What Housing Inventory Says about Future Real Estate Prices in King County

Seattle housing-inventory from Seattle Bubble 

 Source:  Seattle Bubble

Look out Washington! It’s not looking like 2008 is going to be the turning point for the housing market if you look at the inventory curves. No matter how you slice and dice the most recent statistics provided by the Northwest MLS, housing inventory ( the number of houses available on the market ) is literally twice as high as it was just two short years ago at this point in the year, though February brought an increase in the number of pending sales.  Worse yet, while inventory is still well below the recent peak reached in September 2007, a careful look at the actual numbers leaves one to wonder if homeowners didn’t simply give up in late 2007 as the holiday season approached and take their house off the market. Should this be the case, many of these same homeowners may be rushing back into the market this spring and summer swamping the local market and driving prices lower as supply greatly exceeds demand. 

Seattle Bubble provides a great chart  depicting this huge build up in inventory.  (More excellent tell-tale Seattle Bubble charts can be found here.)  Take a close look at the housing inventory since 2000 on this chart and notice the ratio between the houses available in February and the houses available in September of the same year. Could we be looking at 16,000 homes being on the market at the same time by this September? If history is any guide,  I’d say anything is possible.

Should that be the case, hang on to your wallets folks, as the King County housing market may heading into the most turbulent time in at least the last decade.

  • Thor

    Yes, the current inventory is double what it was 2 years ago, and there was a big increase last fall. But if you look at ’02, that year had the 2nd highest Sept inventory, Feb ’03 followed with the highest inventory. But for the rest of ’03 inventory stayed pretty flat, and actually decreased in Sept from the Feb level. Of course conditions are different now, but I don’t think you can look at these curves and predict much. Remember the 3 kinds of lies: lies, damn lies, and statistics.

    As for the chart being a great one, I don’t know about that. If it also showed 0-4,000 on the vertical axis the current increase wouldn’t look so dramatic, which of course is the goal of the chart. Those guys can make charts but they don’t pretend to be unbiased.

  • http://seattlebubble.com/ The Tim

    Thor, I leave out 0-4,000 not to make it look dramatic, but because to include it would be a pointless waste of space. There’s no data in that range, so why bother including it?

    I present the numbers in quite a few ways, including offering a spreadsheet which I have manually populated with NWMLS data from 2000 and even before. The point isn’t to drive some false impression of the market, but to show what’s really going on right now.

    No, we don’t pretend to be unbiased, but at least we lay our biases out on the table, and give people all the information so they can make an informed decision on their own. As I say on our About page:

    “Don’t take anyone’s word when it comes to what will likely be the largest financial decision of your life. Do the research, and determine if the market is right for you.”

  • maggie

    With all the data coming out regarding, increasing inventory and decreasing demand, days on market etc, when are we going to see sellers acknowledging that their homes are not worth what they hope they are and lower their asking prices to more realistic levels?

    Also on the Eastside in areas like Sammamish and Issaquah, there are many homes for sale in developments with practically identical features, that keep being listed at similar high sales prices. These homes continue to sit on the market without selling – who sets the sales price, is it the seller or the seller’s agent or a combination of both. Are they using comps from 2007? If so, is this not a bogus comparison taking the last six months sales performace & inventories into account?

    Any comments/opinions on when this market adjustment is going to occur?

  • http://seattle.redfin.com/blog/author/katrina.munsell Katrina Munsell

    Hi Thor, You’re absolutely right about statistics and I don’t dispute that you should take a critical eye to historical trends and how they play a role in future events. That said, I believe 2003 likely looks depressed in the latter half of the year due to the residual effects of the early 2000 recessionary period. Between early 2002 and mid 2003, the stock market dove from 11,000 to just above 7,000. That’s enough economic uncertainty to do all kinds of crazy things…

  • Susie Naficy

    Maggie – You’re right! See my last blog post on 2/20 titled Disconnected: Unrealistic Sellers and Unwilling Buyers. I think we are in a holding pattern now before prices really begin to drop. Sellers who aren’t desperate to sell, but had their homes listed because they just wanted to make crazy profits using 2006/07 prices, will most likely opt to unlist their home and ride out the bad times.

    However, many sellers need to sell (this includes spec builders) – and this is where we are likely to see price drops soon as they begin to realize the bubble has burst.

  • Larry Burns

    Maggie….you are glossing over the term “decreasing demand”. The sellers price has nothing to do with buyer’s decreasing demand in this current market. Money simply dried up, people are concerned with the economy and $4.50 for a gallon of gasoline.