Every year at about this time I write my annual housing market review and projection for the coming year. First, let me recap my record over the past two years:
In this column on October 7, 2007, I predicted that home values in the Puget Sound region would fall by an average of 10 to 20 percent (depending on the neighborhood) during calendar year 2008. At that time, the housing market had just peaked so I took a lot of heat from real estate community about that prediction, but it proved to be pretty accurate.
On Nov. 9, 2008, I wrote that “home sellers will finally accept the reality that home values have fallen and they aren’t coming back any time soon.” And in that column I predicted that “overall home prices will fall an average of 5 to 10 percent next year, but the depreciation rate will vary dramatically from city to city and neighborhood to neighborhood” during calendar year 2009. The year is not quite over, but so far my prediction is pretty accurate.
According to the Case-Schiller report, Greater Seattle-area home prices are down 6 percent this year through the end of August. And according to the Northwest Multiple Listing Service, the median home price in Snohomish County is down about 6.7 percent compared with October 2008.
As I said last year, home price depreciation varies from neighborhood to neighborhood, with home values falling more in some areas than others — those overall average numbers are right in the 5 to 10 percent range I was expecting for price declines. Keep in mind that at the time I made my predictions late last year, many of the “bad news bears” were predicting that home prices would fall even faster in 2009 than they did in 2008. Fortunately, that did not happen. The home price decline was much more moderate, as I had predicted.
So what will happen to Puget Sound area home prices in 2010? I think average home prices will continue to drop a little, but the pace of depreciation will continue to slow. Overall, average home prices may fall about 5 percent, but as always the rate of depreciation will vary from neighborhood to neighborhood. In general, highly desirable neighborhoods, especially those close to major job centers, will do better than outlying areas.
Will we hit the housing market bottom in 2010? Maybe. You can only know for sure that a market has bottomed in retrospect when you can look back at housing prices on a graph and see the point where they stopped going down and started going up and stayed up. We may very well hit that point some time next year, probably late spring or summer.
In the meantime, I think this is a pretty good market for both buyers and sellers. Homeowners can be relieved that their home values will probably not fall too much further from today’s values and home buyers can take advantage of very low mortgage interest rates and relatively affordable housing prices — without having to worry that home prices will rise quickly.
Just remember that if you are buying a home in today’s market, buy it for your lifestyle, not as an investment. Even though I think the worst may be over as far as price depreciation goes, a home you buy today may be worth a little less next year as the housing market continues to settle. And I think it will be several years before we see any significant price appreciation. So don’t buy a house unless you plan to live it for at least seven to 10 years. If you plan to move in the next five years, you would almost certainly lose money if you buy a home today.
If you are a home seller, price your home realistically (i.e., lower than the competition) and it will sell. Home sales are picking up, even in the higher price ranges, but don’t try to beat the market.
Send your real estate news to Mike Benbow, Business editor, The Herald, P.O. Box 930, Everett, WA 98206, by fax at 425-339-3435 or by e-mail at economy@heraldnet.com.
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