State's Home Sales Drop Biggest in US

State's home sales drop biggest in U.S.
Median price in county is down 10%
By AUBREY COHENP-I REPORTER
Sales of existing houses dropped more in Washington than anywhere else in the nation last quarter, compared with a year earlier, according to a new report. King County's median sale price also dropped roughly 10 percent from a year earlier.
The state's sales were down 36 percent from the third quarter of 2007, the National Association of Realtors reported. The next-largest annual drops were in Vermont and Delaware, where sales fell 33 percent.
A big reason why Washington's annual drop is larger than other states' is that its decline started later, meaning other areas had much slower markets a year ago.
"Clearly it's a reflection of what had been happening in other parts of the country spreading up here," said Glenn Crellin, director of Washington State University's Washington Center for Real Estate Research, which reported similar numbers Tuesday. "It's a reflection of the fact that economic conditions have worsened in the state. Unemployment is going up. Access to credit is still very restrictive."
Statewide, sales were down 6 percent from the second quarter, putting Washington 32nd among states and Washington, D.C.
The Washington Center for Real Estate Research reported statewide sales of existing houses dipped 5 percent from the second quarter and 26 percent from a year earlier. King County sales fell 5 percent from the second quarter and 31 percent from a year earlier.
The quarterly and annual declines in King County and statewide were smaller than the drops in the second quarter, Crellin noted. "While it is premature to suggest the worst is over for the housing market, even modest favorable changes are encouraging."
King County has enough houses on the market to last 9 months at the current sales rate, Crellin reported. "This is consistent with modest price declines but nothing significant."
Most experts consider five to seven months of supply a balanced market between buyers and sellers.
The state has 10.2 months of supply, suggesting larger declines will continue, the Center for Real Estate Research said.
King County's median sale price for an existing house was $427,000 -- down roughly 10 percent from a year earlier, the center said. That's a bigger drop than the 4 percent annual decline in the second quarter and a record fall for the center's reports, which started in 1995. The statewide median was $281,500, down a record 10.4 percent from a year earlier.
The value of a typical home may well be falling faster than the median sales price, Crellin said. "Those households willing to buy in this market have more choices and opportunities to negotiate deals than in recent periods. As a result, they may be getting more house without spending more money, suggesting price depreciation on individual homes is more severe than reported here."
The price drops have made homes more affordable. The typical King County family made 77 percent of the income needed to buy a median-priced house in the third quarter, up from 74 percent in the second quarter and 65 percent a year ago, the Center for Real Estate Research said. First-time buyers typically made 43 percent of the income needed for a starter home, up from 41 percent in the previous quarter and 36 percent a year ago.
Rising interest rates offset price drops somewhat from the second to the third quarter, and King County's affordability percentage is still rather low, Crellin said. "I don't know that it has gotten high enough to make a tremendous difference."
Statewide, the typical family made 97 percent of the income needed for the median house, while first-time buyer income was at 57 percent.
Looking forward, the slow economy will hamper a housing recovery, Crellin said. "I think we're going to continue to see a soft housing market through 2009. That doesn't necessarily mean we're going to continue to see significant reductions in value, but that does mean we won't see significant increases either."
The National Association of Realtors reported that nationwide third-quarter sales of existing houses were up a seasonally adjusted 2.6 percent from the second quarter, but down 7.7 percent from a year earlier.
The median price of an existing house was lower in the second quarter than a year earlier in 120 of the 152 metropolitan areas the Realtors track. The nationwide median price was $200,500, down 9 percent from a year earlier.
The Realtors noted that foreclosure houses and short sales -- sales made to avoid an impending foreclosure -- accounted for 35 to 40 percent of transactions in the third quarter, pulling down median prices.
"A very large proportion of distressed home sales are taking place at discounted prices compared to more normal conditions a year ago," association President Charles McMillan said in a statement.
Metropolitan-area price changes ranged from a 13 percent annual increase in Elmira, N.Y., to a 39 percent drop in Riverside, Calif. Two other California metro areas, Sacramento and San Diego, posted the second- and third-largest drops, down 37 percent and 36 percent, respectively.
Such declines helped give California the second-largest quarterly sales increase, 28 percent, among states. A similar pattern occurred in No. 1 Arizona, where sales were up 28 percent, and No. 3 Nevada, up 26 percent. Nevada had the biggest annual increase, 76 percent, followed by California, up 58 percent, and Arizona, up 49 percent.
"A pattern of sharply higher sales in areas with large price declines is well-established," said Lawrence Yun, the association's chief economist. "Affordability conditions have consistently been a major factor in driving sales. Historically during recessions, buyers have responded to incentives, and it's important for government to keep that in the forefront of stimulus decisions."