Current Market Conditions in Seattle Real Estate

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Seattle Real EstateMarket Overview

January 2010

Stan Humphries, PhD

Chief Economist

[email protected]

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
http://www.zillow.com/blog/files/2009/11/image006.png


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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

Current Market Conditions in Seattle Real Estate

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