Snohomish Co. Business Journal

Published: Thursday, December 30, 2010
Housing market can't fall much more

Analysts see modest recovery in 2011
By John Wolcott
SCBJ Freelance Writer

Snohomish County's housing industry is still struggling but there are signs that the market may be showing a slight improvement, both locally and in the Puget Sound region, according to OB Jacobi, director of the Northwest Multiple Listing Service in Kirkland and general manager of Windermere Real Estate Co.

In his November 2010 NWMLS summary of home and condominium sales, Jacobi noted that pending sales in Snohomish County were up 8.51 percent over November 2009, from 787 to 854 properties, and total listings for the 11-month period were up 1.3 percent over November 2009, from 5,063 to 5,129.

Still, closed sales were down 28.8 percent, from 803 to 572, and median prices for residential homes and condos combined dropped 7.3 percent from $274,950 to $254,975 in Snohomish County from November 2009 to November 2010.

One encouraging sign is that members of the NWMLS in 21 Washington counties reported 4,987 pending sales of homes and condos in November, up about 2 percent from November 2009's volume of 4,888 pending sales.

In the four-county region, including Snohomish, King, Pierce and Kitsap counties, pending sales rose more than 2.8 percent, from 3,829 a year ago to November 2010's total of 3,938, the highest November volume since 2006, Jacobi said in his report.

The Northwest Multiple Listing Service, owned by its member brokers, is the largest full-service MLS in the Northwest, with 24,000 brokers and agents.

“Looking back at the real estate boom, it's clear that many of us got used to the idea of quick home price appreciation … real estate speculation became a game not just for investors but for anyone with some equity and the desire to move,” J. Lennox Scott, CEO and president of John L. Scott Real Estate in Bellevue, said in his annual review of Puget Sound and Snohomish County real estate trends.

From 1980 through mid-2010, “home values in the regions appreciated on average 25 percent every five years,” he said, covering the years of the post-recession boom in the late 1980s, the housing downturn of the early 1990s and the more recent boom and financial crisis of the past decade.

The market has changed dramatically. From this point on, he predicted, most homeowners will want to stay in their homes three to five years to gain enough equity to make selling and moving a financially sound decision.

“Most major real estate economists anticipate that we will not see moderate appreciation in home values until 2011 and very gradual year-over-year improvement in the next decade,” Scott believes.

Historically, that's the normal approach to home appreciation, he said, with gains in home values increasing at an average of 4.6 percent, compounded, annually since 1980, even through the sometimes extreme ups and downs in the real estate market, he said.

“As normal appreciation rates return and become more familiar, we must realize that while real estate is still a good long-range investment, a home is about far more than money, it's there to provide shelter, comfort and a safe place for families to gather,” Scott said.

The market has indeed changed dramatically, as shown in statistical profiles by a variety of real estate and economic trackers. In the wake of the housing boom in Snohomish County and the Puget Sound region, the market has entered a period of much lower prices and demand due to the long recession and growing unemployment.

Lower home prices in both the region and Snohomish County are the direct result of current market conditions, with sales prices comparable to those in 2004 and mortgage interest rates at the lowest point in 50 years. Also, banks have been selling off their inventories of repossessed homes and land at very low prices, which also has kept prices lower.

Jess and Julie Lyda, RE/MAX Northwest Realtors in Bothell, regularly track Snohomish County housing statistics and trends on their website, www. In December, the Lydas reported that home prices in the county peaked in March 2007, averaging $425,228. By comparison, they said average home sales prices dropped to $289,269 in November 2010.

While those higher price levels may have been fine for the sellers, the out-of-line price tags reflected a superheated environment that priced many buyers out of the market and contributed to the bubble-bursting crash.

Snohomish County's home mortgages in default between June 2008 and November 2010 totaled 12,239, topping out at a monthly high of 817 in June 2009 and dipping to 323 in October 2010, the Lydas' charts showed. Actual foreclosures totaled 4,020 during that period. They also tracked bank property sales, showing that 1,844 homes and 364 condominiums were sold over the 23-month period.

Until more of the backlog of properties is cleared and unemployment rates drop to normal levels, the housing market will continue to be sluggish. As the economy recovers, however, economists believe new life will also return to the real estate market.