Real Estate

Seattle Real Estate Market – Historic Growth Trendline

Seattle Real Estate Market – Historic Growth Trendline

We took a take a look at the current launch of the Case-Shiller Seattle index and the OFHEO Pacific index, in addition to the implications for first time homebuyers.

A fast rationalization, the Case-Shiller index basically measures all housing costs (subprime, conforming, and Jumbo) in 30 geographical markets within the US Seattle is a type of markets. The OFHEO index (Workplace of Federal Housing Oversight), then again, measures a wider geographic vary, dividing the info between East North Central US, Center Atlantic, and so on, fairly than particular cities, like Seattle. The opposite vital distinction between the 2 indexes is that the OFHEO index measures solely conforming loans from Fannie Mae and Freddie Mac. The methodologies of the 2 indices are basically the identical, however they measure completely different variables.

The latter distinction is vital, as a result of the phase of the true property market that has been hardest hit is the a part of the market that was articulated inflated with the usage of the brand new by-product associated loans: subprime, Alt-A, Jumbo.

February 1991 to June 2004 Progress Pattern Line: four.50% … We’re utilizing this time interval as a result of that is when the info started for the OFHEO index. The Case-Shiller knowledge goes again a further yr, however utilizing February 1991 permits us to make use of the identical time interval for each Case-Shiller and OFHEO.

Progress Charges Throughout The Bubble: 2004 to 2007 Case-Shiller Seattle Index: 11.52% annualized (Start June 2004, Peak July 2007)

OFHEO Pacific Index: 9.95% annualized (Start June 2004, Peak April 2007)

Present Standing:

For the value knowledge by March 2008, the 2 indexes are each nonetheless above the four.5% long run value development, with the OFEHO Index additional alongside within the correction course of (near the long run development line). As of the March 2008 knowledge (printed in late Might 2008) the OFHEO index is 7.19% above the long run development development line, whereas the Case-Shiller index continues to be 28.13% above the trendline.

Our studying of the info is that the Jumbo market within the Seattle Space is due for a continuation of the correction it has skilled. Given the present financing alternate options out there, together with the brand new expanded conforming loans (within the Seattle market this quantity is $ 567,500), I’d outline the Seattle Jumbo House market as these properties promoting for $ 620,000 and above. That is the value vary we count on to see the best deterioration in costs transferring ahead.

Nevertheless, take into accout, one other main a part of the equation that we now have not addressed on this article, is housing affordability. As rates of interest rise and the likelihood of rising unemployment no less than by 2009, housing turns into much less inexpensive, which might act to additional dampen house costs within the Seattle market.

First Time House Purchaser Implications:

For First Time House Consumers within the Seattle market, nonetheless, the implications are considerably completely different. Assuming FTHB is utilizing an FHA mortgage, with the present allowance of three% gifting from a non-profit group paid by the vendor, with 6% closing allowance paid by the vendor, this 9% complete allowance in closing prices greater than compensates for the 7.19% OFHEO Pacific index is above long run development.

Given the truth that the Senate seems poised to eradicate the three% Reward provision from non-profit organizations equivalent to Nehemiah, AmeriDream, and so on. I’d counsel that now is definitely very rational time for a primary time homebuyer to be contemplating a house buy.

Conclusion:

Given the present state of the mortgage lending markets, the place an absence of liquidity persists; the rise in rates of interest from greater inflationary expectations, an unfavorable view of the anticipated employment scenario by 2009, it seems that Seattle actual property, particularly within the excessive finish of the market, will proceed to battle no less than by the first quarter of 2009.

Sources: Commonplace and Poor's Case-Shiller House Value Index

Sources: OFHEO Pacific House Value Index

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