North Sound Property News

So maybe you noticed I haven’t been posting a lot lately.  Maybe you were wondering why?  Well, two reasons really.  One, I couldn’t see blogging much during the summer, because once summer finally arrived, it was fantastic.  If it comes to a choice between being inside blogging or outside doing just about anything else, I’ll choose the latter almost every time.

  Two, with everything that’s happening, I really couldn’t figure out what to say about any of it.  Call it denial, or writer’s block, or just a short attention span, the reality is, I didn’t feel I could do justice to the complexity of what is happening in the real estate and credit markets with a short post…  So rather than write a short post, or something trite, I chose not to write anything at all.  Bad blogger!

 But, I feel like it would be irresponsible to let this week’s events pass without a blog post about the issues with WAMU, and maybe a few words about the impact of the financial crisis on our Snohomish county real estate market, and Mukilteo in particular.

 With regard to WAMU, there is hardly anything I or anyone can say to express what a big deal this is, not just on the local level.  This is a news story of national, or even global scope.  If it fails it will be the largest bank failure in American history.  This is huge.

As to the government response, I think that the Treasury and the Fed have been a bit hamstrung over the last few months between wanting to control inflation, on the one hand, and recession on the other hand, brought on by the collapse of the housing market.  At this point, the biggest challenge to the health of our economy is no longer inflation.  Though, heaven knows that is much worse than we are being led to believe given that any American consumer can tell you that the cost of just about everything from gas to milk has gone up substantially in the last 3 years.  At this point, the biggest threat to our economy at this point is a recession, or possibly even a depression, brought on by lack of available credit.

 For better or worse, credit is the engine that drives our economy.  Without credit, the majority of Americans can’t buy a home.  Without credit, most new businesses cannot open their doors.  Without credit, existing businesses cannot expand, and our economy cannot grow.  And credit dries up when investors become afraid to invest in our economy.  Our government can’t allow this to happen, so when these are the stakes, I believe they are right to do whatever it takes to restore confidence that investment in our economy as a whole is generally a safe and prudent one. 

 So I am hopeful that this is a first step to restoring that confidence, but I doubt it will translate to much in the way of change for the local housing market for some time to come.  We still have too much inventory, prices are still too unstable, and there is still a long way to go before either of those factors change.

That doesn’t mean I think it’s foolish to buy or sell a home at this time, but I do think it is foolish to do so without being aware of the true situation, and the potential risks/rewards.  For some, the idea of buying into a declining market is completely unacceptable.  For others, the long-term rewards of owning still make sense - whether it’s the desire to put down permanent roots or the possibility of picking up a “bargain” in a weak market.  And for sellers, the decision to sell or hold a home will depend largely on your personal situation.  If you still have a lot of equity in your home, and are planning to move anytime in the next couple of years, now might be a great opportunity.  If you don’t have a lot of equity, and don’t really need to move, then now may not be the time.  The key is to do your due diligence and make sure your decision is one that makes the most sense in your individual situation.

So, all of that said, where is the bottom?  Are we getting close to it yet?

The first thing to note is that unlike this time last year, the addition of new inventory has slowed down.  That’s a positive–that indicates that things are stabilizing a bit.  By and large sellers have figured out that the gravy train has ended, and we are seeing less of the “fly it up the flagpole” types of listings coming on the market.  What we are seeing, however, is a lot more in the way of distress sales - short sales, pre-foreclosures, divorces, estate sales, etc.  These are the types of sales where bargains can be found.

So in general, we still have a lot of inventory, and new inventory is still hitting the market but it’s not growing at a 30% clip like it was last year, and most of it is what I would refer to as being “motivated.”   We are also seeing a slowdown in new construction hitting the market, but this may depend on where you are.  Here in the Mukilteo market, we still have a good amount of new construction coming online from Crown Park, Westridge, the Fairview and now, a new development coming in at The Arbors, which should have it’s first model available in November.  However, compared to last year, production has definitely slowed.  Areas with a lot of new construction are seeing the biggest price drops as builders try to unload their inventory.

 Which brings me to the first sign of finding the bottom: inventory will be shrinking, rather than growing.  All these projects that have been permitted in the last few years and which are still coming on line are going to be driving our market for some time to come.  Remember, it was lack of inventory that drove prices up, and now it’s a glut of inventory (along with a few other things like tighter credit terms) that is driving prices down.

Second sign of a bottom?  Prices will stabilize as a result of less inventory to choose from.  Just as prices started leveling off in June of 2007 and held steady for several months as the flow of credit into the market slowed and inventory began to increase, one would expect to see prices stop dropping and level off, and credit loosening up a bit, before any kind of return to appreciation is likely to occur. 

 In some areas of the country this is already happening, but the Seattle metro area appears to be lagging behind those areas.   Some argue that this is because much of Seattle’s business activity is in the B2B sector (think Boeing, Microsoft) and cutbacks/expansions in B2B spending tend to lag cutbacks/expansions in consumer spending.  We lagged behind the rest of the country as appreciation accelerated, we lagged coming into the downturn, and it probably makes sense that we will lag when things turn around.

About the Author: Sandy Kaduce is Associate Broker of Gallery Homes Real Estate. She serves buyers and sellers in North King and South Snohomish counties. She is 2009 Board President of the Mukilteo Chamber of Commerce, as well as Vice President of Site Selection for Habitat for Humanity of Snohomish County. For more information, visit Sandy on the web at www.sandykaduce.com! Read more from this author