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Seattle Real Estate Market Overview Seattle Real Estate Market Overview

The document provides an overview of the Seattle real estate market in October 2010. It discusses trends in home values nationally and in Seattle, including the peak-to-current decline. Foreclosures are increasing in Washington state. The local market is experiencing high inventory and falling home construction. Negative equity is prevalent among many metro areas, including Seattle. The summary concludes that home values will continue declining into 2011 before bottoming out, and appreciation is expected to be slow after the market bottoms.

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Spencer Rascoff
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© Attribution Non-Commercial (BY-NC)
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Download as PDF, TXT or read online on Scribd
449 views

Seattle Real Estate Market Overview Seattle Real Estate Market Overview

The document provides an overview of the Seattle real estate market in October 2010. It discusses trends in home values nationally and in Seattle, including the peak-to-current decline. Foreclosures are increasing in Washington state. The local market is experiencing high inventory and falling home construction. Negative equity is prevalent among many metro areas, including Seattle. The summary concludes that home values will continue declining into 2011 before bottoming out, and appreciation is expected to be slow after the market bottoms.

Uploaded by

Spencer Rascoff
Copyright
© Attribution Non-Commercial (BY-NC)
Available Formats
Download as PDF, TXT or read online on Scribd
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Seattle Real Estate Market Overview

October 2010

Stan Humphries, PhD


Chief Economist
[email protected]
206.470.7127
Current Market Performance

2
Home values in the United States

Source: Zillow.com

3
Foreclosures in the United States

Source: Zillow.com

4
Local markets: The Good, The Bad and The Ugly

Source: Zillow.com

5
Local real estate performance: The Good

Source: Zillow.com

6
Local real estate performance: The Bad

Source: Zillow.com

7
Local real estate performance: The Ugly

Source: Zillow.com

8
Home values: Seattle vs. US

Source: Zillow.com

9
Seattle home value trends by price tiers

Source: Zillow.com

10
Seattle foreclosures in perspective

Source: Zillow.com

11
Seattle home values in perspective

Source: Zillow.com

12
Peak-to-current change in home values

Source: Zillow.com

13
Month-to-month changes in home values

Source: Zillow.com

14
Construction activity – Seattle (units, SAAR)

15 Source: Census Dept.,


Moody’s Economy.com
Housing starts – Seattle (units, SAAR)

16 Source: Census Dept.,


Moody’s Economy.com
Unprecedented decline in new home sales

17 Source: Census Dept.


Despite falling starts, supply still high and sales cycle long

18 Source: Census Dept., NAHB,


Moody’s Economy.com
Foreclosures increasing in WA; delinquencies high

19 Source: Mortgage Bankers


Assoc., Moody’s Economy.com
Continuing Challenges for Housing Market

20
America is flush with empty homes

Source: US Census; Zillow

21
Current inventory level of for-sale homes is very high
Pent-up supply? 7% of homeowners
(5.3 million) want to sell if they see
signs of improvement

• We made some good


progress reducing
inventory levels last
fall with tax credits

• Did not work as well


this year

• In most months of
this year, we added
more homes to the
market than we took
off due to sales

• Monthly supply now


back to 2008 levels

22
Lots of “shadow inventory” in the wings

• 7.3 million mortgages either in foreclosure or


delinquent as of March 2010. Pct Mortgages
• Accounting for shadow inventory, there was 45% more In Foreclosure 4.63% 2,407,600.00
supply than indicated in official NAR inventory numbers
as of Sept 2009. 30-90 Days Delinquent 4.47% 2,324,400.00
• This discrepancy is growing over time meaning that, > 90 Days Delinquent 4.91% 2,553,200.00
while official inventory has been falling, real inventory
is essentially unchanged.

23 Source: Mortgage Bankers Association; First


American/Corelogic
Negative equity among the largest metro markets

Source: Zillow.com

24
Negative equity + unemployment = more foreclosures

Percent Single-Family
Unemployment
Metro Homes With Mortgages in
Rate
• Negative equity can only Negative Equity
be worked down by (March 2010) (March 2010)

sales/foreclosures, price USA 23.3% 10.2%


appreciation or paying Las Vegas Metro, NV 80.6% 13.8%
Orlando Metro, FL 74.8% 12.1%
down mortgage balances
Phoenix Metro, AZ 64.6% 8.9%
Reno Metro, NV 64.4% 13.2%
• We don’t expect much Modesto Metro, CA 60.7% 19.2%
Merced Metro, CA 58.8% 22.1%
price appreciation near-
Lakeland Metro, FL 58.5% 13.0%
term Fort Meyers Metro, FL 58.2% 13.5%
Stockton Metro, CA 57.7% 18.4%
Port St. Lucie Metro, FL 56.2% 14.0%
• Unemployment forecasted El Centro Metro, CA 54.9% 27.0%
to remain above 8% Vallejo Metro, CA 54.7% 13.0%
through end of 2012 Tampa Metro, FL 53.1% 12.7%
Riverside Metro, CA 51.2% 15.0%
Jacksonville Metro, FL 49.1% 11.9%
• Result: 3+ years of high Sarasota Metro, FL 47.8% 12.7%
unemployment visited on Madera Metro, CA 46.4% 17.5%
homeowners who can’t Melbourne Metro, FL 45.6% 12.2%
Bakersfield Metro, CA 45.6% 18.3%
easily sell or refinance
Vero Beach Metro, FL 45.2% 13.9%
their mortgages Miami-Fort Lauderdale Metro, FL 44.3% 11.5%

25 Source: Zillow.com
When will mortgage rates rise?

• Mortgage rates
are currently
helping the
market

• We’d been
expecting
mortgage rates to
be in the upper
5% range by end
of year. Seems
unlikely now.

• Fed QE, lackluster


GDP growth and
complete lack of
inflation pressure
have helped keep
interest rates low. Source: Zillow.com; see real-time rates and historical charts at
http://www.zillow.com/Mortgage_Rates/

26
Mortgages resets and recasts are better news than before

• Alt-A resets and


Option ARM recasts
have been a concern

• Alt-A: Less
worrisome now with
low mortgage rate
environment

• Option ARM: Default


rates have already
been high in this
product so fewer
that will have to
recast
Source: Deutsche Bank Global Markets Research

27
Conclusions

• Home values nationally will continue to fall until early 2011.

• Seattle bottom will lag the national bottom; mid- to late-2011.

• Likely another 5% decrease in the national ZHVI for a total peak-to-trough


decline close to 30%. Another 5-7% decline in Seattle for a peak-to-
trough of 32-34%.

• Further declines driven by foreclosures (themselves driven by negative


equity and unemployment as well as by more mortgage resets/recasts),
an already high supply of for-sale homes, and weaker demand after the
homebuyer tax credits lapse due to demand-shifting.

• Very anemic appreciation after bottom is reached; may not appreciate at


all in real terms for next 3-5 years.

28

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