seaskyfan
Mar 17, 2008, 12:44 PM
From the P-I - Looks like the housing slowdown has at least hit the exurbs.
http://seattlepi.nwsource.com/local/355253_newhomes17.html
As homes go up, prices go down
Overbuilding creates plenty of deals, especially in the suburbs
By AUBREY COHEN
P-I REPORTER
Karen Waters thought she got a good deal last March when she paid $425,000 for a new house in the SouthRidge at Silver Creek development near Puyallup.
After all, the price was about $100,000 less than buyers had paid builder Centex Homes for similar houses on the block the previous fall. By February, however, neighboring homes were selling for about $350,000.
"I totally wished I would have waited," Waters said last month.
The Seattle-area housing market has held up better than many, largely because it did not have as much overbuilding as places such as Las Vegas and Phoenix. Still, the local market has slowed and builders are taking dramatic steps to clear out housing inventory in suburban areas.
"The reality is, our real estate market is in the tank," said Don Dutton, managing broker of Windermere Real Estate's Puyallup Office.
Overbuilding deserves the biggest share of the blame, he said.
Most experts consider markets with six months' worth of housing inventory, based on the current sales pace, balanced between buyers and sellers.
This figure has averaged eight months for houses in King, Pierce and Snohomish counties, combined, since September, according to data from the Northwest Multiple Listing Service. That's more than double the inventory over the same period a year earlier, thanks to a market where more homes are vying for a shrinking pool of buyers.
But there are clear disparities within these three counties, particularly in comparison with Seattle.
Seattle house inventory averaged just over five months since the start of September 2007, compared with nine months in the Puyallup area; about 10 1/2 in the Bonney Lake and Snohomish areas; and 12 in and around Lakewood and Graham. All were under six months in the same period a year earlier except Graham, which was just under seven.
The percentage increase in Seattle's inventory, compared with the same period a year earlier, was as great as in many suburbs. But Seattle's inventory started out much lower -- at 2.7 months in September 2006 through February 2007 -- meaning that even with the increase, the market has not tipped past that six-month threshold to favor buyers.
Vincent Healy, owner of Clearpoint Appraisal in Seattle, said he started to notice trouble signs, such as longer market times and some price drops, in summer 2006.
"That really began on the periphery of the market, the further you get from Seattle and Bellevue," he said. "By this (past) summer, to a large degree, I think we saw the crest of value."
Years of lax mortgage standards contributed to the nationwide housing boom, but lenders hit the brakes hard last August.
"That (easy) financing has gone away concurrently with a lot of supply going on the market," Healy said. He said many suburban buyers are first-timers who are less established and therefore suffer more than city buyers from tighter standards.
But the biggest reason for the inventory disparity is the lack of developable land in Seattle. Even during the frenzied market, city developers were limited to building a few houses on random lots and in redevelopment projects, such as the Seattle Housing Authority's High Point and Rainier Vista sites.
"Where is the land to build on?" asked Matthew Gardner, a local land-use economist who works with developers. "It is absolutely not in the city."
Most of Seattle's new for-sale housing in recent years has been townhouses and condominiums, which have shown more softness than traditional houses in the city. Developers of these homes have, in many cases, cut prices, boosted incentives, shelved plans and changed projects from condos to apartments.
But these changes are nothing compared with those in the suburbs, thanks to big national home builders who can afford to slash prices dramatically -- writing off losses, if need be -- and have the most motivation to do so, because they're coping with inventory pileups nationwide.
"Every builder is saying, 'We've got to see declines in standing inventory,' " Gardner said.
The most recent quarterly reports for national builders such as Centex, Weyerhaeuser and D.R. Horton show sales and profits down by double digits from a year earlier. With this slowdown have come buyer incentives.
Elaine Nordgaard bought her SouthRidge house for $350,000 last month, benefiting from a weekend Centex promotion.
"The one I bought was listed for $510,000 back in September of '06," she said. "They actually sold it twice (before), but the buyers couldn't complete their financing for some reason."
Now she lives next to Waters and Marschell Lockwood, who paid $464,000 for her house in January 2007.
"It's frustrating because when we moved in they had dropped the prices," Lockwood said. "We thought we got a deal, but now there's people coming in paying almost $100,000 less."
Most builders try to avoid cutting prices because that can annoy earlier buyers and make it hard to raise prices later. Instead, they offer various upgrades and buyer bonuses.
Quadrant Homes, a division of Weyerhaeuser and the area's largest homebuilder, launched its "Easy-Buy" campaign in October, offering a menu of incentives, including reduced interest rates, credit toward upgrades or premium lots, money toward closing costs or down payments and buyer bonuses.
