Prices Up, Fundamentals Down in Seattle (June 2010 Real Estate Insider Report)

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Howdy Seattle-Area Redfinnians!

We just closed the books on Redfin’s analysis of King County real estate in June. Prices for single-family homes increased by 1.7% compared to May, but the fundamentals deteriorated: inventory increased 5.5% and the number of houses sold decreased by 2.0%. Since many Seattle home-buyers raced to close by June for a federal tax credit, we expect July numbers to be worse once the month is done.

Picky Buyers, Anxious Sellers

One sign of market softening is the number of concessions being made on homes already under contract. “After getting under contract with seemingly inflexible sellers, my buyers are still going back post-inspection with requests for large fixes or monetary concessions and sellers are signing off on it,” said Earnest Watts, Redfin agent for Magnolia. “You have to take the time to get quotes on the work needed but sellers are agreeing. One of my buyers got a $2,800 credit and work-orders that will probably cost another $5,000. On another, we got a laundry list of items fixed and a $5,000 credit. On a third, we got $1,000 and a new roof.”

Inventory Increases, But Distressed Properties Less Distressed

After months in which the number of homes for sale declined in the face of buyers snapping up tax-credit-driven deals — the local MLS reported that there was less than six months of inventory at current sales rates, which usually indicates a buyer’s market — Redfin over the past two weeks saw a sharp increase in listing inquiries to its own business, and an increasing number of listings across the market in June:

# of King County Houses for Sale in June 2010, By City

This will mitigate one of buyers’ chief complaints, that inventory has been stale and quality scarce. But even as the goods have improved, the odds are not good. Many sellers seemed to have timed their listing for the summer season rather than the tax credit, only to find that demand is now lower in the summer.

The encouraging news is that the amount of distressed inventory in the market is declining, and the properties that are being sold by banks are in better shape. “In Renton and Kent, the banks are putting new paint, carpet and appliances into foreclosed properties that they recently would have sold as-is,” said Lori Bakken, Redfin agent for Tukwila, Kent and Auburn. “About half of all the bank-owned properties are getting fixed up. A couple times, I had to double-check that it was a bank-owned property and not a flip.”

Within Seattle, inventory was up everywhere except the ever-popular Greenwood:

# of Seattle Houses for Sale in June 2010, By Neighborhood

Sales Volume Down in Seattle, Mixed Elsewhere

Even as inventory increased, sales volume in June was mixed even though the numbers from last month included plenty of deals fueled by the tax credit.

# of King County Houses That Sold in June 2010, By City

We expect sales to decline by 25% or more in July, which is usually the month the market peaks every year. Within Seattle, Beacon Hill, Admiral, and Delridge bounced back nicely from last month’s deep dip, but otherwise all the neighborhoods were down compared to last month and last year:

# of Seattle Houses That Sold in June 2010, By Neighborhood

What surprised us the most was the drop in Ballard, which has been a hot spot over the past year.

Prices Mixed, But Large Price Drops Unlikely

Median prices were also mixed, with about half the towns in King County up and the other half down:

Change in Median Price of King County Houses That Sold in June 2010, By City

What dragged Seattle down was a few neighborhoods where most of the sales volume occurs, especially West Seattle:

Change in Median Price of Seattle Houses That Sold in June 2010, By Neighborhood

Is the market about to go into some kind of free-fall? No.

We do not anticipate the kind of steep drops seen in Phoenix, Las Vegas, Florida or even California, simply because more potential foreclosures are being worked off as short sales, with smaller losses, and traditional sellers are unlikely to accept the catastrophic write-downs that banks force on the market. We are encouraged that new construction in Seattle is finally tailing off, and that many would-be condos are on the market as rental apartments.

But we do think the summer will be slow, the winter will be slower, and buyers will take their own sweet time until interest rates begin to move up. The market probably won’t experience any big pick-ups for a long time.

And that’s all the new data we have for this month. To dive into more detail, just look at the raw numbers in this spreadsheet. Or check out the methodology for our reports. What do you think? Comment below! And have a good July!

Best, Glenn
CEO, Redfin