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Now Prices Are Falling Just About Everywhere

A report from the Seattle Times in Washington. “It was just this spring when Greater Seattle led the nation in home-price increases. Now, prices here are falling faster than anywhere. Prices haven’t fallen this fast since 2011, when the market was still bottoming out after the recession. The Case-Shiller home-price index is notable in that it covers the full metro area from Pierce to King to Snohomish counties. Prices had been falling from their spring highs in Seattle and parts of the Eastside, but the market had still been humming along on the outer reaches of the region until recently; now, prices are falling on a month-over-month basis just about everywhere.”

“Brokers and buyers have reported fatigue as prices have climbed to increasingly unaffordable levels after six years of steep price growth that has far outpaced wage gains. At the same time, rents have stayed flat while interest rates continue to tick up, putting less pressure on buyers to act now. More homes are sitting on the market unsold, prompting sellers to cut list prices and be willing to negotiate.”

“The median house costs $750,000 in Seattle and $890,000 on the Eastside, both down about $80,000 from their record highs set in the spring and summer. Home prices are at $473,000 in Snohomish County, $335,000 in Pierce County and $334,000 in Kitsap County, all down slightly from the high-water marks set earlier this year.”

“Of course the recent declines have done little to counteract the real-estate market’s boom that has dominated much of this decade. Since 2012, prices across the metro area are still up 61 percent more than inflation. And compared to the old 2007 bubble peak, prices are 7 percent higher after adjusting for inflation.”

From KUOW. “Kim Malcolm talks with Seattle Times reporter Mike Rosenberg about why the Seattle area is leading the nation in home price decreases. He covers real estate for the Seattle Times, and he told me about the recent drop: ‘The numbers don’t look that big. It’s only been about 3% over the last three months, but that’s a huge change from where we’ve been. Just earlier this year, prices were rising 8% over a three-month span. So it’s been quite the turnaround and it’s been pretty sudden as well. Typically, you’ll see maybe sometimes in the winter, even during hot markets, that prices will kind of flat line. That’s what’s happening with rents right now. But for prices to go down, it’s pretty rare. So last time this has really happened was during the recession.'”

“Prices may be falling, but they’re falling from quite a height. Homes are so expensive here. Many middle-class folks have been completely priced out of this market. Should they expect to be able to buy a home any time soon?”

“A: ‘No, it’s really too late for most people. All of these price increases as we’ve seen for month after month after month for the last six years have already taken their toll. If you’re looking at prices going down 3 percent, that sounds nice for somebody priced out of the market. But if they went up 75 percent for the previous six years, that’s a drop in the bucket.'”

“‘If you can’t afford a house at $750,000 you’re probably not going to be able to afford it at $725,000. You’re really just moving from really unaffordable to slightly less unaffordable.'”

“‘For a lot of buyers, it really doesn’t matter at this point whether prices tick down a little bit. They’re going to have to really plummet for them to be able to get back in the market.'”

“So is Seattle now a city where the dream of home ownership for a middle class family is pretty much just not going to happen?”

“A: ‘Sadly, yeah. I think so. There’s very few times in history really – the recession was the only time – when prices dropped significantly. Unless you’re expecting that to happen again, and be even more significant than it was during the bubble a decade ago, I mean we’re kind of here to stay.'”

“‘We’ve seen other cities – San Francisco, Vancouver, New York – once you sort of get up into that high-priced stratosphere, you don’t go back down. I think that’s the future that Seattle is facing.'”

This Post Has 38 Comments
  1. ‘Prices had been falling from their spring highs in Seattle and parts of the Eastside, but the market had still been humming along on the outer reaches of the region until recently’

    This is an editorial in a way. The second link explains the writers position more clearly. And he says it’s interest rates causing the drop.

    1. “Home prices plus data on house sales and construction confirm the slowdown in housing”, S&P’s David M. Blitzer said in the report. Sales of existing homes rose modestly in October, snapping a six-month streak of declines. It was the sixth straight month that home price increases have slowed.’

