Housing market goes from boom to bust
March 23, 2011
By Dan Catchpole
It has been a long time since the sun shined on Snoqualmie Ridge’s housing market.
The outlook for 2011 isn’t any better, according to market analysts.
Home prices in King County fell in February to a new low since the real estate boom collapsed in 2008.
Prices have been pulled down by short sales and foreclosures, which are often priced below market value. That is especially true of the Ridge, which has a higher rate of distressed properties — bank-owned homes and short sales listed for less than the owner owes the lender — than the rest of the county.
The number of distressed properties is expected by analysts to rise in 2011, meaning prices will likely continue declining for the rest of the year.
Experts don’t expect prices to stabilize before 2012.
“This year’s going to be tough for everyone,” said Glenn Crellin, an economist and director of the Washington Center for Real Estate Research at Washington State University.
Across the county, 37 percent of houses for sale in February were considered distressed, according to the Northwest Multiple Listing Service.
On Snoqualmie Ridge, that number is 42 percent, and many of those are on the Ridge, said Cary Porter, a Realtor with The Cascade Team, a local real estate agency.
“We’re at 42 percent and headed up,” Porter said.
When a house is sold at below-market price, it forces down the value of other houses on the street.
Porter pointed to his own house on Carmichael Loop. He paid $720,000 in 2005, when housing prices were rushing up. There was recently a short sale on his block for $545,000.
“That means my house is worth maybe $525,000,” he said. “My price is going to go down for another year.”
He expects that if home values recover at a steady 3 percent after 2012, it will take about 16 years for his house to reach its 2005 value.
“Twenty-two years after moving in, I can sell my house for zero profit,” he said.
Fortunately, he likes his neighbors.
Most of the houses on the Ridge were bought when home prices were soaring upward.
“Almost everyone on the Ridge is upside down,” meaning they owe more than on their home than it is worth, Porter said.
Higher-end properties have seen even larger drops in market value. He recently helped sell a home on the Ridge for $500,000. The owner had paid $1,050,000.
“It has just, whew — straight down,” he said while slashing his hand downward.
Prices are also being driven down because the market has too many houses for sale. Currently, there is a 10-month backlog of homes in Snoqualmie Valley. Porter said he expects it to rise to about 12 months because more houses are typically listed in the spring.
A six-month supply usually means prices will be stable.
With so many houses for sale, buyers can be picky. The average home for sale in Snoqualmie and North Bend spends 169 days on the market. That compares to 45 days four years ago.
Since prices are headed down, the longer a home sits on the market, the less it will probably sell for.
“Do homes sell in one day? Absolutely, but they have to be priced right,” Porter said.
One of his agents recently sold a house for $585,000, but three years ago, it would have sold for $800,000, he said.
In addition to the inventory of existing homes, sellers also have to compete with new homes from developers. While home construction on the Ridge has slowed dramatically, it still continues.
To lure buyers, developers have had to increase their offerings, upgrading amenities and slashing prices. That is another drag on home prices.
Builders are still putting up new homes because they have already paid for infrastructure improvements, and they can also spread their losses out across a wider area.
Not all news has been bad news for homeowners, though.
There have been signs that buyers’ confidence in the economy is improving, but that could be short lived if rising energy prices and international instability put a brake on the recovery, Crellin said.
Rising gas prices could especially hurt the Valley, where the vast majority of residents commute to work.
“That’s a very expensive commute with current gas prices,” he said.
Still, analysts see 2011 as a year that must be endured.
“We’re still going to drop for the rest of the year. It’s just math,” Porter said.
Dan Catchpole: 392-6434, ext. 246, or email@example.com.