Recently, I was chatting with Mike Grady (President of CBBain) about the differences between the Greater Seattle housing market this year and last. We were talking because the NWMLS had just released their market stats for October, and three things really stood out. First, the inventory of homes for sale in King County was down substantially year over year—about 25%. Conversely, pending sales of homes were up more than 25%. Typically, this kind of relationship — less product + more demand — will generate higher prices. However, the third statistic that stood out was lower prices…down about 18% for single family homes and condos combined.
At first blush, it is difficult to understand why the nearly immutable laws of supply and demand are not in play in King County. In fact, listing inventory in many popular Seattle and Bellevue neighborhoods is severely depressed…even as more and more buyers are signing contracts. Lower prices simply do not compute.
So what’s happening here? Well, here’s one way to look at it…
The price drops depicted in the NWMLS release are year over year comparisons, so the ‘real time’ market of today suffers the burden of the ‘past-time’ market of the last 12 months. In other words, say a neighborhood dropped 10% in value over the first 9 months of the year, but then rallied to gain 2% over the next 3 months. This would be characterized as a “price drop” of 8%. But would this be an accurate assessment of the market today? No…so I repeat our mantra—all real estate is intensely local. A home that lost 15% of value in one neighborhood might have an identical twin in another neighborhood 10 miles away that has started to regain pricing momentum.
The stats that the NWMLS so ably puts out each month is terrific information…but it will always take the knowledge of a very local expert to effectively interpret.