Tag Archives: Seattle

Record Inventory Floods Seattle, Sending Home Prices Significantly Lower

This is how housing markets turn. Slowly, then all at once.

Seven years of Seattle home prices outpacing wage growth because of low rates; bidding wars replaced by sales at the asking price; days or weeks on the market turning into months; sellers reduce home prices; surging mortgage rates; buyers disappear, and wallah – a classic turning point in an auction, otherwise known as an unfair high that is now rippling through the real estate food chain in the Seattle area.

As a reminder, before we dive into the faltering real estate market in Seattle. Back in September, we outlined a significant clue about the overall health of America’s housing industry: Bank of Ameria called it: “The Peak In-Home Sales Has Been Reached; Housing No Longer A Tailwind.”

With that in mind, it comes as no surprise that inventory countywide soared 86% among single-family homes and 188% among condos in October compared to a year prior, according to newly published data by the Northwest Multiple Listing Service. It was the most massive year-over-year increase on record, dating back to the Dotcom bust, a rhythm that has some asking: Is the housing industry about to go bust?

Mike Rosenberg, a Seattle Times real estate reporter, has been documenting the rise and fall of the real estate market on the West Coast.

Rosenberg said the median home price plummeted to $750,000, down $25,000 in one month and down $80,000 from all-time highs in spring.

He warned, “that is not a normal seasonal drop — prices in the city actually went up during those time frames last year.”

Compared to 2017, prices inched up about 2%. He said interest rates had moved higher in that span have increased monthly mortgage costs.

On the Eastside, the median home sold for $890,000, unchanged from the previous month, but down $87,000 from the all-time high in late summer. On a year-over-year basis, prices were still up 5.3%.

https://www.zerohedge.com/sites/default/files/inline-images/sales%20map.png?itok=wGv4JCCX

Rosenberg notes that prices dipped on a month-over-month basis in South King County but surged at the northern end of the county. He said inventory is flooding the market at the same time as buyer demand evaporates.

https://www.zerohedge.com/sites/default/files/inline-images/Oct%20home%20sales.png?itok=HokTF4vt

As we highlighted in the BofA report, sellers across the country are unloading properties into a weakening market will trigger downward momentum in prices.

Back to Seattle, that is precisely what is happening, as sellers have reacted by cutting asks faster than any other metro area in the country. To make matters worse, buyers are now negotiating prices down even further, as the average home is selling for below list price for the first time in four years, said Rosenberg.

Rising interest rates, declining demand, and flat-lining rents have been the main drivers of failing home buyer demand in the second half of 2018.

Into the fall months, brokers told Rosenberg that buyers are now pausing as they wait for the storm to blow over. 

Ken Graff, a broker with Coldwell Banker Bain in Seattle, listed a townhouse in Magnolia on the market in April, “right before the apparent peak of the market,” and had 11 bidders who ferociously fought for the home, with a winning bid for $800,000. In September, he listed an identical town home in the same neighborhood, it stood on the market for three weeks before selling for $725,000.

“Buyers are still having to pay a premium for Seattle-area properties, but it lacks the frenzy we’ve seen in the last few years,” Graff said.

“People can be a little more measured now, which is a good thing.”

Among other regions where home prices have dropped in October on a year-over-year basis: West Bellevue, Southeast Seattle, Burien-Normandy Park, and the Skyway area. On the other end, prices rose more than 10% from a year ago in Jovita-West Hill Auburn, Auburn, Kent, Renton-Benson Hill, Mercer Island, Kirkland-Bridle Trails and Juanita-Woodinville.

Elsewhere, the rest of the Puget Sound region also saw expanding inventory, including a 65% increase in Snohomish County.

https://www.zerohedge.com/sites/default/files/inline-images/home%20price%20activity.png?itok=Vh7i0Cad

The slowdown in Seattle housing shows little signs of abating as the Federal Reserve is expected to hold rates on Thursday before a hike in December. At their most recent meeting in late September, Fed officials communicated a plan for three more hikes in 2019. With one more rate hike forecasted in 2018 and three more in 2019, it seems that Seattle and much of the country’s real estate market could be at a significant turning point into the 2020 presidential elections. Let us hope real estate prices do not fall even further, as many home buyers could vote with their home prices.

