From Seattle Times today:
Home prices are falling in most major U.S. cities, and at least 10 major markets,including Seattle, are at their lowest point since the housing bubble burst.
The Standard & Poor’s/Case-Shiller 20-city index shows price declines in 19 cities from January to February. The index fell for the seventh straight month. Prices fell at a faster rate in 11 markets in February compared with the previous month.
High unemployment, stricter lending rules and fears that prices will fall further are among the reasons why few people are buying and selling homes. A record number of foreclosures are forcing down home prices in most metro areas, and prices are expected to keep falling through this year.
These factors all hold true locally as well as nationally – we see them in play in every neighborhood and every price range. Although the Seattle area overall economy appears to be in recovery, there is a large percentage of bank owned and “distressed” properties, including short sales, that are keeping prices low. For example, in Mukilteo specifically, rates of short sale and bank owned listings continue to make up 20-30% of the market. In addition, although hiring is improving, unemployment overall in the King and Snohomish county areas remains higher than the national average.
Also from the article:
The cities with the steepest declines from January — 2 percent or more —were Minneapolis, San Francisco, Chicago and Miami. The Seattle metropolitan area, which includes King, Snohomish and Pierce counties, was right behind them with a 1.9 percent monthly drop. Home prices here haven’t been lower since June 2004, according to Case-Shiller.
In many depressed markets, a significant percentage of buyers are really investors and private equity firms looking to cash in on cheap real estate.
This is the interesting thing to note because cash buyers tend to be investors. Investors come into a market when the projected rents provide a rate of return that is attractive. Over the last 12 months, about 10 – 20% of the buyers in Mukilteo have been cash sales. In some cases these may be people who intend to live in a property but the majority are probably purchasing these properties to rent them out. When cash investors believe a market will turn around long term, they do not necessarily wait until it reaches “bottom” if the rental prospects and cash flow projections look promising.