Not far from SouthRidge, in Bonney Lake, Quadrant is offering $45,000 bonuses in a development whose prices start at $261,000.
Deals like these are also in many other Seattle-area communities, including Bothell, Marysville, Lake Stevens and Stanwood.
"It's astounding the incentives that the builders are offering," Dutton said. "They have no choice. They've got to get these homes sold."
But incentives and steep discounts make it hard for those trying to sell existing homes, Dutton said.
Philip Eder of Puyallup said he hasn't drawn much interest in his house since putting it on the market in September.
"The market's just saturated with houses," he said. "I blame these cracker-box housing projects."
Eder mortgaged his house to fund construction of the retirement home he's building. He had planned to pay for the new home with the sale of his current one, but said he instead might be forced to rent the old one out.
The market is adjusting in a number of ways, including shedding excess inventory and coming up with lending programs that are not too lax or restrictive, Quadrant Homes President Peter Orser said. "We've seen this before -- there's a major event and people kind of struggle, and then things stabilize, and then the underlying demand that was always there starts to emerge again."
Centex officials did not respond to calls for comment.
But suburban housing may have a bigger problem than just a temporary slowdown caused by overbuilding and tighter lending standards.
Gardner contended that traffic congestion and rising gas prices are making people more interested in living closer to where they work. He noted that, by 6 a.m. most weekdays, the 30-mile commute from Everett to Seattle takes an hour.
Like Waters, many buyers feel good about the price they paid only as long as the new guy doesn't pay less.
As gloomy as he sounds, Dutton thinks it's time to buy, because the new-home glut isn't going to get any worse.
"Everybody is stopping production down here," he said. "Everything is focused on getting rid of standing inventory."
Standing inventories already have started to decline, Gardner said. But he expects prices to continue falling this year, with many existing homes hitting the market over the summer, as mortgages reset from low initial rates to much higher payments.
Gardner and some other economists have predicted prices will fall by 5 percent this year in the Seattle area. He, and most economists, define the Seattle area as all of King and Snohomish counties, although some also include Pierce and even some other nearby counties.
So that 5 percent prediction really means greater declines in more remote areas and stronger prices in cities, Gardner said. "The more rural areas probably will suffer more."
Healy's advice?
"It's a good time to shop carefully."
http://seattlepi.nwsource.com/local/355253_newhomes17.html
As homes go up, prices go down
Overbuilding creates plenty of deals, especially in the suburbs
By AUBREY COHEN
P-I REPORTER
Karen Waters thought she got a good deal last March when she paid $425,000 for a new house in the SouthRidge at Silver Creek development near Puyallup.
After all, the price was about $100,000 less than buyers had paid builder Centex Homes for similar houses on the block the previous fall. By February, however, neighboring homes were selling for about $350,000.
"I totally wished I would have waited," Waters said last month.
The Seattle-area housing market has held up better than many, largely because it did not have as much overbuilding as places such as Las Vegas and Phoenix. Still, the local market has slowed and builders are taking dramatic steps to clear out housing inventory in suburban areas.
"The reality is, our real estate market is in the tank," said Don Dutton, managing broker of Windermere Real Estate's Puyallup Office.
Overbuilding deserves the biggest share of the blame, he said.
Most experts consider markets with six months' worth of housing inventory, based on the current sales pace, balanced between buyers and sellers.
This figure has averaged eight months for houses in King, Pierce and Snohomish counties, combined, since September, according to data from the Northwest Multiple Listing Service. That's more than double the inventory over the same period a year earlier, thanks to a market where more homes are vying for a shrinking pool of buyers.
But there are clear disparities within these three counties, particularly in comparison with Seattle.
Seattle house inventory averaged just over five months since the start of September 2007, compared with nine months in the Puyallup area; about 10 1/2 in the Bonney Lake and Snohomish areas; and 12 in and around Lakewood and Graham. All were under six months in the same period a year earlier except Graham, which was just under seven.
The percentage increase in Seattle's inventory, compared with the same period a year earlier, was as great as in many suburbs. But Seattle's inventory started out much lower -- at 2.7 months in September 2006 through February 2007 -- meaning that even with the increase, the market has not tipped past that six-month threshold to favor buyers.
Vincent Healy, owner of Clearpoint Appraisal in Seattle, said he started to notice trouble signs, such as longer market times and some price drops, in summer 2006.
"That really began on the periphery of the market, the further you get from Seattle and Bellevue," he said. "By this (past) summer, to a large degree, I think we saw the crest of value."
