Fall in Seattle or the Fall of Seattle?
Much of the country entered into a kind of real estate winter long ago. For many markets across the United States real estate woes had become reality far before the sub-prime lending collapses in spring and summer of this year. However, it wasn’t until a large portion of the nation’s sub-prime loans ceased to be funded in August that we had really started to feel a slow down here in Seattle. That slow down is real and the question is where is our market truly heading?
In posing this question to many of my real estate agent colleagues, as well as several lenders, there is optimism. Over the past few years many of us have wondered when we would see the climate shift from a Seller’s market to real estate environment that is more balanced. That is where many of us see the market heading.
Conventional lending (loans backed by the Federal Government) is still doing quite well. Non-conventional loans (jumbo, stated income, etc.) however are higher risk loans for lenders to extend and that is where we are seeing problems. Buyers using these products now have to pay a much higher price to use them than they did before the problems arose in August.
Of the non-conventional products jumbo loans are probably the main concern. The Federal limit for a conventional loan currently stands just under $417,000. The median residential price for a home in King County this past August was $477,345. So unless a buyer has $60,000 or more for a down payment they will be paying a much higher interest rate, and thus, a much higher mortgage. This has made it difficult for many buyers who would have been able to afford homes in the $450k-$650k price range a couple of months ago. Many of them are now forced to shop at a lower price point and that middle portion of the market is feeling the slow down the most.
In spite of the disarray in the lending world, many loans (conventional and otherwise) are still being funded. King County continues to enjoy a season of generous appreciation. According to Northwest Multiple Listing Service, the residential median closed sales price was up 9.73% in August 2007 over August 2006. I doubt we will see as high a percentage of growth when the September numbers are released next month but I do expect King County to continue to appreciate.
All of this to say, there are still a lot of questions regarding exactly where we will land in this post sub-prime dominated world but there is still much to be optimistic about. So as you pull out those Bill Cosby sweaters and wonder where you put your moon boots, I hope you’ll be able to join me in saying “Ah, fall” without feeling awful.