Lennox's Real Estate Blog

sharing my passion for real estate

Puget Sound Housing Report 2010/2011

with 2 comments

Let’s start by reviewing what took place in the 2010 Puget Sound residential real estate market. Last year experienced a “surge/unsurge” with sales surging in first quarter thanks to historically low-interest rates and the Federal Home Buyer Tax Credit. But when the tax credit expired on April 30th, 2010, home sales took a dramatic drop.

Sales remained sluggish, but as the year progressed, inventory levels began to lower. By the end of 2010 the three-county area of King, Snohomish, and Pierce reported about six months of inventory, which is a positive indicator (based on pending sales). November, December, and January experienced a mini-surge of sales by buyers who made their move when interest rates showed some upward movement. This activity didn’t cause prices to rise, but it’s a positive sign nonetheless. (A market with a supply of approximately six months is considered balanced, favoring neither buyers nor sellers.) We finished the year slightly worse for wear, but with optimism for 2011.

We are heading into 2011 with higher consumer confidence and continued near-historic-low interest rates. Interest rates are expected to rise slowly in the coming months and land somewhere around 5.6% by year’s end. Unemployment is predicted to remain above eight percent through 2012; the unemployment rate in Seattle peaked in March 2010 at 9.5% and is now at 8.8%.

Economists are predicting that home prices in our area will continue to see moderate declines before they begin trending up; however many local markets are already starting to stabilize. Distressed properties continue to pull down the median home price because these homes typically sell for 20 to 30 percent less than normal sales. But recent reports indicate that we are working our way through the distressed inventory and these listings are expected to gradually represent a smaller percentage of the total sales in our area. It may take a little longer in areas like Pierce and Snohomish Counties because the percentage of foreclosure sales is higher in those areas.

There are still some unknowns that could have significant impact on the housing market, such as whether or not the Federal Government decides to reduce its involvement in home financing. This could mean a reduced role for Fannie and Freddie Mac and the loss of high-balance loan limits, both of which would be detrimental to the housing economy. Higher insurance fees on FHA mortgages and a possible increase in minimum down payments for FHA could also have a significant impact on many home buyers. As such, buyers in the “grey zone”, those who are trying to time the market, should strongly consider their options. What we know today is interest rates are very low, home affordability is peaking, and homes in the lower and mid price ranges are selling quickly when they’re priced right.

Housing is a long-term investment for most home owners and the greater Puget Sound area is repeatedly picked as one that is best positioned for recovery. It won’t happen overnight, but I feel confident that the future looks bright.

As always, thanks for reading.

Lennox

Written by Lennox

February 22, 2011 at 1:16 pm

2 Responses

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  1. Lennox…As always, thank you for your professional analysis and, most of all, for your true concern for the Real Estate industry. Continued business and life success to you! Pat McGuire

    Pat McGuire

    February 23, 2011 at 11:38 am

    • Pat,
      Thanks for reading and for your kind comments.

      Lennox

      Lennox

      February 23, 2011 at 12:50 pm


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