Showdown at the King County Corral (Seattle July Insider Report)

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Howdy Seattle-Area Redfinnians!

Even though we’ve been busy adding school ratings to our website’s map, Redfin’s number-crunchers just cranked out a report on King County real estate in July. This is the good stuff. We count transactions nobody else notices, and analyze trends neighborhood by neighborhood.

Here’s the word: after the first-time home-buyer tax credit expired, the few home sales that did occur were mostly high-end, driving median prices in King County up 2.6% compared to June.

But the truth is that demand was weak. King County sales volume fell 30.6% and inventory ticked up 1.0% at a time when home-buyers are usually snapping up whatever’s left on the market.

So far in August, we have seen record numbers of Redfin customers touring properties in Seattle, but buyers are very picky, and in no rush. Prices are going to stay down for the rest of the year, and probably longer.

Mix of Buyers Shifts Up, Driving 2.6% Increase in Median Prices

Based on our first-hand experience negotiating deals over the past few weeks, we attribute the 2.6% month-over-month increase in King County median prices to a shift in sales volume toward higher-end homes, not any buyer willingness to pay more for the same house from one month to the next. This shift was most pronounced in Seattle, where median prices rose 8.3%:

City Change in Median Price
Since June 2010
Change in Median Price
Since July 2009
Median $/Square Foot
Seattle +8.3% +9.3% $330
Bellevue -4.5% +13.6% $299
Renton +6.9% +0.9% $159
Kent -4.9% -3.5% $136
Federal Way +10.1% -1.1% $144
Kirkland -5.6% +1.6% $283
Issaquah +5.2% -2.5% $230
Sammamish +0.2% -0.7% $218
Auburn -5.2% -19.3% $143
Shoreline -8.5% -5.3% $222

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

In August, we believe the median price will drop by as much 2% – 4% in King County, just because the shift toward higher-end homes is a temporary byproduct of the tax-credit expiration.

Negotiations Get Testy As Stand-Off Continues

But sales volume may loosen up in September and October. In July and August, the whole market has frozen up, as buyers and sellers stepped back from the market after the credit to see the direction in which it would go. Few were willing to make the first move.

“Right now buyers want to ‘just try’ a low offer, only to have sellers get offended and refuse to respond,” said Robin McCue, a Redfin agent in Ballard. “The listing agent tells us what we would tell our listing clients: that a seller won’t take a 10% discount in negotiations without trying out that lower price on the broader market. Often both sides are unreasonable. We’ve seen buyers pushing a price that would drive sellers into a short sale, and a seller who rejected a 3% concession on a home 45 days on market. It’s crazy.”

The Number of Homes Sold Falls Through the Floor, Especially in the ‘Burbs

This stand-off is taking its toll on sales volume. Last month, we predicted that King County sales in July would drop by 25% or more. This is exactly what happened, with a 30.6% decline. The biggest drops were the furthest out from Seattle, in Sammamish, Auburn and Shoreline:

City Compared to June 2010 Compared to June 2010 Adjusted for # Weekdays Compared to July 2009 Compared to July 2009 Adjusted for # Weekdays
Seattle -15.7% -15.7% -26.6% -23.2%
Bellevue -32.6% -32.6% -21.2% -17.6%
Renton -32.7% -32.7% -32.1% -29.0%
Kent -42.9% -42.9% -15.4% -11.5%
Federal Way -30.3% -30.3% -36.1% -33.2%
Kirkland -19.4% -19.4% -8.5% -4.3%
Issaquah -20.6% -20.6% -6.9% -2.7%
Sammamish -51.6% -51.6% -27.0% -23.7%
Auburn -48.8% -48.8% -32.3% -29.2%
Shoreline -51.0% -51.0% -56.9% -54.9%

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

Who Blinks First: Buyers Act Only When the Property Leaves the Market

Because interest rates have been low and are likely to remain that way, Seattle-area buyers demonstrated vulture-like patience, waiting until a listing was left for dead, or snagged by another predator, before making their own move.

“I’ve had three potential buyers approach me in the last week after a listing expired or went under contract, saying they’d been watching the home for a while and wanted to make an offer,” said Bryon Ziegler, a Redfin agent in Capitol Hill. “Within hours of pulling one of our listings off-market, a buyer contacted us who’d been watching it the whole time it was active. Now a sale is pending at less than 5% off our list price. Another Redfin listing went under contract, only to have two buyers inquiring if the deal was likely to go through. Now another Redfin customer is inquiring about a third listing, not ours, where the sellers just pulled it off the market.”

Stale Inventory Is Still a Big Problem

Inventory continued to pile up for the second straight month, as the market swung sharply in buyers’ favor in July. That inventory has been increasing mid-summer, during the middle of the traditional home-buying season, does not bode well for the rest of the year.

City Compared to June 2010 Compared to July 2009
Seattle +1.7% +3.2%
Bellevue -2.2% -15.4%
Renton -2.9% 0.0%
Kent -0.8% +19.0%
Federal Way +3.8% +9.5%
Kirkland +0.8% -16.0%
Issaquah +0.3% -9.3%
Sammamish +1.3% -11.6%
Auburn -6.4% +2.2%
Shoreline +5.7% +17.1%

# of King County Houses for Sale on July 31, 2010, By City

The problem is particularly acute on the Eastside. “Touring Eastside homes right now is like shopping for a winter coat in February, with a lot of very, very stale listings in Redmond, Kirkland, Bothell and Woodinville,” said Kathi Kelly-Billings, a Redfin field agent on the Eastside. “I’ve been seeing the same properties again and again and AGAIN for months now. These homes aren’t necessarily bad but just blah and obviously not priced right. I’ve been to one Redmond listing seven times. I know what the customer is going to say about it before we walk in the door.”

Meanwhile, getting deals done hasn’t gotten easier, as lending guidelines are being strictly interpreted. “Of the 25 deals I worked on last month, five loans came back with underwriting demands that forced us to find new lenders halfway through escrow,” said Ryan Kingsbury, a Redfin coordinator supporting Northeast Seattle, Queen Anne, and Magnolia. “All five loans had been set up by mortgage brokers.”

And that’s the news from Seattle. To dig deeper into the data, check out our spreadsheet. For a review of our methodology, check here. If you have any comments or quibbles, just post a comment below!

Best, Glenn
CEO, Redfin