The Seattle Condo Blog

As had been expected, the October figures for Seattle’s condo market performance took a hit.  The slowing local economy, national economic concerns and the continuing mortgage upheaval ran into the sputtering condo market.

The citywide condo median price was $287,450 last month, an 8.82% drop compared to October 2007 and the lowest its been over the past 24 months.  Keep in mind, all this indicates, is that for a 31-day period in time the median price last month, based on 164 units sold, is 8.82% less than the same 31-day period last year, which was based on 324 units sold.  Median price is that point where half the units sold is above and half is below, and last year there were 51% more units sold.   In October 2006 the Seattle condo median price was $284,000 based on 272 units sold.

The number of active condo listings also declined last month to 1,410 units.  That’s 6.2% fewer compared to September and a 10.4% drop compared to October of last year.  Yet, even with fewer listings, the inventory supply rate (active listings divided by pending sales), the key figure used to measure market condition, increased to 8.9 months.  The higher the number of months, the more entrenched we are in a buyer’s market.  The supply rate was most impacted by the sharp decrease in the number of units being purchased.  The 157 pending transactions last month represented a one month drop of 30% in the properties going under contract and a 44.5% drop compared to October 2007.

The supply rate is exceptional for Seattle and we’d have go back more than a half dozen years, if not a decade, to find rates this high.  But, just to provide some perspective, the condo inventory supply rate in Miami is 80 months.  You’ll definitely get screaming deals in South Beach but probably not in Belltown.  I mention this as I’m seeing, more so now, a greater disparity between buyers (as well as sellers) perception of the market and the reality of the market.  And, I think that’s attributed to growing levels of disappointment and frustration among buyers.  There are buyers who’ve overstated the softness of the market, expecting that offers 30% below asking is fair and that sellers will jump.  While the market is heading south, it hasn’t collapsed to such a degree that a 30% loss in value will be taken seriously by sellers, who also have the opportunity to take advantage of the strong rental market.  Though, there will likely be cases in which such bargains can be had, even in the city center.

Price trends are most notable when viewing the figures in different areas of the city with downtown and NW Seattle fairing better.  Again, the figures below are just a snap shot of the month of October and are not necessarily indicative of the market as a whole.  Year-to-date, the Seattle condo median price is just 0.8% below the same 10-month period last year, though prices will likely continue to fall for some time.

The condo market performed fairly well last month; aside from a median price decline it did show signs of stabilizing. Compared to August, the median condo price remained unchanged at $310,000, which also reflected a year-over-year decrease of 6.03%, the largest drop so far this year. It was also the third consecutive monthly drop in year-over-year median price value.

The number of active listings reversed its recent declines, increasing by 12 properties, or 0.08%, over August. Though, for the first time in years the number of active listings fell below the prior year’s figure. There were 1,503 actives in September ‘08 compared to 1,531 in September ‘07, a year-over-year decrease of 1.83%. Now, that’s just 28 properties, but it’s significant when you consider that in January there were 512 more active listings compared to the prior year. Given current market trends, though, it’s not unexpected. For many sellers, it makes more sense to ride out the downturn by taking advantage of the stronger rental market.

The number of pending transactions (under contract in escrow) showed improvement last month, reflected by a 14.3% increase over August. The year-over-year result improved as well. In August ‘08, the number of properties going under contract was just 55% of those that were under contract in August ‘07. In September, the number of pending transactions improved to 85.5% of the previous year’s level.

The improved pendings rate and falling inventory helped to reduce the inventory supply rate (absorption rate) to 6.7 months. It’s still a buyers market, but we’re seeing a little more parity in areas - Capitol Hill, Queen Anne and Downtown. Downtown’s supply rate actually dropped last month (compared to September ‘07) but that can be attributed to pendings at Gallery, particularly previously unrecorded pre-sales that just popped-up as pendings last month. To Gallery’s credit they are recording pendings and solds, something many developments haven’t done (more on this later).

September will likely go down as an anomaly. It had begun to show signs of improvement, which may have been the result of the Fannie Mae / Freddie Mac takeover. That news helped to spur just a little more confidence and briefly lowered mortgage interest rates. Going forward, the recent economic crisis, both nationally and locally, will wipe out the gains made last month. In all likelihood, we’ll see a downward movement in the number of active listings, median price and pending transactions through the remainder of the year.

As has been the case throughout much of the year, each passing month exhibits the fluidity of Seattle’s condo market.  A number of factors have contributed to the buoyancy such as new construction closings, seasonal changes, mortgage availability and rates as well as consumer confidence levels.

