Seattle home prices post decline

The Seattle-area housing market became more like the dreary national market in one more way in January, posting its first year-to-year price drop since 1991, according to a leading index.

Experts expect declines to continue in coming months, but not to get as bad as those in many other parts of the country.

The price of a typical house in the Seattle area, which includes King and Snohomish counties, was down 1.3 percent in January from a year earlier and 1.8 percent from December, according to the Standard & Poor's S&P/Case-Shiller Home Price Indices. The annual decline was the first since December 1991 and the largest since October 1991.

The monthly drop is the largest in the history of the Seattle index, which goes back to the start of 1990.

Until now, Seattle had been one of the only metropolitan areas out of the 20 in the indexes not to post a year-to-year price drop during the latest housing downturn. Charlotte, N.C., is now the sole area with that distinction, with an annual increase of 1.8 percent in January. Prices were down 0.5 percent, year over year, in Portland, the only other area whose prices held up better than Seattle's.

Given that the Seattle area's annual appreciation has been declining since February 2006, the fact that it finally is negative is no shock.

"I'm surprised we hadn't seen a decline actually a couple months ago," said Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University.

But Crellin also didn't put much weight on a 1.3 percent annual decline.

"It's there, it's real, but it's not a big deal," he said.

The Seattle area has declined 5.6 percent from a peak in July, already exceeding an earlier forecast by Moody's Economy.com that area prices would decline 5 percent from the peak to a trough at the end of this year or early in 2009.

"I guess our forecast was maybe a little too optimistic," Andrew Gledhill, an associate economist at Economy.com, said on Tuesday.

Gledhill now expects a "close to double-digit" decline in the Seattle area, hitting bottom the first half of 2009.

"There's still a ton of supply in King and Snohomish counties and it's going to take a ton of time, with demand being so much slower, for that to be worked off," he said. "It's going to be a tough year everywhere, and Seattle's not going to escape it."

Seattle's prices continue to hold up better than places such as Miami, which posted the largest year-to-year decline, 19.33 percent, of the 20 S&P areas, or Las Vegas, which was just behind Miami with a 19.29 percent annual drop and the largest monthly decline, 5.1 percent.

"Seattle's never going to get to that point," Gledhill said.

Crellin did not offer any numerical predictions, saying: "I think we're going to continue to see some rough times for the next several months, but I'm hoping it's not going to get much worse."

The declines in coming months will not be so big that buyers looking for a place to live long-term should worry about waiting, Crellin said. "If it goes down a percent or two, that's not really a big deal -- if they're planning on holding onto the property for 10 years."

According to S&P, expensive houses in the Seattle area generally are holding their value better than houses in other tiers. The typical house in the high tier, defined as those costing more than $455,808, was worth 0.3 percent more in January than it was earlier, compared with declines of 2.1 percent in the middle tier and 2.2 percent in the low tier, defined as houses costing less than $313,686.

The high-tier value was down 2.2 percent from December, compared with declines of 1.3 percent and 1.5 percent in the middle and low tiers, but generally has held up better in previous months.

S&P's indexes provide a good way to track the course of the housing market because they look at repeat sales of the same houses while adjusting for factors such as foreclosures, sales between family members, remodeling, neglect and time between sales. They do not give dollar values.

According to the Northwest Multiple Listing Service, the typical sale price of a King County house was $435,000 in January and $429,900 in February, up 1.3 percent and down 0.01 percent, respectively, from the same months in 2007. In Snohomish County, median house prices were $365,000 in January and $355,000 in February, down 1.5 percent and 0.3 percent from a year earlier.

S&P's 10- and 20-city indexes both posted annual declines of about 11 percent and monthly drops of a little more than 2 percent. All of these declines were records for the two indexes, which go back through 1987 and 2000, respectively.

"Unfortunately, it does not look like early 2008 is marking any turnaround in the housing market, after the declining year recorded throughout 2007," David Blitzer, chairman of S&P's Index Committee, said in a statement with the report. "No markets seem to be completely immune from the housing crisis."

Blitzer noted that prices in all 20 areas have declined every month since September, 13 areas reported their largest monthly declines in January and 16 posted record annual drops. The Seattle area's largest annual decline, 2.3 percent, was in August 1991.

Brian Bethune, chief U.S. economist for the economic-analysis firm Global Insight, expected the gloomy national news to continue for at least a couple more months.

"I wouldn't be looking for a pattern of improvement until April, May or June," he said.

Pava Leyrer, president of Heritage National Mortgage in Detroit, said the tightening of loan standards has compounded the problems of too much inventory, foreclosures and worries over the economy.

"It's just a spiral that will end up taking this year to get out of," Leyrer said.

In a separate release, the Office of Federal Housing Enterprise Oversight said nationwide home prices in January were down 3 percent from a year earlier and a seasonally adjusted 1.1 percent from December. This index is down 4.1 percent from its peak in April 2007.

The office's index uses a similar methodology to S&P, but looks nationwide and only counts homes with mortgages sold to or guaranteed by government-backed mortgage giants Fannie Mae and Freddie Mac. This eliminates large loans and mortgages to people who do not meet federal qualifications. The index does not break out metropolitan areas each month.

SEATTLE-AREA HOUSE PRICES

JANUARY 2007

TO JANUARY 2008

1.3%

DECEMBER 2007

TO JANUARY 2008

1.8%

HOME PRICE INDEXES ON WEB

Standard & Poor's S&P/Case-Shiller Home Price Indices: www.homeprice.standardandpoors.com.

Office of Federal Housing Enterprise Oversight: www.ofheo.gov/hpi.aspx.