Why home prices continue to fall in Snohomish County

Published 9:36 pm Sunday, November 6, 2011

What’s going on with home prices?

Of course they’ve been falling since the recession, but data released last week showed a serious drop in median prices last month, particularly in Snohomish and King counties.

The combined median for single-family homes and condominiums fell by nearly 15 percent in Snohomish County and by even more — nearly 18 percent — in King County during October. The drops are not a month-to-month change, but rather how prices relate to how much homes were selling for a year ago.

In Snohomish County, condos took a sharper hit.

The median price for condos was $143,000 last month, a drop of $47,000, or 24.7 percent, from October 2010. For single-family homes, the median was $235,995, a drop of 13 percent.

The sharp decrease was big news in King County because prices there have been pretty stable for some time. In Snohomish County, prices have been dropping at rates at or near double digits every month for many months, so it wasn’t as big a surprise.

And again, when I say dropping by double digits every month, I mean that each month prices drop in comparison to what they were in same month of the previous year.

Still, a 15 percent difference from a year ago is quite a bit.

Numbers offered by the Northwest Multiple Listing Service offer a partial explanation.

In the Maltby area of the county, near the King County line, median prices dropped around 4 percent. They dropped 21 percent in the area up north near the Skagit County line. In the Everett and Mukilteo areas in the middle of the county, the price drop was closer to 12 percent.

The big difference in prices is to be expected in a poor economy, because many Snohomish County residents work in King County and live here because home prices are cheaper. Prices tend to fall here as the King County commute gets longer.

I think the economy is going to have to improve before people start pushing up prices again, especially in north Snohomish County.

Other reasons for the drop:

•Banks are selling at bargain prices. Banks are still trying to sell homes and undeveloped lots they had to take over in the recession. Many banks are still under government restrictions, and most are trying clean up their books.

Analysts and real estate professionals say it will be at least a year before that eases. About a third of the region’s sales involve homes repossessed by banks or short sales from people selling their homes for less than they owe the bank.

•Investors are offering cash for good deals. A lot of the buyers these days aren’t people who plan to live in the home. They’re investors who want to use them to make money.

Many of the investment purchases are from people offering cash for a lower price. Some sellers are taking less than they want so as not to have to deal with the bank.

•New mortgage rules. Windermere president O.B. Jacobi said last week that a sharp drop was expected because the loan limit for conventional financing dropped from $567,500 to $506,000. He said that fewer people were buying homes at the higher price because they would have to get a more restricted and more expensive jumbo loan. That, he said, lowers median prices.

That would make sense, especially in areas such as King and Snohomish counties, which have a fair amount of the more expensive homes.

When will the market improve? It’s anybody’s guess. The market, at least from a sales standpoint, has been improving in recent months.

But I don’t see it reaching anything like normal for quite a while, despite low interest rates and low prices, because I think a number of buyers are still on the fence waiting for a clearer indication about the economy.

Mike Benbow: 425-338-3459; benbow@heraldnet.com.