Source: ZeroHedge

 

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Home Price Growth Slows Most Since 2011 As Case-Shiller Rolls Over

Amid the collapse on US home sales, as mortgage rates surge above 5.00%, August’s Case-Shiller home price data plunged to its weakest annual growth since Dec 2016, dramatically missing expectations).

Against expectations of a 5.80% YoY rise, August home prices rose 5.49% (slowing from July’s 5.90% YoY) to its weakest since Dec 2016…

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This is the biggest two-month slowdown in Case-Shiller home price growth since 2014…

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On a non-seasonally-adjusted basis, home prices rose 5.77%, down from 5.99%, the lowest since June 2017.

And judging by mortgage rates, it’s about to get a whole lot worse…

https://www.zerohedge.com/sites/default/files/inline-images/2018-10-30_6-12-59.jpg?itok=8UhvPbfH

Of course, the establishment is saying this is “contained”:

“Following reports that home sales are flat to down, price gains are beginning to moderate,” David Blitzer, chairman of the S&P index committee, said in a statement. “There are no signs that the current weakness will become a repeat of the crisis, however.”

Las Vegas had the biggest annual increase at 13.9 percent, followed by San Francisco at 10.6 percent and Seattle at 9.6 percent,

https://www.zerohedge.com/sites/default/files/inline-images/2018-10-30%20%281%29.png?itok=vPBTu7Dq

But Seattle’s price appreciation slumped MoM…the biggest drop since Feb 2011…

https://www.zerohedge.com/sites/default/files/inline-images/2018-10-30_6-23-32.jpg?itok=bTwOj3sb

Is it any surprise that home builder stocks have collapsed along with US housing data?

https://www.zerohedge.com/sites/default/files/inline-images/2018-10-30_5-58-59.jpg?itok=U2x9OqyF

Source: ZeroHedge

Seattle Crawls Back To Wells Fargo Because No Other Bank Wants Their Business

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Dakota Access Pipeline protesters chant outside of the Wells Fargo Bank at Westlake Center in January 2017. The city of Seattle has renewed its contract with Wells Fargo, after it could get no other takers for its banking business. (Lindsey Wasson / The Seattle Times)

Seattle split with Wells Fargo a year ago in protest over the bank’s investments in the Dakota Access Pipeline and fraud scandals. But the two are together again after the city could find no other bank to take its business.

The city of Seattle will keep banking with Wells Fargo & Co. after it could get no other takers to handle the city’s business.

The City Council in February 2017 voted 9-0 to pull its account from Wells Fargo, saying the city needs a bank that reflects its values.

Council members cited the bank’s investments in the Dakota Access Pipeline, as well as a roiling customer fraud scandal, as their reasons to sever ties with the bank.

Some council members declared their vote as a move to strike a blow against not only Wells Fargo, but “the billionaire class.”

“Take our government back from the billionaires, back from [President] Trump and from the oil companies,” Council member Kshama Sawant said at the time.

The contract was set to expire Dec. 31, but as finance managers for the city searched for arrangements to handle the city’s banking, it got no takers, said Glen Lee, city finance director. That was even after splitting financial services into different contracts to try to attract a variety of bidders, including smaller banks.

In the end, there were none at all.

It became clear this was our best and only course of action,” Lee said of the city’s decision to stick with Wells Fargo after all.

The first sign that it would be hard to make the council’s wish a reality came soon after the vote when Wells Fargo too-hastily informed the city it could sever its ties immediately with no penalty for breaking the contract. The bank even promised to help the city find a new financial partner.

But it quickly became clear how hard that would be as the city reworked its procurement specifications and searched for months.

Source: By Lynda Mapes | Seattle Times

Home Prices In All US Cities Grow Faster Than Wages… And Then There’s Seattle

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From 1898 until Aug. 10, 1940, streetcars (here seen in 1910) made their way between upper and lower Queen Anne Hill, assisted by a weighting system called a “counterbalance.”

