Seattle Real Estate

Here's a couple of Altos Research mentions in the Seattle Post Intelligencer last week.

Altos client and blogger Sandy Kaduce is a contributor to the paper's blog site, wrote last week about the changing nature of the market.

On Friday, writer Aubrey Cohen called to get our take on the Seattle housing market numbers. The numbers that come out of the Northwest MLS are just starting to show year over year declines. (If you're an Altos watcher, you've seen this coming for a long time now of course.) Aubrey notes that the mix of property types being sold have an impact on the over all "median price" of a market. He uses one of my favorite qutoes to describe the 2007 (where the pain is starting low).

And the recent problems in the subprime mortgage market, which serves people with poor credit, have a disproportionate effect on cheaper homes, meaning those that do sell are more likely to be at the higher end of the market, buoying the median price, said Michael Simonsen, chief executive of Altos Research in Mountain View, Calif.

"You don't buy a $1 million waterfront property on a subprime mortgage," he said.

Some readers have asked lately about a recent jump in our Days on Market statistic. I thought it makes sense to explain it here. We recently did a methodology change where we increased the look-back window for watching properties.

By making this change, we more accurately reflect the actual total time on market, even for properties that have come on and off the market, especially including those that have been off the market for 30 days before being relisted.

What we found was that in some markets, we can find a significant chunk of properties that have really been on the market for long periods and these properties were previously under-reported in our stats. We've seen a notable decline in the number of properties relisted (with the sole intention of "refreshing" a listing) in Silicon Valley since last fall when the local MLS changed its rules. In San Jose California we've observed a drop from nearly 25% of homes on the market having been relisted down to 9%. That's real progress.

Those rules however do not impact a property that for example was on the market all last summer, was pulled off over the holidays and put back on the market in January. A soon-to-be-announced Altos partner calls these properties "stale fish." We've adjusted our nets to catch more stale fish. We're still dolphin-safe though.

This change effected our the trend charts in most communities a little bit. In some areas, though, you might notice a big jump in the DoM stat that week in January 2007. This change is the reason for the jump. Inset is a snapshot of the current Days on Market trend for San Jose Homes.

What does one get for a million bucks these days? That's the question on our mind as we went spelunking through the database today. We grabbed 5 more or less random markets in the Bay Area, San Diego, Los Angeles, Seattle, and Chicago that have a quartile of the market with a median price at $1 million this week. Here's what you can expect if you wanted to drop a mil on a home in those markets.

City	Zip	Quartile	Avg. Square Ft	Lot Size	Era Built	Median Price Per Square foot
Carlsbad	92009	2nd (mid-high in this zip)	3369	quarter acre	Mid-Nineties	$306
Huntington Beach	92649	3rd mid-low	2291	eighth acre	Early Seventies	$469
Santa Rosa	95404	2nd	2940	1+ acres	Late Nineties	$361
Chicago	60614	4th (bottom of this zip)	1662	postage stamp	Early Nineties	$606
Seattle	98198	1st (top of the market)	2706	quarter acre	Early Nineties	$258

Some fun things to note:

• The properties in these market chunks all average approximately 4 beds / 3 baths.
• The Chicago zip code 60614 is Lincoln Park, a part of town that has always been among the ritziest. So for around a million bucks, you could live in a very cool single family (detatched) home, in a killer location. Any part of this zip code that wasn't always tony went through massive gentrification in the late '80s and early '90s. I particularly like this place. That's where I'd go if I transplanted my Bay Area mortgage back to Chicago. $1million is the bottom of this zip code.
• For a million bucks in Huntington Beach, however, you'd get a place built in the '70s. This is the lowish side of the market too. So anything scraped and rebuilt in the last 15 years in Huntington is significantly more pricey that our sample for the day. 'Course it is February and that's gotta be worth a premium over Chicago today.
• The Des Moines section of Seattle on the other hand has a wide range of properties. But the nice long stretch on the water provides some great opportunities for the high-end of the market here on the south side of town.
• Santa Rosa is the most exurban of the zips in our sample today. Over 50 miles from San Francisco, the area provides some good opportunity to build on big lots at reasonable (for the Bay Area) prices. Which is great if you work in the wine business or don't mind a mega-commute.

