Jul. 16, 2009 - 2009 Housing Market - Where is it going?

King County Home Prices are in what we call the "Spring Bounce" period. Using month to month or year to year comparisons is a fool's game. It's for people who like to create drama. A serious housing market evaluation will compare to a benchmark cycle of change.

Below is the benchmark expectation for Spring Bounce period, taken from pre-subprime 2001

Below is the 2009 Spring Bounce period. The visual abnormality is readily apparent. In the Seattle area, the year started off in a fairly typical and robust Spring Bounce manner. The expection would be 3% up at the onset as it was in 2001. That would put February at 190, and the market surpassed the expectation by going to 192 (median price per square foot)

As you can see in the graph above, Spring Bounce was interrupted sending home prices downward, vs. upward or stable at the new highpoint expectation of 190 - 192.

This "market bottom"  of 187 was created by the announcement of the $8,000 Home Buyer credit, prior to it being passed.

Back to graph 1 for a minute, let's say a reasonable expectation for Jan vs June price would be 4% or so increase (131 to 137) in a year that is flat to moderate by year end. That would set the expectation for 2009 at 185 plus 4% at 192 for June.

So in the graph above, we are "on track" if you envision the market having gone 185, 190, 192, 192, 192, 196 in a more typical benchmark pattern.  So where we are now is "as expected" and the "price slump" of 187 was a "bottom" created by the housing credited waiting period.

In fact if prices recede a bit from 196 back to 192 or so in July & August (which I expect)...we would continue to have an erratic pattern for 2009, but with the same standard result of expectation set in the benchmark pattern year.

To answer the question "Where are prices going?" you have to remember that in any flat to moderate-increase year, the market giveth and the market taketh away. Both graphs above and below show that what a market is doing is based on where it starts and where it ends, not on the fluctuations in between.

In an UP market, the Dec end number will be higher than the Jan beginning number. Let me say that again, when a year STARTS at 127 and ends at 132 such as 2001 (benchmark year) that means the market is on an upswing.

While some will report in that year that the market is "down", because the market went from 137 in Spring Bounce to 132 by year end, that would be incorrect. A down year equals the final month number being LOWER than the start month number, not a decline from Spring Bounce to 4th quarter.

Using month to month or year to year comparisons is a fool's game. It's for people who like to create drama. A serious housing market evaluation will compare to a benchmark cycle of change.

So...where is the market going? If 2001 is 127 in Jan to 132 in Dec, at a 3.9% increase, then to be "on track" prices in 2009 should end at $192 median price per square foot for King County.

I think the housing stimulus will equal "recovery" at prices "propped" up at the Jan 2009 level (flat year), vs. "pushed" up to $192. I expect the year to end about where it started, at $185 median price per square foot.

The market giveth...and the market taketh away. I think Spring Bounce will be eradicated between now and the December numbers, but I don't expect the year to end lower than it started.

Still a further study of volume stats (to follow) may cause me to rethink that stance, so let's move to volume.

Required Disclosure - The data used in this post is not compiled, verified or posted by The Northwest Multiple Listing Service. Hand calculated by ARDELL.