Bad Real Estate Numbers

02/11/2009

The Washington Center for Real Estate Research at Washington State University is set to release the latest data on the housing market tomorrow (Thursday). Even though on paper it's a great time to get a good deal on a home, the truth is no one is optimistic about the numbers. As KUOW's Patricia Murphy explains, low interest rates and high inventory are not doing much to ease the psychological impact the down economy is having on buyers.

Windermere real estate agent Bill Garrison has seen a lot. He's been selling homes in the Seattle area for 15 years.

Garrison: "I was showing houses this morning to a couple who can only afford to spend about 275–and there are a lot of properties out there for $275, $285."

Garrison: "It's got a lot of great detail."

Murphy: "It's beautiful."

This is not a 275– thousand dollar home. We're standing in a very well kept craftsman built in 1904. A block from Greenlake which is still considered one of Seattle's hottest neighborhoods.

Garrison: "It's just under a million one. It's a million 99."

Murphy: "And it's been on the market how long?"

Garrison: "It's been on the market about four months."

Four months is an eternity in some real estate circles. This story is not surprising to Glenn Crellin, Director of the Center for Real Estate Research at Washington State University.

Crellin: "There aren't enough buyers for the high end properties that are out there."

Crellin says the inventory of houses on the market in the million plus price range is extremely problematic. A similar situation is occurring in the condo market. A lot of building and very little selling. Crellin thinks 2009's real estate market will continue to weaken. One reason he says is simply because the market in Washington remained strong through 2006. That's when many buyers were getting mortgages with low or interest only teaser rates that are now on the verge of resetting at or above the current interest rates.

Crellin: "Those borrowers are going to have a very hard time making the new payments even if their employment situation is stable. And if they are among those who have lost jobs or have lost some income in the household, making those payment jumps is going to be virtually impossible."

That could lead to more foreclosures.

Crellin says foreclosures are a very expensive process for the banks. So for some homeowners facing impossible payments negotiation may be an option. But many mortgages have been sold into mortgage pools and Crellin says investors would rather see foreclosure action rather than a reduction in payments. Many economists believe fixing the housing market is key to stabilizing the economy.

But it's a vicious cycle. Historically low interest rates and high inventory are not easing the apprehensive mindset about the economy and what it means for the future.

Agent Bill Garrison says these days houses are typically selling for 10–percent below asking. Even still he's seen his business drop by about a third.

Garrison: "In many cases I'm doing four open's, four open houses on a weekend two on Saturday and two on Sunday over the past few months I've had one or two buyers come through."

Garrison says many agents are taking second job or even getting out of the business entirely. But he's an optimistic guy, so even though right now he's working harder for less business he still feels fortunate. And he says with a smile that seems more genuine than salesman, it's a great time to buy a home.

Patricia Murphy, KUOW News.

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