State’s real estate market still sputtering

SPOKANE — Ask real estate expert Glenn Crellin when the state’s housing market will return to normal and you get a laugh.

“I’m not sure what normal is anymore,” said Crellin, associate director of the Runstad Center for Real Estate Studies at the University of Washington.

Indeed, sales of existing homes in Washington have been sputtering along since 2008. The state is not nearly as bad as places such as Arizona and Florida. But the market here hasn’t been good either.

There are faint signs that change is coming. The most recent report by the center, for the second quarter of 2012, showed the market improving dramatically in portions of the populous Puget Sound region — the greater Seattle area — while improvement was less pronounced in the rest of the state.

“Central Puget Sound is doing quite well,” Crellin said.

In the second quarter, sales of existing homes in King County were up 17.2 percent from the same period a year ago. The median sales price was up 6.5 percent, to $370,000, highest in the state, the center said.

In Snohomish County, second quarter sales were up 23 percent from a year ago and prices were up 8.2 percent, the center said. And in Yakima County, using seasonally-adjusted numbers, existing homes sold in the second quarter were up 4.1 percent from the first quarter, and up 10.5 percent from the second quarter one year ago. The median sale price was $161,900, up 7.4 percent from the previous year.

The Puget Sound region has a stronger economy than the rest of the state, and continues to see an influx of new residents, Crellin said. Sharply rising rental prices there are also pushing more people into becoming homeowners, he said.

Statewide in the second quarter, sales of existing homes rose 10.4 percent from the year before. But Crellin cautioned against putting too much weight on that increase.

He noted that the seasonally adjusted rate of homes sold actually dropped 2.6 percent from the first quarter, which is unusual because home sales are typically higher in the spring than in the winter.

“The market is clearly stronger than a year ago, but it eased off a bit compared with the pace we saw in the first quarter,” Crellin said.

The median price of homes in the second quarter was up 4 percent from a year ago, to a statewide average of $236,000.

Crellin does see some positive signs for the statewide housing market.

For one thing, mortgage interest rates have started to creep up in recent weeks, which is a signal to prospective buyers that they’d better hurry if they want to lock in a cheap loan, Crellin said.

Average home prices are also increasing, a signal to buyers that the bottom of the market may have been reached and that prices are now rebounding, he said.

“The combination of those numbers is telling buyers they missed the absolute best bargains, but conditions are still pretty good for being in the market,” Crellin said.

The increase in prices is also likely to prompt more people to put their homes up for sale, helping replenish a market that was actually suffering from a shortage of properties, Crellin said.

“My expectation is that as signs continue that prices have stabilized, you are going to see more buyers in the marketplace,” Crellin said.

One major problem is the number of distressed properties in the state.

There are about 80,000 mortgages in the state that are either 90 days past due or in foreclosure proceedings now, Crellin said.

“That doesn’t include anything that has already been foreclosed,” he said. “We’ve got a very large hill in front of us.”

Unlike other states with distressed markets, most of the houses in foreclosure in Washington were existing homes, Crellin said.

“We don’t have neighborhoods of new construction that need to be torn down in this state, like they do in California,” Crellin said.

The recent rise in home prices produced a modest drop in the Housing Affordability Index, which measures the ability of median-income families to buy median-price homes, assuming a 20 percent down payment and 30-year mortgage at prevailing rates.

But the index still showed that middle-income families — at an annual salary of $72,400 — “still have a significant cushion in terms of buying a median-priced home,” Crellin said.

Homes remained affordable for median-income families in all Washington counties, Crellin said, with the highest affordability in Lincoln County and the lowest in San Juan County. For first-time buyers, Benton County was the most affordable and King County the least affordable.

“While the market appears to be improving, the sluggish economy combined with a continuing overhang of distressed properties means a sustained recovery is still tenuous,” Crellin said.

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