Editor’s note: This report also includes an audio interview about price changes in the Boston market. Click here to listen to the audio file.
While home prices lulled in many regions across the country during the descent from a prolonged real estate Gold Rush, rapid appreciation has continued in major Pacific Northwest and Rocky Mountain markets.
The U.S. Office of Federal Housing Enterprise Oversight, a federal agency that monitors government-sponsored enterprises Fannie Mae and Freddie Mac, reported that Utah, Wyoming, Idaho, Washington and Oregon had the steepest home-price appreciation in fourth-quarter 2006 compared to fourth-quarter 2005.
In fourth-quarter 2006, the top five metro areas for year-over-year price appreciation on OFHEO’s list were in Oregon, Washington, Utah and Idaho, while the sharpest metro-area price declines were in Indiana, California and Michigan. OFHEO’s first-quarter-index report is due out later this month.
Median resale home prices in the state of Washington rose about 9.3 percent in the fourth-quarter of 2006 compared to the same quarter in 2005, and in 2006 the statewide median price was 12.6 percent higher than in 2005, the Washington Center for Real Estate Research at Washington State University reported. The median price in King County — home to Seattle — rose 13.6 percent in fourth-quarter 2006 compared to fourth-quarter 2005.
The National Association of Realtors reported that the median sales price of resale homes in the Seattle metro area rose 12.3 percent in first-quarter 2007 compared to first-quarter 2006, and climbed 11.3 percent in fourth-quarter 2006 compared to fourth-quarter 2005.
Seattle and Portland were among the strongest markets in fourth-quarter 2006 for home-price appreciation among 20 U.S. markets featured in the monthly Standard & Poor’s/Case-Shiller Home Price Index.
Glenn Crellin, director for the Washington Center for Real Estate Research at Washington State University, Pullman, said job and income growth have been strong throughout Washington and especially in the Seattle area. “That’s clearly one of the things that is contributing to the strength of the market,” he said.
Also, he said, “Because of the depth and the length of the previous recession, the Seattle area really started its recovery much later than some of the other places around the country. We are at a different point in the cycle than many of those previously high-flying markets have been.”
Growth management policies in the state have kept speculative building in check, he said, and this has prevented a massive over-supply of units on the market. “We certainly haven’t seen the degree of inventory accumulation that some of the markets such as Vegas or Phoenix have seen. Realtors are still talking about many instances of multiple offers coming in.”
Large national builders are not as active in the Seattle area as they are in other markets, Crellin said, and the subdivisions tend to be small-scale.
While price growth has been slowing, it is still strong — this year will be a good year, he said, though 2006 was not as strong as 2005, “and I think 2007 is not going to be as good as 2006.” Single-family home sales fell 12 percent in 2006 compared to 2005, and affordability is a growing problem.
“First-time buyers are in very dire straights,” Crellin said. “Affordability has declined sharply, as it has virtually every place. Still, by comparison to California markets, Washington housing still looks relatively affordable.”
Traffic in the region has been impacted by the “drive-until-you-qualify” commuters, he said, as prices toward the job centers have pushed some buyers to the suburbs and beyond in search of affordable housing.
Brian J. Kreick, broker-owner for Kreick Realty Group in Lynnwood, Wash., which is north of Seattle, said the booming high-tech industry has definitely buoyed the real estate market. While the for-sale inventory and time on market is rising, Kreick said it takes perhaps four to eight weeks to sell a property these days — which is still a healthy market.
Nationwide, the median price of resale homes fell about 2.7 percent in fourth-quarter 2006 compared to fourth-quarter 2005, the National Association of Realtors reported, while the Census Bureau reported that the median new-home price dropped about 2 percent.
NAR reported that the Cumberland, Md.-W.V., metro area had the strongest price appreciation in the first quarter compared to first-quarter 2006, followed by Beaumont-Port Arthur, Texas; Gulfport-Biloxi, Miss.; Salem, Ore.; and Bismarck, N.D. Other markets that were on the top-10 list for price appreciation were in New Mexico, Utah, Washington, Oklahoma and New Mexico. Salt Lake City and Salem, Ore., were in the top five for price appreciation in NAR’s fourth-quarter report, and markets in New Jersey and Texas also topped the list.
Markets with the biggest year-over-year median-price declines in the first quarter included Elmira, N.Y.; Sarasota-Bradenton-Venice, Fla.; New Orleans-Metairie-Kenner, La.; Reno-Sparks, Nev.; Palm Bay-Melbourne-Titusville, Fla.; and Green Bay, Wis., NAR reported. And the five metro areas with the most severe price drops in fourth-quarter 2006 were in Florida, Illinois and Louisiana.
Among the 20 markets tracked in an S&P/Case Shiller price index, Detroit, Boston, San Diego, Cleveland and Washington, D.C., experienced price declines in fourth-quarter 2006.
John A. Keith, a real estate broker in Boston, said that while some statistics show price declines in Boston, he believes the downtown market is strengthening and that prices have begun to stabilize.
“I feel there is more activity now. The volume I think has improved and prices have stabilized. People are pricing close to what properties are worth,” he said. Also, inventory has shrunk and there is a low inventory of properties for entry-level buyers. It’s difficult, he said, to find a one-bedroom unit for less than $500,000 in downtown Boston.
The first quarter of the year was busier for him than fourth-quarter 2006, Keith said. And while some consumers are waiting to see if Boston prices will drop further, he said he doesn’t expect to see any major swings in price, barring some unexpected “calamity.”
Across the country, Jim Abbott of California Prudential Realty, who leads a five-person real estate team, said that while prices have slipped up to 15 percent to 20 percent for some downtown units, other units “have sold for more than they did a year and a half ago — it depends on the product.”
Some small units, among them converted apartment-to-condo units are slow to sell, he said. There isn’t much demand for units ranging from 500 square feet to 700 square feet, he said.
An Anderson Forecast for the San Diego market, prepared by a University of California, Los Angeles, center, calls for “less building, weak sales volumes and flat to slightly falling home prices through 2007, with some improvements starting in mid-2008.” The forecast anticipates median prices for all homes and condos to fall to about $478,500 by fourth-quarter 2008, which is down about 2.1 percent compared to the median price in fourth-quarter 2006.
The buyers in the San Diego market these days appear to be buying for the long haul, Abbott said, as the investors and speculators are no longer a factor. “I don’t see any investors in the marketplace at the moment and I don’t think we will until it’s proven that prices are starting to rise,” he said.
Buyers do have some fears, he said, about the declining market. “What we always point out is that the best deal on a house is the one you should have bought five years ago, and that’s almost always true. A lot of people are trying to time their purchase perfectly. A lot of that is interest-rate dependent,” he said.
Short-sale properties are available in the San Diego market, though these properties can raise a red flag because lenders can be overwhelmed by the volume of these sales, and this can lead to long processing times, Abbott said.
*based on average monthly price change for 3 mos. of the quarter
**based on data for metro area’s central county
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