We were covered in The Seattle Post Intelligencer this weekend. Aubrey Cohen published a local real estate article on Saturday and included some stats and quotes from us. Here's a sample:

Melvey's [Widnermere] own analysis of the number of sales versus the number of homes listed shows that Seattle is still a seller's market.

"Definitely inventory dropped a lot during the holidays, but the activity level didn't drop off as much as I expected it to," he said.
"It certainly seems to me that the market is still really healthy."

Altos Research numbers show the average house is now spending 69 days on the market.

"Ten weeks is pretty long, compared to the levels of the last few years," Simonsen said. He said 36 percent of properties currently on the market have had their prices reduced -- relatively high, but lower than reductions of more than 40 percent seen in many San Francisco Bay Area markets.

Simonsen predicted that Seattle would start seeing slight year-over-year price declines this spring or summer, although he said the city had a strong economy, and its housing market would fare better than outlying areas.

"While we see some positive things to keep the bottom falling out, we don't see any big catalyst that will let prices jump upwards," he said.

Full article available at the Seattle PI.

We wanted to call your attention to ShackPrices.com which launched this week. Great stuff from Galen, a frequent contributor to Rain City Guide. The site is a very slick real estate search mashup, ala Trulia, or Redfin and Movoto, though they're not real estate brokers.

I hope ShackPrices has a national ambition, and it'll be interesting to see if they can repeat the community flavor elegance (photos, local recommendations) that they've created for their native Seattle. Trulia has been spending a lot of effort on that neighborhood part of their operation. I imagine it's paying dividends.

If you're looking to buy in Seattle, ShackPrices is a great place to start.

Talking with a new client in Seattle this week had me digging into the Kirkland real estate market. I thought I'd share a bit with you. The homes for sale in Kirkland are median priced at just under $800k this week. That's a little deceptive since half the homes for sale in Kirkland are basically new construction, bigger and better. The less expensive half of the market are smaller properties, built in the '70s. Here's our real time profile for Kirkland Washington.

Note the recent price trend arrow. Properties, especially those newer ones at the high end of the market eased down all summer long, but in the last few weeks we've seen that downtrend flatten and even bounce up a bit. Notice our Market Action Index illustrates enough demand to bump us up into Seller's territory this week. But it ain't strong. Like a retriever with his nostrils above water paddling as hard as he can.

Unfortunately for home owners in Kirkland, we don't see a lot of evidence that this trend will continue. Notably, the time it takes to sell a place continues to climb, especially at the low end of the market. In the chart below, the light blue line is the average Days on Market for the cheapest 25% of the properties for sale. This chart shows a 90-day rolling average, and the weekly sample has us at about 49 days currently.

Looks to us like the Kirkland real estate market has stabilized for the autumn, but the leading indicators have not shown strength. So buyers will will continue to have their options and the time to make the best decisions.

Here's an overview of the current Seattle housing market. Next week we'll illustrate a handful of key Seattle zip codes to explore a little. First, our real-time market profile for the city as a whole:

Median Price	$497,000
Average Price	$698,828
Asking price per square foot	$266
Average Days on Market	51
Total Inventory	2250
Absorbed this week*	205
Percent Price Decreased	43%
Percent Relisted**	10%
Percent Flip***	2%
Median Home size	2,009 sq. ft.
Median Lot size	approx 7000 sq. ft.
Average age	51

The number of properties lowering their price has grown to 43%, which is comparable to San Jose. Single family homes in San Francisco are holding up significantly better, with only (!) 27% having lowered their prices.

Some other interesting tidbits about the homes for sale in Seattle:

• Despite the signs of market cooling noted above. Prices are not generally falling through the floor. In fact the median prices have hovered around a plateau for a full six months. We may be seeing the weak cyclical trend ("the burst") interacting with a typically strong seasonal market ("summer buying season"). The net effect is prices haven't moved. Watch as the winter comes on to see if convergent seasonal and cyclical weakness impacts prices more noticeably.
• Our Trend Indicators for the broad Seattle real estate market see plateaus in other market measurements as well, for example Days on Market has held steady.
• The highest priced properties (the top quartile) went through a 20% correction earlier in the summer but appear to have stabilized in the last few months, price-wise. The following chart, while a little boring, illustrates the key part of the market that's moving.

