September/October 2006

By Peter Clute and Fred Kendrick

The housing market slowed further in July. New contracts for condominium and cooperative units reached a five-month low while sales of single-family homes were at their lowest monthly level of the year. Seven months into 2006, the combined sales volume of residential homes and units is 17% lower than it was a year ago at this time. It is also lower than in each of the three previous years but for these years the major cause of the decline is the sharp slide so far in 2006 in the number of single-family home sales.

Compared to 2005, the single-family decline is in almost every price range while nearly 70% of the condo and co-op price ranges show lower numbers. Compared to the 2002-2004 period, home sales are down by over 35% while unit sales show gains of 11% to 23%.

The overall inventory of residential properties for sale has remained relatively level over the last three months although it is substantially higher than earlier in the year and higher by far than in all of 2005. There is now a 4.5 month supply of homes and units for sale whereas a year ago this supply index stood at 1.4 months. In perspective, the National Association of REALTORS® reports that the average national inventory now stands at over 6 months.

Sales prices continue on a much more even pace than in the last several years. Seven months into 2006, the average sales price for all residential properties was essentially the same as at the end of 2005, but it was somewhat higher for single-family homes and slightly lower for condos and co-ops.

Single Family Homes

New contracts for single family homes in July dropped 13% from the number in June and were down 19% from July of 2005. Sales were off in most price ranges, but gains were seen by homes priced from $500,000 to $600,000 (+28%), $800,000 to $900,000 (+16%), $1,000,000 to $1,250,000 (+56%) and over $1,500,000 (+78%).

For the year-to-date, single-family sales are down 18% from a year ago with sales gains only for homes priced from $1,000,000 to $1,250,000 (+ 18%) and over $1,500,000 (+6%). This increase in upper-bracket home sales in July, and throughout much of the year so far, is one explanation why average sales prices are higher despite the overall downturn in the single-family market.

There is currently a 4.3 month supply of homes for sale in Washington. The inventory is up 60% from the beginning of the year and double that of a year ago. There was a particularly large number of homes available in the $300,000 to $700,000 price range and over $1,500,000.

The average sales price of single-family homes is up 4% from all of 2005 and 6% when compared to this time a year ago. The median, or mid price, is up only 0.2% compared to 2005. In either case, these are very modest increases compared to the 23% average price increase in 2005 and the 15% increasein 2004.

Condominiums and Cooperatives

New contracts for condo and co-op units also slowed in July – down 6% from June, lower than any earlier month in 2006 except January and February, and 4% lower than July of 2005. But in comparison to earlier years, they were 11% to 23% higher than the July’s of 2002 – 2004.

Year-to-date sales reflect much the same picture – down 14% from the same period of 2005, even with 2004 and ahead of 2002 – 2003 by 10% to 27%. Compared to a year ago, sales are down – usually by double digit amounts – in most price ranges. The only price ranges to show gains over 2005 to date have been units priced from $150,000 to $200,000 and from $700,000 to $1,000,000. In comparison to earlier years, however, all price ranges over $300,000 have shown solid gains.

There is currently a 4.6 month supply of condominium and cooperative units for sale. This compares with a 2.9 month supply at the beginning of the year and 1.4 months a year ago. Active listings are 213% higher than at this same time in 2005 so great caution in pricing is critical in today’s sales market.

The average condo/co-op price is 4% lower at the end of July in comparison to all of 2005 and 2% lower than at this same time a year ago. Median prices are also down by almost the same amounts.