September’s median price for single-family homes dipped from August, a welcome change for potential buyers but not for the many homeowners whose mortgage debt remains greater than their home’s value.
After the most brisk summer selling season in a decade, the Seattle area’s home prices showed signs of easing in September.
Potential buyers may welcome a cooling, but it’s grim news for the large slice of the region’s homeowners whose mortgage debt remains greater than their home’s value.
September’s median price for single-family homes sold in King County was $490,250, up 6.6 percent from a year ago, but down 2 percent from August, according to figures published Monday by the Northwest Multiple Listing Service.
The percentage of Snohomish County mortgaged homes (19,600) that at the end of June had a negative equity, according to Seattle-based Zillow, the real-estate website.
The percentage of King County mortgaged homes (33,500) that had a negative equity, also according to Zillow.
Although home prices have rebounded strongly since the Great Recession, more than 33,500 King County homes had negative equity at the end of June, or 9 percent of homes with a mortgage, according to Seattle-based Zillow, the real-estate website.
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An additional 19,600 homes in Snohomish County, or 13 percent of mortgaged homes, were in the same predicament. Collectively, the homeowners owe $7.5 billion more than their homes are worth, Zillow estimates.
Owners in that position have little financial incentive to list their properties for sale, reducing the potential inventory available to first-time buyers. And lower-value homes account for a disproportionate share of these so-called underwater homes.
“It’s causing a lot of friction at the bottom of the market, which then ripples through to the entire market,” said Zillow Chief Economist Svenja Gudell. “For some of these homeowners, they may pay off their mortgages before they resurface.”
In the two-county region, there are 11 ZIP codes in which more than 1,000 homes were underwater. These span most of Snohomish County but also parts of South King County — Federal Way, Covington and Auburn — according to Zillow’s data.
In more than 30 ZIP codes, at least one in seven homes was underwater — and in two Snohomish County ZIP codes (98251, 98204), it’s one in four, Zillow reports.
Underwater homeowners can try to negotiate a mortgage modification or short sale with the owner of their debt. In a short sale, the homeowner is allowed to sell the property for less than the outstanding debt, avoiding a foreclosure.
Richard Eastern, whose firm Washington Property Solutions specializes in short sales, said his firm keeps busy because loan modifications are mostly unsuccessful.
“We used to have a lot of short sales in Bellevue, Kirkland and Redmond,” Eastern said. “We got pushed out to the exterior rim of King County, and Snohomish and Pierce.”
The thousands of underwater homes, while not as severe a problem as in years past, contribute to the shortage of homes for sale.
There were just 4,257 single-family and condominiums listed for sale in King County, down 30 percent from 6,107 a year ago, the MLS reported Monday.
The worsening drought in listings has helped fuel intense bidding wars and the most heated summer of sales in a decade: June’s median home price, $500,000, surpassed the last record set in July 2007.
“We simply can’t sustain double-digit increases in sales when inventory levels continue to drop every month,” OB Jacobi, president of Windermere Real Estate, said in a statement. “We’re on the cusp of a housing- market slowdown.”
Condos, which were hit harder than single-family homes in the recession, are now outpacing them in annual gains.
The median price of condos sold in King County last month jumped 16 percent over the year to $304,950. The median price in downtown Seattle, the largest condo submarket and where pricey new condos are being built, was $712,250.
Median prices of single-family homes gained the most ground in more affordable outlying areas: In Southwest King County, the median was $304,000, up nearly 14 percent over the year; in Southeast King County, $344,975, a 13 percent jump; and in North King, $450,000, a nearly 14 percent increase.
The median price of single-family homes sold in Seattle was $571,000, up 10.4 percent over the year. On the Eastside, it was $680,000, up 12.4 percent.
Farther-out areas also saw strong price growth in September: The median single-family price in Snohomish County rose 7.7 percent to $355,500; Pierce, 10.3 percent to $252,500; Kitsap, 6 percent to $265,000.
The tight home supply won’t improve in a meaningful way until more new homes get built, experts say. From January to August, there were 5,863 permits for single-family homes in the Seattle metro area, down 3 percent from a year ago, according to the National Association of Home Builders.
Will more buyers give up in the face of rising prices and a shortage of available homes? Tim Ellis, publisher of the Seattle Bubble blog, said he expects some drop in buyer demand from three possible factors — a rise in interest rates, worsening traffic congestion and a plunge back into a national recession.
“There are a lot of potential dark clouds, but it’s really fuzzy as to where they are,” Ellis said.