Middling results to be sure. The housing market bears call look at these signs and call it "just the beginning of the housing market crash." The bulls (are there any real housing market bulls these days? Maybe what we have is "Bear" and "What, Me Worry?") read these signs as "less damage than expected."

Footnotes:

*sold and pulled off market

**properties currently on market that have been on earlier in the year under a different MLS ID. This stat is dropping precipitously since the Northwest MLS issued new rules about 6 weeks ago.

***properties on the market earlier in the year at a lower price.

A few weeks ago, we introduced in our paid research three new statistics tracking the percentage of properties in a market that have been priced-reduced, re-listed, or flipped.

Re-listing is the tactic used by agents to re-introduce a property to the market. It gets treated as a fresh property. The tactic can sometimes frustrate buyers who have already seen a property. From our point of view, it's a really fascinating marker of real estate market and housing demand conditions.

Apparently, many MLSes had heard the same market feedback that pushed us to introduce the re-listing monitor feature. In September, the Northwest MLS which serves Seattle introduced member rules to expressly prohibit properties from being relisted (Story today at Inman News.) Also in September, the Silicon Valley MLS introduced a "continuous days on market" which measures the listing time across all the relistings. (Here's Kevin's take on relisting in Silicon Valley). From the Inman article today:

Northwest MLS, a regional MLS in Washington state, on Sept. 1 issued a notice to members threatening "disciplinary proceedings against agents and brokers who improperly cancel and relist properties or input meaningless price changes. Canceling and relisting is only permitted when there has been a substantial change in the quality or condition of the property."

The notice advises that price changes should only be entered into the MLS "when there has been a material change in the price of the property. Otherwise, canceling and relisting and inputting changes are deceptive and misleading marketing ploys, designed only to gain undeserved market exposure at the expense of other properties."

So is relisting a dirty, potentially illegal, trick? Or is it merely smart marketing? Is there such a thing as "undeserved market exposure?" If I'm selling a property, it's ALL deserved, baby. Furthermore, why now?

My take is that the re-listing phenomenon is intertwined with the current legal/monopolistic howling about the MLSes - born of the same parents, as it were. In an ironic twist, by aggressively addressing this relisting tactic, the MLSs may be building the case for their detractors. The logic goes something like this:

• Initially, MLS systems were simply books. Collections of the properties for sale. Everyone had a handy repository for the local properties.

• At that time, property marketing was all personal. Agents show a house. People walk through. Deals get done. Any impersonal marketing, say an ad in the newspaper, was done outside the MLS.

• The paper was the aggregator for whomever is marketing. No one cared if the local paper had FSBO ads along side properties that also happened to be listed with a Realtor, and therefore on the MLS, which was merely a back-end convenience for the Agents to use. No one had to game the MLS to get more attention for their property.

• Enter the internet. MLSs go online and instantly become highly effective marketing channels in and of themselves. Much more effective than a newspaper ad. And everyone gets it for "free".

• On top of that, the internet also opens additional marketing opportunities. Send me an email instantly when a new property meets my criteria. Put the listings on a map. Tell me about the neighborhood crime stats. Great stuff, if you're a home buyer.

• But this is where the trouble begins. You can change your ad in the paper. But is it wrong to change your listing? If the only way to trigger the "new listings" email to put my property in front of hundreds of potential buyers is to re-list it, I'm going to be tempted.

• Now, with the MLS as marketer, they have to fight competitive marketing channels. By blocking out, or even appearing to dissuade, competitive marketers, they invite the monopoly catcalls.
  

• Meanwhile, the MLSes want to be seen as an advocate of the consumer. So they crack down on this nefarious re-listing practice, effectively admitting that they are first and foremost a marketing channel, rather than being a central repository. They're painting the target on their chests. Bummer of a birthmark, Hal.