Years of lax mortgage standards contributed to the nationwide housing boom, but lenders hit the brakes hard last August.
"That (easy) financing has gone away concurrently with a lot of supply going on the market," Healy said. He said many suburban buyers are first-timers who are less established and therefore suffer more than city buyers from tighter standards.
But the biggest reason for the inventory disparity is the lack of developable land in Seattle. Even during the frenzied market, city developers were limited to building a few houses on random lots and in redevelopment projects, such as the Seattle Housing Authority's High Point and Rainier Vista sites.
"Where is the land to build on?" asked Matthew Gardner, a local land-use economist who works with developers. "It is absolutely not in the city."
Most of Seattle's new for-sale housing in recent years has been townhouses and condominiums, which have shown more softness than traditional houses in the city. Developers of these homes have, in many cases, cut prices, boosted incentives, shelved plans and changed projects from condos to apartments.
But these changes are nothing compared with those in the suburbs, thanks to big national home builders who can afford to slash prices dramatically -- writing off losses, if need be -- and have the most motivation to do so, because they're coping with inventory pileups nationwide.
"Every builder is saying, 'We've got to see declines in standing inventory,' " Gardner said.
The most recent quarterly reports for national builders such as Centex, Weyerhaeuser and D.R. Horton show sales and profits down by double digits from a year earlier. With this slowdown have come buyer incentives.
Elaine Nordgaard bought her SouthRidge house for $350,000 last month, benefiting from a weekend Centex promotion.
"The one I bought was listed for $510,000 back in September of '06," she said. "They actually sold it twice (before), but the buyers couldn't complete their financing for some reason."
Now she lives next to Waters and Marschell Lockwood, who paid $464,000 for her house in January 2007.
"It's frustrating because when we moved in they had dropped the prices," Lockwood said. "We thought we got a deal, but now there's people coming in paying almost $100,000 less."
Most builders try to avoid cutting prices because that can annoy earlier buyers and make it hard to raise prices later. Instead, they offer various upgrades and buyer bonuses.
Quadrant Homes, a division of Weyerhaeuser and the area's largest homebuilder, launched its "Easy-Buy" campaign in October, offering a menu of incentives, including reduced interest rates, credit toward upgrades or premium lots, money toward closing costs or down payments and buyer bonuses.
Not far from SouthRidge, in Bonney Lake, Quadrant is offering $45,000 bonuses in a development whose prices start at $261,000.
Deals like these are also in many other Seattle-area communities, including Bothell, Marysville, Lake Stevens and Stanwood.
"It's astounding the incentives that the builders are offering," Dutton said. "They have no choice. They've got to get these homes sold."
But incentives and steep discounts make it hard for those trying to sell existing homes, Dutton said.
Philip Eder of Puyallup said he hasn't drawn much interest in his house since putting it on the market in September.
"The market's just saturated with houses," he said. "I blame these cracker-box housing projects."
Eder mortgaged his house to fund construction of the retirement home he's building. He had planned to pay for the new home with the sale of his current one, but said he instead might be forced to rent the old one out.
The market is adjusting in a number of ways, including shedding excess inventory and coming up with lending programs that are not too lax or restrictive, Quadrant Homes President Peter Orser said. "We've seen this before -- there's a major event and people kind of struggle, and then things stabilize, and then the underlying demand that was always there starts to emerge again."
Centex officials did not respond to calls for comment.
But suburban housing may have a bigger problem than just a temporary slowdown caused by overbuilding and tighter lending standards.
Gardner contended that traffic congestion and rising gas prices are making people more interested in living closer to where they work. He noted that, by 6 a.m. most weekdays, the 30-mile commute from Everett to Seattle takes an hour.
Like Waters, many buyers feel good about the price they paid only as long as the new guy doesn't pay less.
As gloomy as he sounds, Dutton thinks it's time to buy, because the new-home glut isn't going to get any worse.
"Everybody is stopping production down here," he said. "Everything is focused on getting rid of standing inventory."
Standing inventories already have started to decline, Gardner said. But he expects prices to continue falling this year, with many existing homes hitting the market over the summer, as mortgages reset from low initial rates to much higher payments.
Gardner and some other economists have predicted prices will fall by 5 percent this year in the Seattle area. He, and most economists, define the Seattle area as all of King and Snohomish counties, although some also include Pierce and even some other nearby counties.
So that 5 percent prediction really means greater declines in more remote areas and stronger prices in cities, Gardner said. "The more rural areas probably will suffer more."
Healy's advice?
"It's a good time to shop carefully."