You've likely overheard conversations (or maybe participated in them) recently about the state of the real estate market, particularly what caused the crisis and when we will "hit bottom". Everyone seems to have an opinion of who is to blame and how to get things back on track. But rarely do you hear real numbers that apply to your own community. Even the numbers used in local publications generally look at county-wide sales data to formulate their statistics. If you are a Thurston County resident then you are aware that areas like Yelm, Tenino, and Rochester follow much different trends than the Olympia market. So, for all my fellow Olympians, here are some statistics that actually look at YOUR neighborhood.

While my statistics cover only my local market of Olympia, Lacey, and Tumwater, WA I have a feeling these same trends may apply to many markets across the country. For the sake of comparing apples to apples I have limited my sales data to single-family, stick-built, detached homes. All data was provided by Northwest Multiple Listing Service.

Peaks and Valleys

This first chart provides a picture of the number of homes sold per year, dating back to 1999. I've broken it down into total number sold (green), resale homes sold (red), and new construction (blue). Interesting to note that Resale sales volume peaked a year earlier than new construction, perhaps because all those buyers in 2006 were lured away by the shiny appeal of brand new homes. I just hope they didn't all get in on adjustable rate mortgages with no down payment....

The Intimate Relationship of Supply and Demand

Next, we'll take a look at how median sales prices have reacted to the sales trends seen above. The same colors apply in this chart. (Just so everyone is on the same page here, MEDIAN represents the middle number in a list. So for example, if you had 5 sales with prices of $150, $185, $205, $210, and $260, your median sales price would be $205 because half of the prices are smaller and half are larger. Median prices are used as a measure of the real estate market because there tends to be a large number of sales in the middle of the range of prices. Averages are sometimes used but if you have a few sales that are way above the rest the results will be skewed.) What stands out most to me is that prices have not really reacted to the huge decrease in sales volume. The resale market began to dip last year, I'm sure due to the "inventory reduction sales" and "buyer bonuses" being offered at the struggling new construction sites. However, I found it very interesting that the new construction median price has continued to rise through '08. I would call myself an optimist, but at times you have to be real and look at the facts...when demand drops, prices are sure to follow. The degree to which they fall will be determined by the confidence of the consumer, the availibility/affordability of loans, and the rate of foreclosure in the area.

Back to Reality

Many of us were fooled into thinking that 20+% appreciation in home values was sustainable. Banks lent money to borrowers based on this philosophy. People assumed that real estate was an avenue to get rich quick. But, when the honeymoon ended and reality started to set in we saw the finger pointing begin. Lets face it, greed is the only guilty party. When your neighbor buys his house then sells it a year later for a $50,000 profit without making a single improvement you are going to want in on the game. And so the bubble inflated....  In this chart I have set 1999 as the bench mark for value, therefore it shows as 0% appreciation. There was in fact appreciation in '99 but I had to start somewhere!

The moral of the story is that I, like everyone else, wish I had the crystal ball to be able to answer that question of "when will we hit bottom". Unfortunately, we will only be able to see the bottom in hindsight.

If you'd like to discuss the impact recent changes in the housing market have had on YOUR home, please contact me. I have detailed charts and data for most neighborhoods in the Olympia area.

Mike Conner     360.970.4408  /  mike@cityrealtyolympia.com