. It leads me to pricing strategies for new listings, among other decision points.

The second term, or set of terms I use are, Balanced Market, Sellers Market and Buyers Market. A balanced market is defined by an absorption rate greater than 24% and less than 30%, a sweet spot that usually places buyers and sellers on an equal footing. A sellers market is defined as an absorption rate 30% or greater, a buyers market is a rate less than 25%. Make sense? OK, lets move into the figures, I think you will be surprised.

Ill define the Seattle area by the borders of King County, which includes the cities of Seattle, Bellevue, Bothell, Woodinville, Kirkland, Redmond, Sammamish, Issaquah, Renton , and many more. Hence the name King I suppose.

Looking at a ten year period of absorption rates from 1998 until March of 2008 we find that since August of 2007 King County has been in a record buyers market for 8 months in a row.

The absorption rate for Aug07= 22%, Sep07=15%, Oct07=17%,Nov07=16%, Dec07=14%, Jan08=14%, Feb08=16%,March08=16%. That folks, is a ten year record.

Lets just sit back and absorb that for a moment, then we will move on.

Here is the "slide" from a sellers market into a buyers market that took place in that last 15 months; Jan07=33%, Feb07=41%, Mar07=43%, Apr07=37%, May07=35%, June07=31%, Jul07=26%, Aug=22%, Sept07=15%, Oct07=17%, Nov07=16%, Dec=14%.

Looking back one can clearly see the slide happening, but before you try to predict what April of 08 will bring, try this little exercise. Take the above line and with a piece of paper, cover all the figures except Jan07, then try and predict each month, uncover it and predict the next. Its an exercise that will quickly show just how difficult it is to predict the future using historical data.

The last time there were as many consecutive months of being well in the territory of a buyers market was 2002, where we had a buyers market for 6 months in a row, from Sep02 thru Feb03.

However, as one looks at the number of homes for sale and pending you have to note the difference in volume from 2002 to 2008. For instance December of 2002 had 9,243 for sale while Dec 2008 had 10,947, pending were 2,049 and 1,488 respectively. Wow, ouch!

OK, lets break it all down for March into the neighborhoods by zip code, a dizzy chart of figures to be sure but if you live or are thinking of living in one of these burgs, this is a nice data point to have. Note, this isnt all inclusive, although it looks like it, I have not gone farther north of Seattle nor farther south deeper into Renton.


March 2008

City Zip Area Active & STI Pendings Solds AB Rate
Seattle 98101 Pike Place / Water Front / Down Town 110 20 9 18.18%
98102 East Lake Union 216 30 11 13.89%
98103 Freemont / GreenLake/Wallingford/ 322 66 64 20.50%
98104 Pioneer Square / Qwest Field 59 11 11 18.64%
98105 LaurelHurst / Ravenna 90 27 30 30.00%
98106 Westwood / SSCC 135 21 34 15.56%
98107 Ballard 168 39 48 23.21%
98108 Rainer Valley / George Town 100 16 23 16.00%
98109 West Lake Union 201 20 26 9.95%
98112 Capital Hill / Montlake / Madison Park 163 22 22 13.50%
98115 Greenlake/Ravenna / View Ridge 224 54 45 24.11%
98116 Alki / West Seattle 214 26 35 12.15%
98117 North Beach / Crown Hill / Loyal Heights 157 46 41 29.30%
98118 Columbia / Rainer Beach 292 49 30 16.78%
98119 Queen Anne 165 29 35 17.58%
98121 BellTown / Water Front 213 66 21 30.99%
98122 First Hill / Central Area / Madrona Park 274 46 34 16.79%
98125 North Seattle / Lake City 181 45 35 24.86%
98126 Delridge 129 36 32 27.91%
98133 North Gate / Bitter Lake / Shoreline 234 38 48 16.24%
98134 Harbor Island / Safeco Field 4 0 0 0.00%
98136 Fauntleroy 139 23 31 16.55%
98144 Beacon Hill / Mount Baker 182 29 22 15.93%
98155 Lake Forest Park / North City / 180 35 37 19.44%
98177 ShoreLine / Arden / Richmondbeach 127 18 13 14.17%
98199 Interbay & Magnolia 147 24 24 16.33%

Woodinville 98072 Hollywood / Cottege Lake / 211 20 23 9.48%

Kirkland 98034 Juanita / KingsGate 372 43 31 11.56%
98033 Forbes Creek / Bridle Trails 546 46 55 8.42%

Redmond 98052 Willows Run / Earlmont / Avondale 402 88 71 21.89%

Medina 98039 Medina 47 2 4 4.26%

Mercer Island98040 Mercer Island 184 28 19 15.22%

Bellevue 98004 Clyde Hill / Downtown 453 62 23 13.69%
98005 Wilburn 112 22 15 19.64%
98006 Somerset / EastGate / Lakemont 251 36 39 14.34%
98007 LakeHills 107 17 9 15.89%
98008 Lake Sammamish / Rosemont Beach 134 28 23 20.90%

NewCastle 98056 May Creek 273 26 25 9.52%
98059 Cougar Mtn / LakeMont / Renton 359 89 57 24.79%

Issaquah 98027 Squak Mtn / Cougar Mtn / Talus / Highland 264 28 33 10.61%
98029 Klahanie 338 58 52 17.16%

Sammamish98074 Sahalee / Adelaide 225 37 42 16.44%
98075 MonoHan / Pine Lake / Beaver Lake 178 24 14 13.48%

Snoqualmie98024 Preston / Fall City 91 8 5 8.79%
98065 Snoqualmie Ridge / Preston / North Bend 207 30 13 14.49%

North Bend 98045 RattleSanke Mtn / Tanner 127 10 8 7.87%

If you got through all of that and are still awake, give yourself a pat on the back.