The duality makes for a catch 22. MLS as repository makes sense to centralize, like a stock exchange. But the MLS as marketing channel makes sense to blow wide open. The repository must have accurate data, be legally binding and consistent. But how do you reconcile that control in the face of external marketing necessities? One thing is sure: the re-listing tactic is merely a symptom of the greater challenge. Addressing the symptom may be desirable in the short term, but there is more pain to come.

Here's a look at 16 zip-codes showing mounting pressure from the slowing housing market. We looked at Northern California and Seattle area zip codes with greater than 40% of the properties with price reductions. We also filtered for decreasing demand trends (measured by our Market Action Index), sufficient inventory, and median days on market (at least 7 weeks).

The result is one way to identify some at-risk bubble markets:

City	Zip	Median Price	Inventory	% Price Decreased	Days on Market	Market Action Index
BEN LOMOND, CA	95005	$649,500	47	57%	49	20
BODEGA BAY, CA	94923	$937,500	38	42%	91	12
CARMEL VALLEY, CA	93924	$1,395,000	81	42%	91	13
CASTROVILLE, CA	95012	$639,000	35	51%	91	16
LOS ALTOS, CA	94024	$1,995,000	62	50%	56	39
MARTINEZ, CA	94553	$600,000	222	50%	49	40
PACIFIC GROVE, CA	93950	$989,500	91	46%	84	18
PEBBLE BEACH, CA	93953	$2,695,000	110	49%	119	13
REDMOND, WA	98053	$859,900	126	40%	56	43
ROHNERT PARK, CA	94928	$479,000	247	60%	63	36
SAN ANSELMO, CA	94960	$972,000	58	47%	49	12
SAN JOSE, CA	95148	$789,000	143	45%	49	41
SAN JOSE, CA	95131	$727,000	41	49%	49	41
SAN JUAN BAUTISTA, CA	95045	$1,125,000	27	44%	63	17
SARATOGA, CA	95070	$2,189,000	132	42%	77	38
WALNUT CREEK, CA	94597	$799,000	27	63%	42	38

Some patterns emerge. High-end markets, even those close in, like Los Altos, Saratoga, and Redmond are showing their weakness. Outlier communities like Bodega Bay start to filter in. Worst, of course, is the combination of high-end communities far from the economic center - Pebble Beach and Carmel.

Note 1: We filtered pretty aggressively, exclusion from this list does not mean everything is rosy in homeville. You can draw parallels with similar communities that aren't on this list for one reason or another.

Note 2: Inclusion on this list does not imply market rout. In fact prices for these markets are UP an average of 2% year-to-date.

Just some important warning signs for our housing bubble vigilance.

The blogosphere is thick with stories of impending doom. The real estate bubble is upon us. Since we measure these things pretty closely, I thought I'd highlight a few local markets that have been defying gravity and conventional wisdom this year. This turned out to be harder than I expected.

I queried our database for the zip codes in California and Seattle that are at their single-family home median price peak for the year (within a couple percent) and where demand is strong (comfortably in a Seller's Market), and demand is not showing signs of cyclical or seasonal weakness. This last parameter eliminates some markets where prices are holding up, but demand trends don't bode well. We also limited the query to areas with at least 35 properties on the market to get a good sample.

Of the several thousand zips we cover, exactly seven look strong enough to include. Here they are, in order of demand strength (Market Action Index).

1. Auburn, Washington, 98092: Median price at $422k, Market Action Index of 75. Auburn is the only city on our list strong enough to call "Hot". There's lots of demand in this relatively affordable city just south of Seattle.
2. San Francisco 94122 (Sunset district): Median price at $858k, Market Action Index at 59. The Sunset, long a haven for relative affordability in the City, has reasonably good turnover in the single-family homes. Condos in the Sunset are showing signs of summer demand weakness.
3. Montebello, CA 90640: the LA suburb has shown solid pricing and level demand trends all summer. Also named one of Money Magazine's 100 best places to live. Coincidence?
4. Concord, CA 94519 (including neighborhoods Baldwin Park, Dana Estates): prices have pulled back a tad from their absolute peak in April, so Concord almost didn't make our list. But demand has stayed reasonably robust this summer.
5. San Francisco 94124 (Bayview): at a median price of $677k for a single family home, the Bayview area is one of the most affordable (if unglamorous) parts of town.
6. Rowland Heights, CA 91748: another LA suburb (isn't all of LA suburb?) the most interesting thing I can find about this town (I've never been there) is it's relatively high Asian population.
7. Seattle 98188: At a median price of $353k, this area is among the least expensive in our research areas. That's probably because it's right next to SEATAC airport.

