The last two weeks have been a crazy time for the financial sector. We had Lehman Brothers file for bankruptcy, Merrill Lynch rescued by Bank of America, the federal government taking control of Fannie Mae and Freddie Mac, and bailing out American International Group with a $85 billion loan. Closer to home, WaMu’s shares sunk to $2.01 this week. There’s no doubt this presents a challenging and discouraging time for America and obviously impacts those who have been considering buying a new home.
In Seattle, numbers from the NWMLS for August indicate that inventory has started leveling off with a total of 1,491 condos on the market, 9% higher than same time last year. On the bright side, back in January this year, we had ~65% higher inventory than January of 2007 so inventory trends are coming down.
Median prices for August ($310,000) have fared better than the previous month ($299,975) but are still lower than a year ago which was $327,500. This is a 5.34% drop versus the same time last year. Compared to other cities, we are still experiencing a minor drop in median prices but it’s unclear if Seattle will continue to be an oasis of fairly stable prices in light of what’s going in in the rest of the country.
Number of pending sales for August 2009 was about the same level as July 2009. However, there was a drop in pending sales of 42.25% compared to same period last year. With the current inventory on the market, we are looking at ~9 months of supply. On a nationally level, there is a 11.2 month supply.
Closed sales figures for last month still lagged behind a year ago by 52.42%. Put plainly, inventory is not piling up but what’s already in the market will take twice as long to sell versus last year.
With the fed announcement of taking control Fannie Mae and Freddie Mac, interest rates dipped close to 5.5% level for 30 year fixed and 5.375% for 5 year Adjusted. Home sellers who were able to capitalize on the market benefited from attractive refinancings — hopefully this will make it easier for them to stay in their homes while they wait out the market. Interest rates have since gone back up close to 5.87% for 30 year fixed and 5.75% for 5 year Adjusted.
With the tight credit market, unless the home buyers have good income and credit scores, they will need to come up with more down payment, pay higher loan fees, and provide more documentation to the bank. If you are not planning to buy for the next 6-12 months, this is probably a good time to clean up your credit and save up some down payment.
In summary, the Seattle market is plodding ahead but activity is much slower than last year. Prices are dipping but definitely not crashing. Everyone seems to be holding their breath to see what’s going to happen in Washington DC, New York, and the rest of the country since that continues to be the big driver of buyer hesitation so far.