Cooling? Housing prices here still on rise

Pending sales of single-family homes and condos in King County dropped 6.2 percent in February over the same month a year ago, but prices continued to rise. In King County, the median price for single-family homes rose 14.7 percent to $392,950. Condo prices rose 11 percent to $228,950.

Real estate agents are reporting a strong rebound from a holiday slowdown in 2005 that was more pronounced than the previous couple of years. Dick Fulton, a managing broker at Coldwell Banker Bain, said last month's drop in pending sales -- reflecting offers made and accepted, but not yet closed -- isn't cause for concern.

"This year we had to build the momentum, whereas last year we didn't because the momentum was already there," he said. "I'd have to say the market is pretty strong. We're getting multiple offers on the properties that are priced properly."

Prices are increasing at a quicker pace in areas outside Seattle, as high costs push buyers farther out. In Snohomish County, the median cost of a single-family home rose 22.6 percent over last February, to $324,950. (The median price is the price at which half the homes cost more and half cost less.) Skagit County saw an increase of 29.6 percent, to $253,700.

"The trend seems to be very steady and clear, that the market in Seattle, because of its appreciation last year, has slowed down and it's the outlying areas ... that are now seeing the more accelerated appreciation," said Jim Reppond, an associate broker at Coldwell Banker Bain.

"We see that over and over again. It seems to work in bands -- it starts downtown and goes to the outlying neighborhoods, and then to suburbs and then further out in the counties."

Still, prices in the region have not spiked as they have in markets such as Las Vegas and Southern California, making increases still palatable for some home buyers here. Prices rose nearly 50 percent in the Phoenix area last year, while in Manhattan, the median price for an apartment was $760,000 at the end of last year, up from $605,000 at the end of 2004.

"If you just look at the West Coast, with the median home prices in say, San Francisco or San Diego, they're over $500,000," said Jill Jacobi Wood, president of Windermere Real Estate Co. "Here, appreciation is still high. I think (prices) have been undervalued here, and I think they're starting to catch up."

The overall scenario in King County is much brighter than in other markets nationwide, where homes are sitting on the market longer and the inventory of properties for sale is creeping up. In markets along the East and West coasts, some have noted a standoff between buyers waiting for the real estate bubble to burst and sellers holding firm to their target prices.

At the same time, the available housing stock nationally has increased, with the National Association of Realtors reporting a rise of 36 percent in the number of homes for sale between January 2005 and this January. Home sales across the nation dropped 5 percent over last January.

The Commerce Department reported that January sales of new single-family homes across the United States fell 5 percent, the fourth decline in seven months, and the number of unsold new homes hit a record high.

But in King County, bound geographically by water and mountains, lack of available homes for sale continues to be a challenge. Agents put 3,471 houses and condos on the market in February, compared with 3,734 during the same month last year. Seattle had 1,033 new listings in February, down from 1,141 last February.

Reppond said a dearth of condos for sale is prompting a price spike, particularly in downtown Seattle. At the moment, he said, there are only five condos listed in the downtown area for less than $300,000.

"There is a huge demand," he said. "More and more people are looking to downtown as the best living, lifestyle alternative, as opposed to spending so much time on the freeway and so much money in their gas tanks."

Despite the area's low inventory -- and perhaps because of it -- Fulton said local buyers are particularly astute. With few properties available in a particular range, he said, potential buyers become "laser focused" and are savvy about what constitutes a fair price.

"Sellers tend to think, 'Oh well, if there's not enough for sale, I can just put any price I want on it,' " he said. "But you can overprice a property and buyers will just pass on it, one after another."

Glenn Crellin, director of the Washington Center for Real Estate Research, said that while sellers may have to be a little more flexible on price, any notion of the bubble bursting and creating a drastic price decrease is unrealistic. When a market softens, he said, buyers tend to spend the same amount they originally intended to spend and purchase up the chain -- resulting in stable or slightly increased median prices.

"The perception of the sellers that they're going to have to cut prices may be right, and the perception of the buyers that they're going to be able to cut some deals may be right," he said, adding, "We're still going to be looking at a market with strong demographics. The underlying factors are still there -- job growth is continuing, mortgage interest rates are still favorable.

"The expectation by most analysts is that prices will continue to increase, although a bit more gradually."

One potential wild card, Crellin said, are the investors who hold about 25 percent of the nation's housing stock.

"We don't know how they're going to behave as the market slows," he said. "Are they going to panic (and flood the market)? If they do, we run some risk of seeing more in the way of potential declines in prices. "

This story includes information from The Associated Press and New York Times News Service. P-I reporter Deborah Bach can be reached at 206-448-8197 or deborahbach@seattlepi.com.

Add P-I Local headlines to