Reality hits once-sizzling home market
Seattle Times business staff
They are some of the most expensive neighborhoods in the nation — Capitol Hill, Queen Anne, Laurelhurst and Madison Park — places where people saw their home values double and triple in the 1990s.
But last year home values there dropped, the first time in six years that any neighborhood in King County saw a decline, signaling the end of the high-end feeding frenzy.
At the other end of the spectrum, neighborhoods with less cachet and some of the most-affordable homes around — Delridge, Rainier Valley and Skyway — saw values surge in 2001.
In fact, the value of a single-family home continued its escalator ride up in most parts of the Seattle area last year, a Seattle Times computer analysis of year-end data from the King County Assessor's Office shows. The analysis measured home values on a price-per-square-foot basis, not on the actual sales price. Price per square foot is considered a more accurate measure of the overall real-estate market.
There were signs of a slowdown, though. King County's overall increase of 4.6 percent for the median price per square foot was the lowest since 1996. The bidding wars that were so common a couple of years ago are now rare, and the time it takes to sell a house increased, too.
"The correction in the stock market, the terrorist attacks and Boeing layoffs have created a cautious pool of buyers who weigh their options because they have options," said Alan Pope, a Redmond-based real-estate appraiser.
• Sales of single-family homes in King County dropped about 3 percent last year, according to figures from the Northwest Multiple Listing Service, a Kirkland-based real-estate group that tracks home sales in the Puget Sound region. Sales increased, though, in Snohomish, Pierce and Kitsap counties as they continued to attract buyers priced out of King County.
• Overall, King County median home values per square foot in the fourth quarter dropped a fraction — 0.7 percent, the analysis of Assessor's Office data shows. This is the first quarter-to-quarter decline in five years.
• At the neighborhood level, 12 out of 84 areas — most in Seattle — saw median values per square foot decline in 2001. The last time any King County neighborhood, except in the rural northeast corner of the county, saw declining values was in 1996.
• The actual median sales price in King County rose to $262,000 last year, according to figures from the multiple listing service.
A droopy stock market and the dot-com crash that began nearly two years ago put a damper on the high end at a time when many were trying to cash in on the real-estate boom.
"We had a surge of people wanting to sell their homes," J. Lennox Scott, president of John L. Scott Real Estate, said of the high-end market — homes selling for more than $700,000. "Inventory doubled overnight."
That caused prices to drop, sometimes significantly, among the most-expensive homes. There were 948 homes in King County that sold for more than $700,000 last year, down 6.3 percent from the 1,012 sold in 2000.
But the most-affordable neighborhoods — the 18 where the median sales price was under $200,000 — all saw square-foot valuations appreciate, with the exception of South Park/Georgetown. Low interest rates propped up low-end demand and prices. But the old saying — location, location, location — didn't seem to mean much last year.
The communities that did well were spread throughout the county and represented a wide range of home prices — the Federal Way area, Rainier Valley, Bellevue/Medina, Magnolia and parts of Shoreline.
"Every market moves independently of each other, based on location, price point and outside forces," Pope said.
Brian Fairchild, who has sold real estate in the Seattle area for 25 years, would agree. Fairchild is the broker of the Windermere Real Estate office in Southeast Seattle that sits smack dab in the middle of some of the most- and least-expensive neighborhoods in the area — some that saw values climb the most, some that saw them drop the most.
The North Beacon Hill figures especially stood out, with the biggest drop in the county. Based on median price per square foot, values in the neighborhood fell 4.7 percent.
But the actual median sales price increased by 6.5 percent to $220,975, although this was mostly because the homes that sold were larger on average than those sold the year before.
"That is a hot neighborhood," Fairchild said. "We have no problem selling anything up there."
In some ways, it was a year that defied logic. Despite a recession and massive layoffs at Boeing and local high-tech companies, median price-per-square-foot values went up in about four out of every five King County neighborhoods. Real-estate experts attributed the strength to some of the lowest interest rates in history, which have allowed many apartment dwellers to buy homes and homeowners to trade up.
"It's rather astounding," said Glenn Crellin, director of the Washington Center for Real Estate Research in Pullman. "I'm on record as saying (in the 1980s) I never expected to see mortgage rates below 10 percent."
A typical 30-year fixed mortgage is now at 7 percent. That means if someone buys a $200,000 house with 10 percent down, the monthly payment would be about $1,400, about the same price as renting a two-bedroom, two-bath apartment in Queen Anne, Kirkland or Bellevue and much less than in Belltown.
Take into account the tax advantages of owning a home, which can translate into a savings of a couple of hundred dollars a month, and homeownership can look as affordable as renting, real-estate professionals say.
That is what's helping drive sales in the more-affordable price ranges. Renters make up about 50 percent of all households in Seattle and about 30 percent in the region, said Mike Scott of Dupre+Scott Apartment Advisors, leaving a large number of potential buyers.
Fairchild said many of the sales in his Southeast Seattle office are to first-time buyers moving out of apartments on Capitol Hill, Queen Anne Hill and in North Seattle.
The sense that interest rates are creeping back up also is prompting people to buy, as is the fact that as recessions go, this one hasn't been that bad overall, Crellin said.
"We've had a lot of people interested in becoming homeowners despite all that was happening," he said.