February 2009 condo market update
The Seattle condo market’s February results were underwhelming. From a record high $335,000 citywide median price in January, February came in at $274,000, the lowest level since June 2006. The median price last month reflected a one month decline of 18.2% and a 12.9% drop compared to the prior February. Most neighborhoods also realized declining values with two exceptions — Queen Anne / Magnolia (MLS Area 700) and Downtown / Belltown (MLS Area 701) saw year-over-year median price increases of 13% and 10.4%, respectively.
As the market ramps up we’d normally see increased listings come on the market as we approach Spring and February was no exception with a 9% bump in listings compared to January to 1,282 properties. On the other hand, that’s 6.4% fewer listings compared to February of last year.
The number of pending transactions dropped slightly from January and is down 38.8% from February 2008. There were only 98 properties that closed in February out of 150 pending transactions in January. As closings typically occur about a month after a listing goes pending, we’d like to see the number of closings for the current month to be on par with the prior month’s pendings. The stats reflect that about 65% of the number of pendings in January closed in February, the lowest percentage we’ve seen for some time. A few possible reasons for this – (1) the pendings were weighted towards the end of January and will close in March given the fewer days in February, (2) buyers were unable to secure financing, (3) developers added pre-sales into the MLS as pendings or (4) doubts about the economy and job security may have put buyers back on the fence. We’ll have to see March numbers to get a better idea on why so few of January’s pending transactions closed in February.
The inventory supply rate (absorption rate) rose to 9.2 months in February reversing a recent decline. This is good news for buyers as the market remains solidly in their favor. We’ll probably see prices continue to soften. Sellers, on the other hand, have a tough decision to make particularly if they purchased their unit in the past several years. Do they sell now and potentially take a loss, hold out until the market rebounds, or do they lease the unit at a time when we’re seeing an considerable increase in new rental inventory. Not an easy decision.
Last month Congress passed the American Recovery and Reinvestment Act of 2009 with a provision revising the first-time homebuyers tax credit, increasing it by $500 to $8,000 and eliminating the repayment requirement. The jury is still out on whether this will incentivize first-time buyers into the market, but it’s certainly a nice bonus.
Interesting stats. It looks like the economy has started to catch up with Seattle a little bit. It was holding strong compared to markets such as ours in AZ for quite a long time.
Although real estate is local, we are all hearing the same thing. Sellers have some hard decisions to make and buyers are having a hard time making a decision.