The Bad News is That the Bad News Should Have Been Worse

Redfin published its latest analyses of Bay Area and Seattle real estate markets last night, based on proprietary data from our websites and war stories from our agents. To no one’s surprise, prices were down in Seattle, and mixed to down in the Bay Area.

In both markets, three trends jumped out at us from the August numbers:

  1. Sales volume declined, by 7.7% in King County and by as much as 24% in the Bay Area counties. After a disastrous July, we expected sales volume to bounce back, especially in Seattle, which wasn’t affected by the California credit expiring in July. Since prices follow sales volume, this tells us that prices may fall further than most analysts originally expected — and since our revenues have been fairly steady, that Redfin market-share is increasing.
  2. The number of homes for sale declined. When sales dip, inventory usually piles up, but most sellers are pulling their properties off the market ’til spring. This means sales volume will continue to be low throughout the winter, as buyers and sellers wait one another out to make the first move. Since we see an enormous numbers of buyers out in the market, conditions could change fast, but probably won’t: most economists expect interest rates to remain low, and employment to be stagnant. When the economy improves, we do think there is significant pent-up demand, just based on the number of tours we’re hosting.
  3. Prices were fairly sticky. King County’s drop in dollars per square foot was significant but not drastic at 3.5%, and some counties in the Bay Area actually saw price increases. This tells us that the market can’t correct prices quickly because so many sellers don’t want to sell short, which forestalls a recovery.

For more inside-baseball, read the actual Seattle and Bay Area reports, as well as the lively commentary from Redfin Nation. And tune in next month, as we hope to train our analytical sights on other markets, probably DC.