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Greetings Seattle-Area Redfinnians!
Seasonality is setting in on the Seattle real estate market, and just like the colorful leaves of fall, all of the numbers are dropping for the second month in a row. Inventory available in King County fell by 3.5% and sales volume is down by 16.6%.
Where does this leave prices? Last month, Redfin’s stats P.M. Tim Ellis predicted “another 2-4% drop in the size-adjusted median”, and he wasn’t too far off the mark. King County ended up dropping 2.3%. We are predicting median prices to hold steady over the next month to compensate for the last two months of drops and then take the inevitable fall as people bundle up and head into winter.
Foreclosure news, dreams of real estate bargains, and multiple offer scenarios have affected the psyche of the Seattle buyer. Old ways of doing business are shifting slightly, and we’re seeing some interesting trends emerging. Read on for all the details and our take on the new rules of real estate.
Short Sales, Foreclosures, and Bankruptcy Sales: Oh My!
We’ve seen a moderate and consistent drop in the volume of inventory across the entire metro area this month. Sellers, as expected, are holding off on listing their homes if they don’t have an immediate reason to sell.
|City||Compared to August 2010||Compared to Sept. 2009|
Change in # of King County Houses for Sale on September 30th 2010, By City
“Most of my clients are taking a wait-and-see approach to buying this past month,” said Michelle Swierz, a Redfin agent in Bellevue. “With little to no new inventory coming on the market, a lot of house hunters aren’t even finding homes they want to tour, let alone homes they would seriously consider purchasing.”
Many buyers have a romantic notion of swooping in and picking up their dream home at a bargain price due to all the media reports of distressed inventory. With so many people focusing on distressed inventory you are likely to find a good deal if you are willing to negotiate on a competitively priced home.
“I’m not seeing much of a change in the number of foreclosures coming on the market, but I am seeing an increase in other types of distressed inventory such as short sales and even the occasional bankruptcy sale,” said Klaus Gosma, a Redfin agent in West Seattle and Beacon Hill. “Buyers see these as bargains to be had, but they don’t realize the risk and headache that can come with the process.”
Non-refundable costs needed up front, the stress of buying home as-is, and a process that seem interminable are all common issues encountered when buying distressed inventory. Sometimes the pain is worth the gain, it just depends on your constitution.
Dig In for Bargain Shopping
The real big dip we are seeing this month is in sales volume: areas of the Eastside dropped off as much as 28%, and Seattle slowed down almost 20% over the last month.
|City||Compared to August 2010||Compared to August 2010 Adjusted for # Weekdays||Compared to September 2009||Compared to September 2009 Adjusted for # Weekdays|
Change in # of King County Houses That Sold in September 2010, By City
Since there aren’t many buyers pounding the pavement looking for homes, now is the perfect time to engage in healthy negotiations without a lot of competing offers.
“Most buyers think they need to wait to start house hunting until spring when more homes are listed for sale,” said Kathryn Rion, a Redfin agent in Redmond. “But what they don’t realize is that many of the people listing their homes right now are extremely motivated to sell. There are deals to be had if you are able to move fast to pounce on an attractive listing, willing to negotiate, and can be patient with the process of searching for the right home.”
The New Rules of Multiple Offers
There are a few spots where the median price per square foot has remained flat or experienced an increase, most noticeably in Redmond, but everywhere else we are seeing the same gentle downward trend in price.
|City||Median Price in September 2010||Median $/SqFt Change
since August 2010
|Median $/SqFt Change
since September 2009
Change in Median Price of King County Houses That Sold in September 2010, By City
“We are seeing an increase in the number of homes coming on the market priced well below comparable homes,” said Allie Howard, a Redfin agent specializing in Capitol Hill. “These sellers are hoping to create a multiple offer scenario that will drive up the final price, but what they don’t realize is that the multiple offer game has fundamentally changed.”
The traditional tactic of listing at a low-ball price and creating a bidding war doesn’t work quite the same way as it used to. After hearing “it’s a buyer’s market” over and over, your average buyer is psychologically opposed to paying over the listing price. This distaste of paying over list price means they are frequently unwilling to negotiate on price or include an escalation clause in their offers. However, buyers are willing bolster their offers in other ways such as promising an as-is inspection, increasing the amount of earnest money offered, and making sure their offers are very clean with straightforward terms.
Allie said, “Last month there was a seller who listed at the lowest end of the price range and received three offers within two days of being on the market. One buyer bailed because they did not want to be part of a multiple offer situation. The other two buyers modified their offers to strengthen them. But, only one of the two included an escalation addendum. Since there was no other escalator to bounce off, the price remained very close to the list price and sold to the buyer who had the escalator.” The game sure isn’t what it used to be.
If you want even more information on real estate stats and trends, be sure to dig into our downloadable spreadsheet where you’ll find county, city, and neighborhood information. If want to get in on the conversation, please liven up the comments section below.
Michelle Broderick, Redfin Analytics Team