current market conditions in seattle real estate
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Seattle Real EstateMarket Overview
January 2010
Stan Humphries, PhD
Chief Economist
206.470.7127
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Current Market Performance
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Home Values in the United States
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Foreclosures in the United States
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Local Markets: The Good, The Bad and The Ugly
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Local Real Estate Performance: The Good
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Local Real Estate Performance: The Bad
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Local Real Estate Performance: The Ugly
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Home Values: Seattle vs. US
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Home Values: Seattle vs. US
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Seattle Market: Single-Family vs. Condos
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Seattle Home Prices: Zillow vs. Case-Shiller
Case-Shiller only looks atsingle-family homes(excludes condos/coops).
Case-Shiller only includeshomes that have sold atleast twice (and excludes allnew construction)
Case-Shiller includesforeclosure re-sales eventhough these aresubstantially different thannon-distressed sales.
ZHVI looks at all homevalues, regardless of whathas sold or not.
ZHVI does not include
foreclosure re-sales.
MoM: 0.3%
MoM: -0.1%
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Peak-to-Current Change in Home Values
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Foreclosures in Seattle
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Seattle Market Dynamics: List-to-Sale Price Falling
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Seattle Market Dynamics: Less Price Cutting on Listings
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Continuing Challenges for Housing Market
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Negative Equity Among the Largest Metro Markets
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Lots of Vacant Inventory
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Mortgage Rates Likely Will Increase After Fed Intervention Ends
Source: Deutsche Bank Global Markets Research
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Mortgages Continue to Reset and Recast
Source: Deutsche Bank Global Markets Research
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Foreclosures Move Up-Market
Homes in the top one-third of home values
now make up twice theproportion offoreclosures they didthree years ago.
In 2006, the top one-third made up 16% offoreclosures.
In July 2009, they madeup 30%.
High delinquency ratesin Prime, Alt-A andOption Adjustable Ratemortgages result inforeclosures outside ofsubprime.
Cure rates are low, andwith 21% of all single-family homes withmortgages underwater,they will likely stay low.
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Foreclosures are a Distinct Market from Non-Foreclosures
Foreclosures sell for
substantially lessthan non-foreclosures, evenafter controlling forlocation and physicalspecifications.
In Seattle, foreclosedhomes currently sellfor 81% of non-foreclosure saleprice.
Across all metros,foreclosures sell forabout 72% of non-foreclosure saleprice.
http://www.zillow.com/blog/files/2009/11/discount9.pnghttp://www.zillow.com/blog/files/2009/11/discount9.pnghttp://www.zillow.com/blog/files/2009/11/discount9.pnghttp://www.zillow.com/blog/files/2009/11/discount9.png -
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More foreclosures in
an area do lead to asmaller gap betweenforeclosure and non-foreclosure prices.
But this discount israrely less than 20%.
Methodology:Comparing actualsales of foreclosuresand non-foreclosuresto Zillow valuation
(Zestimate)
Foreclosures are a Distinct Market from Non-Foreclosures, Contd
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Home values nationally will continue to fall until Q2 2010
Likely another 5% decrease in the national ZHVI for a totalpeak-to-trough decline of 25%.
Further declines driven by foreclosures (themselves drivenby negative equity and unemployment as well as by moremortgage resets/recasts), increasing mortgage rates, analready high supply of for-sale homes, and weaker demandafter the homebuyer tax credits lapse due to demand-
shifting.
Very anemic appreciation after bottom is reached; may notappreciate at all in real terms for next 3-5 years.
Conclusions