Buyers aren't purchasing homes as short-term investment vehicles anymore, says principal Jeff Bell of Cobalt Mortgage in Kirkland, and that's a huge shift.
Despite declining prices — or is it because of them? — last year is shaping up as the Seattle area's best year for home sales since the real-estate market tanked in 2007.
Through November, closed sales of houses and condos in King and Snohomish counties were running 10 percent ahead of 2010's pace, according to Northwest Multiple Listing Service statistics (December's numbers are expected Wednesday).That's still barely half the peak pre-bust volume. But market-watchers say the improvement is encouraging, especially considering 2011 was the first year in the past three with no federal-stimulus tax credits to entice buyers.
So who bought last year? And who's likely to be buying in 2012?
Renters who've decided low prices and interest rates now make buying more attractive than renting, brokers and other industry insiders say.
Investors who sense opportunity in deeply discounted distressed properties. Folks whose changing life circumstances — a new job, a growing family — dictate a move.
And, perhaps most important, people willing to live with the possibility that their home's value may go down still farther before it goes up — because they don't plan to sell anytime soon.
Buyers aren't purchasing homes as short-term investment vehicles anymore, says principal Jeff Bell of Cobalt Mortgage in Kirkland, and that's a huge shift.
"The whole system is different now," he says. "We're going back to the way real estate was 20 or 30 years ago."
Seattle economist Matthew Gardner, who analyzes the market for Windermere Real Estate, concurs.
Before the bust, he says, "it wasn't, 'This is my home.' It was, 'This is going to make me money.' "
Among buyers today, Gardner says, that expectation is all but gone.
No big change
For the most part, industry observers don't expect any dramatic changes in the local real-estate scene in 2012. "The market's probably going to be struggling for a while overall," says Glenn Crellin, director of the Washington Center for Real Estate Research.
"We'll be bouncing along the bottom," OB Jacobi, Windermere's president, told a recent industry gathering.
Prices may slip a little more, experts say, or at best hold steady. Interest rates should stay at or near their record lows.
Inventory probably will remain depressed — in part because so many homeowners are underwater on their mortgages, says Tim Ellis, who writes the Seattlebubble.com real-estate blog: "People who might otherwise be selling can't afford to."
Tougher lending requirements probably will continue to short-circuit a significant number of sales, brokers say — financing obstacles are depressing sales by 10 to 15 percent, says John L. Scott Real Estate Chairman and CEO Lennox Scott.
Finally, observers say, foreclosures — which helped drive sales up and prices down in 2011 — will continue to play an influential role.
Sales of bank-repossessed homes were up substantially last year. They accounted for 17 percent of all King County sales in October, up from less than 10 percent in October 2010, according to Seattle-based real-estate marketplace Zillow.com.
Those homes sold not only for significantly less, but also at steeper discounts than other properties compared to a year earlier. The median price of repossessed houses sold in King County in November was down 18 percent from the same month in 2010, according to an analysis by Washington Property Solutions, a short-sale negotiating firm.
For nondistressed houses, the year-over-year drop was less than 3 percent.
The foreclosure pipeline probably won't dry up anytime soon, most analysts say, despite a recent slowdown in auctions and repossessions they consider merely a pause.
The percentage of Washington homeowners at least 30 days delinquent on their mortgages has nudged up from 7.1 to 7.5 percent over the year, according to the Mortgage Bankers Association.
And, according to Zillow's latest data, 29 percent of King County single-family homes with mortgages have "negative equity" — their owners owe lenders more than the homes are worth.
That's likely to keep foreclosures elevated, says Stan Humphries, Zillow's chief economist.
But their impact on prices doesn't reach across the board, he adds: Higher-priced houses, which face less competition from foreclosures and short sales, have declined much less in value over the past year than lower-priced stock.
That's among the signs of stability in the Seattle market that Humphries says he finds encouraging heading into 2012.
"It's not a terrible time to buy," says Ellis, the blogger. "It depends on your situation."
He bought his first house last year, a short sale in Everett, after looking on-and-off for five years.
Ellis' situation: A growing family that needed more room. Rising rents — he says what he needed would have cost him at least $1,500 a month. Declining home prices. Historically low interest rates.
The monthly payments on his new house — principal, interest, taxes and insurance — total about $1,250, Ellis says.
His home's value could drop over the next few years, he acknowledges, but so what? He plans to stay there at least 10 years.
"You can't count on a house being a good investment," Ellis says. "If you can't hold it for at least seven years, renting may be the better idea."
That's what Crellin, the real-estate researcher, concluded. He moved recently from Pullman to Seattle when his center switched affiliations from Washington State University to the University of Washington.
He's 61, headed toward retirement. When he considered what the real-estate market might do between now and then, Crellin says, he wasn't certain he'd recoup his investment if he bought.
Considerations like that drove buying decisions in 2011 and will continue to drive them in 2012, experts say.
"It's not 'Buy because you're going to get 10 percent appreciation over the next couple years,' " says Bell, the mortgage broker. "It's not what it used to be at all."
He plans to buy a new house this year — and stay there 15 or 20 years. "I'm not looking for the house to appreciate," he says. "I'm moving for my lifestyle."
Another likely 2012 buyer: Zillow's Humphries. He's not looking to make money, he says. He just wants a bigger back yard.
"With three kids, that's important," the economist says.
Eric Pryne: 206-464-2231 or epryne@seattletimes.com
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