Market trends are seasonal as well as cyclical, so the brevity of this list doesn't imply a housing bubble pop, per se. But it does point to a return to rationality from a crazy market. A much easier post on the weak markets will be forthcoming...

Here's a real-time glance at King County property values. This is from our July 22 snapshot.

City	Median Single Family List Price	Trend
AUBURN	$379,950
BARING	$117,475
BELLEVUE	$937,475
BLACK DIAMOND	$584,925
BOTHELL	$499,500
CARNATION	$697,000
DUVALL	$529,999
ENUMCLAW	$449,950
FALL CITY	$875,950
FEDERAL WAY	$358,000
GOLD BAR	$279,950
HOBART	$399,950
ISSAQUAH	$652,000
KENMORE	$590,950
KENT	$389,950
KIRKLAND	$795,000
MAPLE VALLEY	$424,950
MEDINA	$2,250,000
MERCER ISLAND	$1,499,000
MILTON	$429,950
NORTH BEND	$539,950
PACIFIC	$299,950
PRESTON	$679,950
RAVENSDALE	$571,975
REDMOND	$753,490
RENTON	$507,253
SAMMAMISH	$816,250
SEATTLE	$479,900
SKYKOMISH	$195,000
SNOQUALMIE	$679,990
SNOQUALMIE PASS	$536,495
VASHON	$504,750
WOODINVILLE	$700,000

A single arrow means the trend extends over the four weeks. A double arrow means that the trend reaches over the previous quarter. The side-to-side arrow implies no clear trend-prices are bouncing around a plateau.

In short, you can see that King County real estate prices are moderating in the summer months. We're not seeing and housing bubble burst nor a roaring upside. Hope for the best...

Seattle-area readers - give me a buzz and let me know if there are specific real estate research questions you'd like to see answered here. How worried are we about the real estate bubble in Seattle?

Yesterday we looked at how demand is related to median price in the Bay Area. Today, let's apply the same lens to the Seattle Area.

This chart plots 30 towns in King County. The regression line crosses into Buyer's territory at just under $1mil. (In the Bay Area it's $1.5mil)

Because King County isn't that big, I sense that the proximity impact we see in the Bay Area is less on this chart. Kirkland and Auburn are two bigger towns sitting in the Buyer's market zone.

Also notable difference between Seattle and the Bay Area is that none of the cities have demand at levels that we describe as "Hot" conditions. That surprises me. (We do know, however, that some individual zip codes, though not plotted here, are hotter than the cities overall. See the West Seattle post I did a few days ago.)

In addition about 70% of these towns have been experiencing declining relative demand as measured by the Market Action Index. That mirrors the Bay Area's hottest markets, but appears to be weakening faster than the Bay Area as a whole.

West Seattle is one of those quintessential parts of Seattle, with a dense mesh of 50 to 70-year-old homes, on the hills, in the trees that the city won't let you trim. Lots of newish construction and upgrades going on. Appears to have excellent investment potential as the city's economy powers ahead. Here's a view of zip 98126.

Prices are up strongly since the beginning of the year...

This is the first post we've done about conditions in Seattle. We checked out some properties in Issaquah today and I thought I'd show a quick take on the Market Action in that area.

Here is this week's Market Action Index chart for the 100 or so homes listed 98027 in Issaquah, Washington. Prices in the quartiles is as follows:

Quartile 1: $1.148mil; Quartile 2: $795k; Quartile 3: $600k; Quartile 4: $450k

Market Action above 30 is "se