PULLMAN Existing single-family home sales in Washington during the third quarter of 2008 stood at their lowest level since the closing months of 1996, according to statistics prepared by the Washington Center for Real Estate Research at Washington State University. Homes sold during the third quarter at an annual rate of 85,180 units statewide, slipping 5.1 percent below the sales rate in the second quarter and 26.0 percent below the same time last year.
“While the sales rate was disappointing, the declines were less than observed last quarter when compared to either the previous quarter or previous year,” said Glenn Crellin, WCRER director. “While it is premature to suggest the worst is over for the housing market, even modest favorable changes are encouraging,” he said.
The median price home in Washington during the third quarter sold for $281,500. This price level was 10.4 percent below a year ago, the sharpest decline since WCRER began producing the statistics in 1994. This marked the fourth consecutive quarter with year-to-year declines in median prices. The current median price is roughly the same as the median reported in early 2006.
Examining home sales on a local level shows that the seasonally adjusted annual sales rates was higher in the third quarter than the quarter before in 10 counties, and unchanged in four more. The strongest quarter-to-quarter improvement was seen in Klickitat County which recorded a sales rate 59.3 percent about the second quarter, and only 2.3 percent below last year. Among urban counties, the biggest sales improvement was a 3.6 percent increase in Clark County. Among the counties reporting slowing sales, the most significant decline was a 55.9 percent drop in Okanogan County, while among the urban areas the sharpest decline was 12.7 percent compared to the second quarter in Skagit County (Mount Vernon). As always, King County had the highest sales rate of 20,240 homes, while four counties recorded annualized sales rates less than 100 homes sold.
Median prices ranged from $110,000 in Adams County to $559,000 in San Juan County. Among the urban markets the range was somewhat narrower, from $156,400 in Yakima County to $427,000 in King County. In terms of price changes compared to a year ago, the median price declined by 18.5 percent in tiny Wahkiakum County. At the other extreme, the median price in small Klickitat County was 14.9 percent above a year ago. Among urban counties the range of price changes was from an increase of 3.1 percent in Asotin County (Clarkston) to a decline of 12.7 percent in Clark County.
Despite the prevailing belief that all home prices are declining, a total of eight Washington counties reported higher median prices than a year ago. It must be emphasized, however, that the change in median prices should not be referred to as an appreciation rate. “Those households willing to buy in this market have more choices and opportunities to negotiate deals than in recent periods. As a result, they may be getting more house without spending more money, suggesting price depreciation on individual homes is more severe than reported here,” Crellin said.
The future direction of housing prices may be indicated by comparing the inventory of homes available for sale to sales rates.
When prices were surging there was a two months’ supply of homes on the market. Five to seven months is considered a balanced market where prices increase on a par with the overall inflation rate. Supplies in excess of nine months are consistent with softening prices. The statewide supply as of the end of September was 10.2 months, suggesting prices will decline further in the months ahead, but these statistics can change quickly. “A potential bright spot is a decline in the month’s supply compared to last quarter,” Crellin noted. In most markets the month’s supply was highest for the most expensive homes, suggesting prices will stabilize for entry-level homes before the luxury market.
When prices were surging there was a two months’ supply of homes on the market. Five to seven months is considered a balanced market where prices increase on a par with the overall inflation rate. Supplies in excess of nine months are consistent with softening prices. The statewide supply as of the end of September was 10.2 months, suggesting prices will decline further in the months ahead, but these statistics can change quickly. “A potential bright spot is a decline in the month’s supply compared to last quarter,” Crellin noted. In most markets the month’s supply was highest for the most expensive homes, suggesting prices will stabilize for entry-level homes before the luxury market.
The final set of statistics released by WCRER measures of the ability of typical families to purchase typical homes, measured through the Housing Affordability Index. The statewide all-buyer index stood at 96.9 for the third quarter, the fourth consecutive increase in affordability after several quarters of decline. The index is constructed assuming lenders rely on traditional underwriting standards, consistent with current lending practices which are more restrictive than a year or two ago. This means that a median income family has about 95 percent of the income required to qualify for a conventional mortgage on a median price home. Jan Ellingson of Burlington, the 2008 President of Washington Realtors®, emphasized: “Affordability improvement may not parallel price declines because increasing interest rates often offset the lower prices paid by postponing a home purchase.”
The most affordable local housing market was in Columbia County with an index of 189.1, while San Juan County continued to offer the least affordability with an index of 44.0. The index was greater than 100 in 28 Washington counties, suggesting that the typical family can afford to purchase the typical home in many parts of the state.
A healthy housing market requires opportunity for households to afford the purchase of their first homes. The companion first-time buyer affordability index assumes a lower purchase price, a lower income incorporating the fact that most higher-income households are already homeowners and the fact that single persons (who are excluded from the family income statistics) are more likely to be potential buyers. The statewide measure was 56.9, meaning that the typical would-be homebuyer has a little over half the income needed to qualify for a mortgage on the typical starter home. Again the statewide measure reflected marginally improved affordability conditions compared to recent quarters. The range in first-time buyer affordability measures was from 110.3 in Adams County to 26.0 in San Juan County. The metropolitan range was from 95.3 in Benton County to 42.9 in King County.
WCRER has produced these statistics in partnership with the Washington REALTORS® since early 1994. Each quarterly release is timed to coincide with news releases of existing home sales by state and median home prices by metropolitan area from the National Association of REALTORS®. Sales data is available for each county and median home prices and affordability are reported for 38 of Washington’s 39 counties.
