King County home sales rose faster than the nation's in May

By Aubrey Cohen
SeattlePi.com Staff
June 23, 2009

King County saw a larger spring surge in existing home sales than the West and the nation as a whole in May, but compares less favorably by year-to-year change, according to a new report.

Sales of existing houses and condos in May were up just over 30 percent from April in King County, compared with increases of 6.6 percent in the West and 9.2 percent nationwide, according to data from the Northwest Multiple Listing Service and the National Association of Realtors.

But county sales were down 20 percent from May 2008, compared with an increase of 8.7 percent in the West and a 6.6 percent drop nationwide.

Seasonally adjusted numbers (not available for counties) showed sales up 2.4 percent nationwide and down 0.9 percent in the West from April. The adjustment compensates for the fact that more homes generally sell in May than in April.

The Realtors noted that seasonally adjusted monthly increases in April and May were the first such back-to-back gains since September 2005.

Analysts greeted the Realtors report with a yawn.

"While activity has stabilized, a meaningful recovery has yet to begin," wrote Paul Dales, U.S. economist with Capital Economics.

Patrick Newport, U.S. economist at the economic analysis firm IHS Global Insight, wrote that foreclosures, people selling to avoid foreclosure and (to a lesser extent) increased affordability are driving up sales, while weak demand pulls sales down.

"Distressed sales and improved affordability won the tug of war in April and May," he said. "But over the past seven months, the war has been a stalemate, as sales have hardly changed."

About one in three homes sold last month was a foreclosure or distressed sale.

Realtors association Chief Economist Lawrence Yun acknowledged in a news release that sales totals did not meet predictions.

"The increase in sales is less than expected because poor appraisals are stalling transactions," he said. "Pending home sales indicated much stronger activity, but some contracts are falling through from faulty valuations that keep buyers from getting a loan."

The Home Valuation Code of Conduct, which took effect May 1, cuts people responsible for originating mortgages off from the appraisal process.

Realtors association President Charles McMillan said the recovery depends on "realistic appraisals that are based on proper comparisons and done by a local specialist." He also called for expanding the federal $8,000 first-time buyer tax credit to all buyers and continuing it into 2010.

"Freeing a pent-up demand in housing will absorb inventory at a faster pace, strengthen communities and stabilize home prices earlier," he said.

Washington Realtors is trying to goose demand this weekend with a Statewide Open House event featuring more than 3,000 open houses statewide, including more than 1,200 in King County.

"This opportunity won't last forever as the housing market rebounds. We are seeing multiple offers again, especially with the more affordable homes," Keith Nelson, president of Seattle KingCounty Realtors and owner of Better Homes and Gardens Real Estate Executives, in Bellevue, said in a news release. "With only five months until the tax credit expires, the Open House weekend is an ideal chance to shop before the sale ends."

May sales were financed with mortgages negotiated when rates on a 30-year, fixed-rate loan averaged 4.8 percent. Subsequent increases, up to 5.38 percent last week, will blunt the impact of the tax credit, Newport said.

"We expect sales to sag over the next 12 months," he said. "In 2010, an improved economy and improved affordability will bring buyers into the market, and sales will start to rebound."

A National Association of Realtors survey in May showed first-time buyers accounted for 29 percent of sales with the number of buyers looking at homes up nearly 10 percentage points from a year ago.

"Investors appear less active, but are more prevalent in areas with large price corrections," Yun said.

The nation had a 9.6-month supply of homes for sale at the end of May, down from 10.1 months in April but still above the six months generally considered balanced between buyers and sellers.

That drop was "the best news in the report," said Joseph LaVorgna, Deutsche Bank's chief economist.

Still, the inventory figures don't reflect the large number of houses being held off the market by owners reluctant to sell while prices are so weak, noted Richard Moody, chief economist with Forward Capital.

King County had an 8.4-month supply in May, down from 10.6 months in April.

Nationwide the median price of an existing house was $215,700, while the median condo price was $214,600. That's down 14.1 percent and 18.5 percent, respectively, from a year earlier and up 3.5 percent and 1.7 percent from April.

In King County, the medians were $361,250 for a house and $259,000 for a condo, down 16.4 percent and 8 percent, respectively, from a year earlier and down 3.2 percent for houses and up 5.7 percent for condos from April.

Newport predicted nationwide prices would fall another 5 percent to 10 percent before rebounding in 2011.

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