According to the latest BLS data, average hourly wages for all US workers rose at a respectable 2.9% relative to the previous year, if still below the Fed’s “target” of 3.5-4.5%, as countless economists are unable to explain how 4.3% unemployment, and “no slack” in the economy fails to boost wage growth. Another problem with tepid wage growth, in addition to crush the Fed’s credibility, is that it keeps a lid on how much general price levels can rise by. With record debt, it has been the Fed’s imperative to boost inflation at any cost (or rather at a cost of $4.5 trillion) to inflate away the debt overhang, however weak wages have made this impossible.

Well, not really.

Because a quick look at US housing shows that while wages may be growing at a little over 2%, according to the latest Case Shiller data, every single metro area in the US saw home prices grow at a higher rate, while 15 of 20 major U.S. cities experienced home price growth of 5% or higher, something which even the NAR has been complaining about with its chief economist Larry Yun warning that as the disconnect between prices and wages hits record wides, homes become increasingly unaffordable. Paradoxically – the higher prices rise, the more unaffordable US homes become for the average American as we showed this weekend. In fact, as of this moment, homes have never been more unaffordable, which even more paradoxically hasn’t stopped priced from hitting new all time high virtually every month for the past year.

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And while this should not come as a surprise, one look at the chart below suggests that something strange is taking place in Seattle where prices soared by a bubbly 13.2% Y/Y, and which has either become “Vancouver South” when it comes to Chinese hot money laundering, or there is an unprecedented mini housing bubble in the hipster capital of the world.

https://i2.wp.com/www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/10/21/case%20shiller%20aug%202017.jpg

Putting the above data in context, here are two charts courtesy of real-estate expert Mark Hanson, the first of which shows how much household income increase is needed to buy the median priced home in key US cities…

https://i2.wp.com/www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/08/12/HOUSEHOLD-INCOME-MUST-INCREASE_0.png

… while the next chart shows the divergence between actual household income, and the income needed to buy the median priced house.

https://i0.wp.com/www.zerohedge.com/sites/default/files/images/user5/imageroot/2017/08/12/divergence-hh-income-vs-hh-cost-to-own.png

Source: ZeroHedge

Seattle Has Most Cranes In Country For 2nd Year In A Row — And Their Lead Is Growing

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With about 150 projects starting this year or in the pipeline just in the core of the city, construction is as frenzied as ever.

(The Seattle Times) For the second year in a row, Seattle has been named the crane capital of America — and no other city is even close, as the local construction boom transforming the city shows no signs of slowing.

Seattle had 58 construction cranes towering over the skyline at the start of the month, about 60 percent more than any other U.S. city, according to a new semiannual count from Rider Levett Bucknall, a firm that tracks cranes around the world.

Seattle first topped the list a year ago, when it also had 58 cranes, and again in January, when the tally grew to 62.

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The designation has come to symbolize — for better or worse — the rapid growth and changing nature of the city, as mid-rises and skyscrapers pop up where parking lots and single-story buildings once stood.

And the title of most cranes might be here to stay, at least for a while. The city’s construction craze is continuing at the same pace as last year, while cranes are coming down elsewhere: Crane counts in major cities nationwide have dropped 8 percent over the past six months.

During the last count, Seattle had just six more cranes than the next-highest city, Chicago. Now it holds a 22-crane lead over second-place Los Angeles, with Denver, Chicago and Portland just behind.

Seattle has more than twice as many cranes as San Francisco or Washington, D.C., and three times as many cranes as New York. Seattle has more cranes than New York, Honolulu, Austin, Boston and Phoenix combined.

At the same time, Seattle’s construction cycle doesn’t look like it’s letting up. Just in the greater downtown region, 50 major projects are scheduled to begin construction this year, according to the Downtown Seattle Association. An additional 99 developments are in the pipeline for future years. And that’s on top of what is already the busiest-period ever for construction in the city’s core.

