Falling Into the New Rules of Real Estate (Insider Report)

Redfin’s monthly Seattle real estate insider report draws from our proprietary database of information on homes for sale and that just sold, along with insight from our agents to get a sense of what’s going on in the market right now. To get the report via email, just sign up!

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
Seattle -1.8% +6.1%
Bellevue -5.1% -12.5%
Federal Way -3.5% +3.6%
Issaquah -5.6% -6.3%
Kent -2.6% +12.5%
Kirkland -2.2% -5.2%
Renton +0.2% +7.2%
Shoreline -5.3% +9.1%
Redmond -4.0% +9.1%

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
Seattle -19.7% -19.7% -41.3% -41.3%
Bellevue -24.0% -24.0% -11.2% -11.2%
Federal Way -13.0% -13.0% -39.4% -39.4%
Issaquah -27.1% -27.1% -39.7% -39.7%
Kent -24.5% -24.5% -27.3% -27.3%
Kirkland +0.0% +0.0% -39.5% -39.5%
Renton -2.8% -2.8% -43.9% -43.9%
Shoreline +6.5% +6.5% -29.8% -29.8%
Redmond -27.7% -27.7% -44.3% -44.3%

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
Seattle $434,000 -0.5% +4.9%
Bellevue $529,000 -10.5% -0.2%
Federal Way $212,450 -5.5% -11.5%
Issaquah $445,000 -11.9% -14.7%
Kent $262,073 +6.3% -2.9%
Kirkland $462,450 -5.8% -6.6%
Renton $300,000 -7.2% -6.3%
Shoreline $305,000 -9.8% -7.6%
Redmond $605,000 +17.5% +6.1%

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.

Best,
Michelle Broderick, Redfin Analytics Team

  • Rob

    Just completed a purchase last month. I would totally agree with the article’s advice to sellers against trying to create a bidding war. In this market I would have felt like the world’s biggest fool if I paid higher than list. If I were a seller I’d price at current market value (i.e. today’s, not 2 months ago’s), and feel lucky if I got it.

  • waiting it out

    Interesting. Anyone else notice the push from Redfin to buy? Perhaps a -41% yearly drop from volume is making them bored. I say let the prices fall. Those comps will put downward pressure on new and active listings. Let's get affordable housing back.

    • http://twitter.com/MichelleBee Michelle Broderick

      Definitely not trying to be pushy and certainly not trying to parrot the old adage “it's always a good time to buy!”

      However, it is dangerous to blindly say “there is nothing good out there” as a blanket statement and rule out any & all potential opportunities.

    • http://www.MetTacoma.com Erle

      I did not interpret it that way. However, even if they did… it is their job to talk about buying real estate. If it wasn't then they would need a different job. If you don't like it don't get their emails.

  • Erle

    We want to see Pierce County Stats! or at least Tacoma

    • http://twitter.com/MichelleBee Michelle Broderick

      It's your lucky day! Check out the downloadable spreadsheet for Pierce County stats:
      http://blog.redfin.com/seattle/files/2010/10/Redfin-Seattle-Real-Estate-Market-Report-September-2010.xls

      • Christine

        We don't all have Excel. Please put the Pierce County stats on the website. The house next door just sold for $30,000 below what I owe on my loan from late 2007, and another nearby just dropped $20,000 below that. It's very concerning, to say the least.

        • The_Tim

          Hi Christine,

          The blog post is meant to be just a high-level highlight of what's going on in the region as a whole. We selected a few cities to post a couple metrics that give numeric examples of what we're talking about, but the real meat is always going to be in the spreadsheet.

          If you don't have Excel there are a number of free alternatives you can use to view the spreadsheet such as OpenOffice and Google Docs. Or you can always go to our stats pages on the website. Here's the page for Pierce County, and here is a list of every Seattle-area city we have a stats page for.

  • Sabrejim

    Median home price only has meaning if a town is homogeneous. I am new to the area but from what I see, neighborhoods here are like night and day just a block away. You have multi millon dollar mansions a couple of streets from a 60's home with 5 cars parked in front of it. Averages only give part of the story. Look at Redmond with their +17.5% increase in price per square foot. This may be due to either a huge influx of buyers into Redmond, or maybe there is a large number of high end new homes being sold. Does this mean that everyone in Redmond saw their home value increase 17.5%? I don't think so.

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  • RottedOak

    “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%.”

    If he predicted 2-4%, and the actual value was within that range, isn't that “was on the mark” rather than “wasn't too far off the mark”?

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  • joicemorse

    It is hoped that the significant increase in investor interest in the region in recent years has led governments to reform outdated practices in the real estate market and take steps to eradicate corruption.

  • jackiestar

    The new mortgage reforms will definitely have a significant impact on the housing market because many prospective homeowners will not be able to meet the stringent income to mortgage payment ratio of 28% and heftier down payments. As a result we will see more renters. 

    http://www.ditech.com

  • http://www.bankruptcyattorneybaltimore.com/ bankruptcy attorney Baltimore

    There is always a good time to purchase when it comes to real estate. Although of a couple of years back, this post is still a good source of information for those who want to buy a new home.