Wouldnt it be nice if we could just take the lowest absorption rate, run out with our Realtor and start making offers?

This is but one of several data points to be considered when either buying or selling. For example 98134, Harbor Island scores a big fat goose egg for absorption, but this is largely where the shipping containers are loaded and the port operates Seattle Harbor. Not very conducive for the peace and quite of single family home ownership. One of many reasons you need the advice and council of an agent that knows the area before you dive in as a buyer or seller.

Absorption rate provides a nice barometer going into the year and we will keep a weather eye on these rates as our traditional buying season for this region starts to heat up in the coming months.

Now, if I replaced the word Home with Salmon and the numbers represented pounds of salmon available versus those sold, wouldn't you be inclined to visit the grocery store and check the price of a pound of Salmon? I know I would. And I would increase my rate of Salmon absorption to be sure. You can do that easily right at your PC or MAC.

Well, actually I don't know about the Salmon but you can easily check homes in your neighborhood or other areas of interest by setting up a search account at http://www.seattleshomesearch.com/ (shameless plug) and checking out the home prices in differing areas. The search results delivery is automated and the search tool is quite easy to use. Who knows you might just discover a nice price on a pound of home.


As a final note, we are seeing a steady pick up in buyer interest in the Seattle area and if you happen to be a buyer, take note of these numbers and share this information with your Realtor. They will know you are doing your homework and you both will benefit from a little bit more knowledge of the market.

If you are a seller, take heart, brighter days are on the horizon.

RH


http://www.seattleshomesearch.com/

Freaky Weather And A Funky Market

The month of March is about over but winter is holding on tight as we have unseasonable snow and cold temps. The general housing market in Seattle and the surrounding areas of Bellevue, Kirkland, Sammamish, Issaquah, Snoqualmie and North Bend are all feeling the brunt of what we know as a slow market.

Compared to many local markets in other states, we are still holding our own, in terms of values, but sales are off and inventory is building. Will the summer bring relief? Many are saying, no.

Foreclosures are up in the south end, (Renton, Tacoma, Auburn) with perhaps more to come. Over building and balloon payments are mostly to blame there.

With rumors flying about Washington Mutual’s next round of layoffs ( no one left in the mortgage dept to layoff, so the deep cuts are coming) with an impending 5 to 12 million dollar write down on its way, things are looking pretty gloomy on the mortgage front, which is causing buyers some headaches when trying to qualify, which in turn is causing homes to remain on the market longer and price reductions to become the rule of the day. By the way WAMU stock is now near $10 a share, from $40 a share last summer.

"Is it a buyers market yet?" one client recently asked me, tongue in check. "You have tremendous power right now", I replied, "if you can utilize it, there are some great deals to be had". But like so many potential buyers choosing to sit on the sidelines and "wait it out", she was one of them

Wait out what? Fear, fear of recession, fear of job loss, fear, fear, fear. All the old fears that always crop up in a market like this one. Its our fear that holds us back, but for the brave buyers willing to buy and hold, rewards are on the horizon. That is the smart way to "wait it out", if you can swing it financially.

As sure as I’m writing this blog the market will even out and return to “normal”, and home prices / values aren’t going to stay down for any appreciable length of time, but I yell to the wind, no one else is listening. That’s OK, I’m patient by nature.

One of my sellers recently asked me, "How do I maximize my profits and still get my house sold?". Wrong question. The real question is what is the market price of my home in a declining market? Ah, there is the trick, valuing a home in this market.

Me? I hire a pro for my sellers, a real wake-up call for most of them, but having an independent appraisal in hand is invaluable in this market.

If a home is presented well, and I mean really well, great curb appeal, nicely staged and de-cluttered inside, no glaring maintenance issues ( like a new shingle roof being needed) and, (and this is the BIG and), if the home is priced CORRECTLY, then selling it is no problem. In fact buyers will come out of the woodwork and line up to buy fairly priced home that shines outside and in.

For the right house at the right price, we still see multiple offers and homes being sold in three to four days or within a week or two. The rest, just sit and wait, like poor performers waiting to be picked. To be sure, a home sold in two or three days with multipule offers is far from the norm these days, but it still does happen.

Clearly there is a disconnect between the sellers and buyers. I have been counseling my sellers, if they aren’t dead serious about selling, take it off or don’t put it on the market, you are wasting everyone’s time. Its tough love, but when the market changes, you have to change with it, or wither on the vine.

In the next installment Ill have some metrics, sales figures, inventory, days on market and some examples of transactions in the area. Oh, and some juicy gossip to share as well! Until then, take care and remember they aren’t making any more land in the US of A.