“We continue to see a lot of construction activity; projects that are finishing up are quickly replaced with new projects starting up,” said Emile Le Roux, who leads Rider Levett Bucknall’s Seattle office. “We are projecting that that’s going to continue for at least another year or two years.”

“It mainly has to do with the tech industry expanding big time here in Seattle,” Le Roux said.

Companies that supply the tower cranes say there’s a shortage of both equipment and manpower, so developers need to book the cranes and their operators several months in advance. It costs up to about $50,000 a month to rent one, and they can rise 600 feet into the air.

Most cranes continue to be clustered in downtown and South Lake Union, but several other neighborhoods have at least one, from Ballard to Interbay and Capitol Hill to Columbia City.

By Mike Rosenberg | The Seattle Times

 

West Coast Housing Market Heating Up

Source: National Mortgage Professional Magazine               Homes_on_Market

Pro Teck Valuation Services’ July Home Value Forecast (HVF) reports this month that many of the West Coast metro areas are toward the top of the market ranking while the East Coast is toward the bottom. The authors look at the top and bottom 10 rankings from 2011 to see if there are any major similarities or differences in the markets today. New top and bottom 10 market rankings are also updated for the month.

In July’s Home Value Forecast update, interestingly, the authors found that Seattle moved from the bottom 10 in 2011 to the top 10 in 2014. Seattle had its highest percentage of REO properties between the first quarter of 2011 and first quarter of 2012, and hit the bottom in average price per living area in third quarter of 2011, according to the HVF. The higher numbers of REOs were quickly worked through the system (non-judicial foreclosure process), leading to a sustained recovery today.

This authors also saw this trend by comparing REO to Regular sold price per square foot of living area. July’s HVF says that the “REO discount” (REO price/Regular sale price) was largest in Seattle from the second to fourth quarter of 2011, averaging 40 percent. Today that number is 24 percent and trending toward historical norms.

“Looking back, we see a very different picture,” said Tom O’Grady, CEO of Pro Teck Valuation Services. “The top markets in the East had significant price declines from their peak levels, which had been moving sideways or slightly downwards for more than two years. On the West Coast, in 2011, the bottom market home prices, including Seattle, held up quite well since the peak in the market and they were able to more quickly work through their REO inventory.”

This month’s Home Value Forecast update also includes a listing of the 10 best and 10 worst performing metros as ranked by its market condition ranking model. The rankings are run for the single – family home markets in the top 200 CBSAs on a monthly basis. They highlight the best and worst metros with regard to a number of leading real estate market indicators, including: sales/listing activity and prices, months of remaining inventory (MRI), days on market (DOM), sold-to-list price ratio and foreclosure and REO activity.

“All of our top 10 markets are from the western United States and all are exhibiting traits of very tight market – low inventory (active listings down), low Months of Remaining Inventory (MRI), lower days on market and high sale price to list price ratio,” said O’Grady. “These hot markets are leading to very competitive prices for sellers.”

July’s top CBSAs include:
Modesta, Cali.
►Portland-Vancouver, Ore.-Wash.
►Santa Rosa, Calif.
►Seattle-Bellevue, Wash.
►College Station-Bryan, Texas
►Lubbock, Texas
►Oakland-Hayward-Berkeley, Calif.
►Sacramento-Roseville-Arden-Arcade, Calif.
►San Antonio-New Braunfels, Texas
►Stockton-Lodi, Calif.

“We believe that higher foreclosure numbers and more than six months inventory in all of the markets are the reasons the metros in the bottom ten continue to see a slower recovery,” added O’Grady. “However, many of the indicators are trending positive.”

The bottom CBSAs for July were:
Akron, Ohio
►Gary, Ind.
►Hagerstown-Martinsburg, Md.-W.Va.
►Jacksonville, N.C.
►Lakeland-Winter Haven, Fla.
►Mobile, Ala.
►Orlando-Kissimmee-Sanford, Fla.
►Racine, Wis.
►Tampa-St. Petersburg-Clearwater, Fla.
►Youngstown-Warren-Boardman, Ohio-Pa.