      ‘A year ago, Dallas-area prices were more than 7 percent higher than 2016 levels in the Case-Shiller comparison. “There are already signs the market is beginning to swing toward buyers: Inventory is up after nearly four years of uninterrupted declines, especially in formerly red-hot and pricey West Coast markets, and price cuts are becoming more frequent”.

      “As the pace of home value growth continues to slow, the national housing market is finally beginning to find more balance between buyers and sellers after years of near-total seller control”, (Zillow’s) Terrazas said. Even in Seattle, “where prices were rising at double digit annual rates a few months ago, prices dropped last month”, he added.’

      This sounds more like a bubble bursting than anything else:

      ‘prices were rising at double digit annual rates a few months ago’

    2. Interest causing the drop

      No way! We were told that it was the demand cuz people everyone wanted to live there.

  2. ‘The CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) today issued the following statement in response to the Federal Housing Finance Agency’s (FHFA) announcement to increase the 2019 conforming loan limits for mortgages acquired by Fannie Mae and Freddie Mac to $484,350 on one-unit properties and a cap of $726,525 in high-cost areas. The previous loan limits were $453,100 and $679,650, respectively.’

    “C.A.R. commends the FHFA for recognizing California’s robust home price increases over the last few years and raising maximum conforming loan limits, which will give tens of thousands of California homebuyers a chance at homeownership” said C.A.R. President Jared Martin. “Increasing the existing Fannie Mae and Freddie Mac conforming loan limits will greatly benefit higher-priced areas of the state and provide stability and certainty to the housing market.”

    1. “Increasing the existing Fannie Mae and Freddie Mac conforming loan limits will greatly benefit higher-priced areas of the state and provide stability and certainty to the housing market.”

      So what I’m getting from this increase is that we need stability in our housing market?? I thought we are in a healthy environment here… makes me think they are a bit worried and throwing a Hail Mary to further delay the inevitable crash

      1. ‘More than a million of the nation’s priciest homes will no longer require a jumbo mortgage as a result of new conforming loan limits announced today by the Federal Housing Finance Agency (FHFA). The typical U.S. home’s value, $221,500, is less than half the new loan limit, but about 6.7 million homes (about 6 percent of the national total) would still require jumbo loans, assuming a 25 percent down payment. In some of the priciest counties, a majority of homes would still exceed the new conforming loan limits: In San Mateo County, a whopping 86 percent of homes would still require jumbo loans to purchase – the highest share in the country.’

        ‘The FHFA set higher limits in 199 counties and territories, including high-cost counties as well as all of Alaska, Hawaii, Guam, and the U.S. Virgin Islands. The Boston and Seattle metro areas, as well as Eagle County, Colo., which includes Vail, will see the biggest jumps in conforming loan limits when they go into effect on January 1, 2019. The FHFA raised Boston-area limits by $85,100 and raised Seattle-area limits by $59,525. Based on current home values, those increases mean about 26 percent fewer homes would require jumbo loans in Boston and 22 percent fewer in Seattle.’

        ‘After loans are designated conforming by the FHFA, they can be bought by Fannie Mae and Freddie Mac, making them a safer bet for lenders to originate. That means lenders may generally apply looser underwriting standards to conforming loans, while they typically require larger down payments and higher credit scores for jumbo loans.’

        ‘Higher conforming loan limits make it easier for buyers in pricey markets, but also might accelerate price growth by making it easier to borrow in areas where prices have increased very sharply. By permitting Fannie Mae and Freddie Mac to buy larger mortgages, higher loan limits also increase their exposure to default risk on those loans.’

        1. In 2019, the maximum conforming loan limit will be $484,350, the Federal Housing Finance Agency said Tuesday. That’s up 6.9% from the 2018 maximum of $453,100. The change is based on the rate of change in home prices between the third quarter of 2017 and third quarter of 2018, as measured by FHFA’s House Price Index.”

          If that index registers falling prices next year, will conforming loan limits shrink? And if so, where will that leave all of the recent buyers?

