Seattle Home Values Doing Better Than Reported

Clueless on Seattle home values? Stable real estate markets thought to be immune to steep home price declines are finally feeling the same pain that cities like Phoenix have been suffering through for the last three years, according New York Times. Home prices in Seattle plummeted 4.7 percent in the last year, an even bigger drop than for houses in the foreclosure capital of the world, Las Vegas.

Um, not so fast, says Jonathan Miller, real estate guru and number cruncher for MRIS, the largest database of housing data in the U.S.

Miller takes the Times to task for what he claims is a major hole in the story: The plunge in home prices described in the article is based on data that is up to five months old.

Price fluctuations outlined in the article come from the most recent Case-Shiller Home Price Index, which measures prices for homes that closed last September.

Now, summer is normally the busy season for home sales, but last summer was different. Since the federal government's tax credit for first time buyers expired last April 30, the summer of 2010 was a very slow one for home sales. Artificially slow, in fact.

To find out what's really going on in Seattle, you need to look not at prices, but on pending sales figures, says Miller. Deals reflect "the meeting of the minds'' between buyers and sellers. The deal is a leading indicator, meaning prices move in response to sales activity, not the other way around.

Miller explains it this way: Say you have a town with 10 sales a month for 5 years. Then, all of a sudden you have 100 sales a month. What happens after that? Prices begin to rise.

So, what does all this mean for Seattle and other "stable'' markets that now seem to be on the ropes, like D.C. Metro and Baltimore?

It means prices in those markets will stabilize and maybe even rise, says Miller. His Real Estate Business Intelligence Pending Home Sales Index released last week shows home sale deals jumped 34% in January from December for the Washington DC Metro and Baltimore regions. Miller doesn't do Seattle, but he predicts that sales activity will be a lot healthier there than the NYT snapshot suggests.

"I'm not trying to be a Pollyanna or a cheerleader for the market," he says. "But this is being presented as if it's happening now. But it's based on five months ago after the first-time buyer credit expired.''

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