Affordability Returning to Local Housing Market

Thurston County's housing market is starting to reveal some positive trends, chief among those is affordability. Through April 24th, sales of homes priced at $200,000 and under are up 16% compared to the same period last year.

During the unprecedented Sellers market from 2003-2006, home price gains were greatly outpacing gains in household income. That pattern was simply not sustainable. Now prices, mostly at the lower end of the market, are back in line with incomes.

According to the Thurston Regional Planning Councils 2008 Profile Thurston County's median household income was estimated at $50,562 in the year 2000. That number had climbed to $60,209 by 2007, for an increase of 19%.

By comparison the median sales price of a home in the county increased 85% from 2000 to 2007 ($143,900 in 2000 v. $265,925 in 2007).

The combination of these figures meant that a home buyer in 2000 was applying 23% of her gross wages to principal and interest payments on a median priced home. By 2007, that number climbed to 32%.

Since the peak in 2007 home prices have come down. Our median sales price now stands at $243,000, which translates to just 26% of 2007 wages.

Affordability and value, however, are both relative terms. The lower price ranges are seeing affordability, but the upper-end price range as a group has not returned to relative affordability. As a result, sales of properties over $450,000 are down 65% from a year ago. The disparity between the pace of sales in those categories has at least one explanation.

The lower end of our local market has been the most influenced by bank-owned foreclosure properties. During the first quarter of 2009, 45% of all sales at $200,000 and under were bank owned. In contrast, only 16% of sales over $200,000 were foreclosed properties.

These sales are an interesting case study in market value because the banks are motivated to sell today. Banks do not like being in the business of owning houses, but they also want to recover as high a price as they can. Locally, we are not seeing banks under pricing their homes. There are certainly a few examples of that, but we are not seeing that phenomenon in Thurston County like a few hard hit communities around the country have seen. Instead, we see banks setting the asking price at todays market value not some hoped-for value in the future.

The banks desire to price at market value has provided a lot of comparable sales activity that in turn guides other sellers to successful asking prices.

Homes in the upper price ranges, however, do not have as much activity to inform the pricing decision. These sellers should instead consider that lack of activity a signal that prices are too high. They will see positive activity once prices there reflect relative affordability. There are homes in those upper ranges that are offering that value, and those sellers are finding success in this market.

Also, this does not mean that sellers at the upper end are not making money. Our research shows that the vast majority are making returns right in line with our long-established historical performance. See our May 8, 2008 posting.

Statistics compiled by Coldwell Banker Evergreen Olympic Realty, Inc. from the NWMLS database. Statistics not compiled or published by NWMLS.