The citywide condo median price rose 3.3% in August to $310,000 compared to July.  Historically, though, August outperforms July along with an uptick in the median price so it’s to be expected.  In comparison to the prior year, the citywide condo median price in August fell 5.3%.  And, that’s significant when you consider it was the largest one-month YOY decrease spanning back several years.  Yet, keep in mind that only compares the results of two 31-day periods in time.  Looking at YTD median price figures, the citywide median price is unchanged relative to 2007, though a downward movement is expected.

Perhaps the best piece of news in August was the third consecutive decrease in the number of active condo listings, down to 1,491 or 48 fewer than July.  In comparison to August 2007, there were only 127 more listings, or 9.3%, the slimmest margin in YOY listings since the condo market softened. A fair number of sellers are mitigating the effects of the downturn by taking advantage of the rental market.  Interestingly, should the number of listings plateau in September, we’ll realize a YOY decrease in listings next month.

On the other hand, the inventory supply rate (a measure of months of inventory based on active listings and pending transactions) remains at a moderate 7.6 months, even though we’re seeing parity in the number of active listings compared to 2007 levels.  The main reason being that buyers are remaining on the sidelines, tepid about the market and concerned about the economy.  Compared to last year, the number of condo purchases is down 45.3%.

We may yet see a bounce in the market given two key factors - inventory options and recent government actions.  Buyers have the advantage of a buyers market resulting in more inventory choices (fewer active buyers in the market to compete against).  Slower sales volume may also translate into better deals in terms of price, contract terms and concessions.  The government’s recent takeover of Fannie Mae and Freddie Mac helps to instill confidence in the mortgage market and has resulted in lower rates, dropping below 6% this week.  Plus, low down payment loan options are still available.  Finally, the $7,500 first time home buyer tax credit (an interest-free loan) means a more immediate benefit to buyers.

As for sellers, September may result in a rebound as well.  Not in regards to price, which is likely to remain below 2007, but rather in the number of properties that are selling (pending transactions). Through the first week-and-a-half of September we’re seeing a rise in sales volume.  But, this is cyclical as well since we normally see a bump in September/October, though lower interest rates may be spurring buyers off the fence.

July exemplified the fluidity of the housing market…it was tough month for Seattle’s condominium market. After median price gains over the past couple of months, the median price took a tumble to $299,975 last month, which reflected a 4.5% decrease compared to the same period last year and the fourth year-over-year decrease this year.

Though, not all was negative. The number of active listings decreased for the second consecutive month to 1,539. That number reflects just 14% more listings compared to July 2007, the smallest year-over-year percentage we’ve seen in over two years, and a significant reduction since January’s 65% difference in actives.

Relative to last year, which was a seller’s market, there aren’t that many more properties on the market, yet we are considered to be in a buyer’s market. That distinction, though, is largely based on the fact that so few buyers are actively purchasing condos. The number of properties going under contract fell to just 202 units, or 19.5% fewer than June and 46.8% fewer compared to July 2007.

The condo inventory supply rate (absorption rate) rose to 7.6 months based on pending sales, the highest level spanning back several years. Downtown, MLS area 701, and West Seattle, MLS area 140, led the city with 9.8 and 9.9 months, respectively. Yet, Downtown’s high rate wasn’t due to rising inventory (same number of actives in both 2007 and 2008) but due to the number of properties purchased, 83 in July 2007 compared to just 33 last month. Based on my observations so far this month I expect more of the same.

Whether this is good or bad news depends on if you’re a seller or a potential condo buyer. If you’re a seller you’re faced with a shrinking pool of interested buyers and volatile prices. Though, if you need to sell, are willing to accept the current market environment and price your property accordingly, you shouldn’t have difficulty selling.

If you’re a buyer, you have the benefit of downward pricing trends and less competition from other buyers, yet there isn’t a fire sale on condos in the city. Additionally, buyers can now take advantage of a first time buyers tax credit. The credit is based on the purchase price and maxes out at $7,500, subject to eligibility requirements.

There is a potential that the number of active listings may continue to drop as seller’s pull their properties off the market, many renting them out instead, while waiting for the housing environment to improve. And, that may help to normalize the market.

June exhibited a solid month for Seattle’s condo market. Though unchanged from May, the citywide condo median price of $320,000 reflected a 6.7% increase over June of last year, marking the second consecutive year-over-year increase since December. In fact, most neighborhoods recognized value appreciation last month.

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Lets start with the bad news first. The median price for Seattle condos fell for the third consecutive month; it now stands at $305,000, a 3.3% decrease compared to October. And, as we’d expect with cyclical patterns, fewer condos were sold last month, though pendings transactions remained unchanged.

The good news? Overall, Seattle’s condo market performed very well in November. While the month over month figures show a downward trend in the median price, compared to a year ago, median price rose 2.5%, the 11th consecutive month that 2007 sale prices have outpaced 2006. Additionally, the number of closed sales increased 15.3% over the prior year. Buyers are still buying and sellers are still experiencing value appreciation.

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