          1. If that index registers falling prices next year, will conforming loan limits shrink? And if so, where will that leave all of the recent buyers?

            1) Possibly. depends on the size of the shrinkage. 2) It won’t invalidate their existing loan if the conforming limit drops below their original loan amount – just any new loans.

    2. If you can’t afford a house at $750,000 you’re probably not going to be able to afford it at $725,000

      If you can’t afford a loan 10x your gross income, you can’t afford one 9.75x your income. You can qualify for the loan, but you can’t afford it.

  3. “‘If you can’t afford a house at $750,000 you’re probably not going to be able to afford it at $725,000. You’re really just moving from really unaffordable to slightly less unaffordable.’”

    Sure we can Mike, the gobernment is handing out 3% down loans like meals at a soup kitchen. But on second thought, maybe I’ll wait it out a little longer and see how much further these unaffordable prices will go. What a optimistic POS this guy is. Values up 75% in 6 years and that’s where they will stay, ya right…

  4. “It’s too late for most people…”

    Priced out forever.

    “Once prices are up there, they don’t come back down”

    Permanently high plateau.

    “Unless you’re expecting a recession even larger than 10 years ago…”

    Prices falling would be an absurd idea, unless you’re crazy.

    (Quotes paraphrased)

    After reading the post, I keep hearing this song lyric in my head this morning. I think things are going to get ugly.

    “It’s going down / I’m yelling Timberrrrr….”

    – Ke$ha / Pitbull

    1. http://www.nasdaq.com/article/us-new-home-sales-plunge-to-lowest-level-in-well-over-two-years-20181128-00702/amp

      Plunged, slumped, plummeted, tumbled, nosedived all mentioned but yet NAR says:

      Last Wednesday, the National Association of Realtors released a report showing existing home sales rebounded by more than anticipated in October after six straight months of decreases.

      NAR said existing home sales surged up by 1.4 percent to an annual rate of 5.22 million in October after plunging by 3.4 percent to a rate of 5.15 million in September. Economists had expected existing home sales to jump by 1.0 percent.

  5. “Of course the recent declines have done little to counteract the real-estate market’s boom that has dominated much of this decade. Since 2012, prices across the metro area are still up 61 percent more than inflation. And compared to the old 2007 bubble peak, prices are 7 percent higher after adjusting for inflation.”

    No bubble this time, and yet prices recently climbed to 7 percent higher than the last bubble peak, even after considering inflation?

    ‘Tis a puzzlement!

    1. Since 2012, prices across the metro area are still up 61 percent more than inflation. And compared to the old 2007 bubble peak, prices are 7 percent higher after adjusting for inflation.”

      Those inflation numbers come from our Soviet-style CPI data, which deliberately and systematically under-reports true inflation, i.e. the loss of purchasing power due to the Fed’s debasement of the currency with its deranged money printing. CPI fake inflation data is used to screw the olds out of their social security cost-of-living adjustments.

      1. screw the olds out of their social security cost-of-living adjustments.

        Holding my own just fine here. SSA is giving a 2.8% raise and my budget is still going down.

    1. currency “miners”

      It is still one of the funniest things I’ve ever seen; calculating profits for a living. An era of insanity that is well coming to a close.

    1. Yes on a more discretionary rate increase path; no on QE5 until the moment of panic in the next financial crisis. But the stage is definitely set for QE5.

      Wall Street bulls are nonetheless partying over the anticipated Fed blink.

  6. ““So is Seattle now a city where the dream of home ownership for a middle class family is pretty much just not going to happen?”

    “A: ‘Sadly, yeah. I think so. There’s very few times in history really – the recession was the only time – when prices dropped significantly. Unless you’re expecting that to happen again, and be even more significant than it was during the bubble a decade ago, I mean we’re kind of here to stay.’””

    Oh, yeah, the old priced-out forever as houses remain at a permanently high plateau where the majority of people cannot afford them. In such a large market it begs the question: “Who is going to buy them, then?”

    These shills/dolts are nauseating.

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