Market Strength of the Under $200,000 Housing Inventory In 36 Geographic Areas

(Relevant for agents working with first time buyers and banks interested in tracking data for Community Reinvestment Act program audits)

Dear Clients & Friends,

The median sale price for single family houses in the Central Puget Sound region that sold over the past six months through the Northwest Multiple Listing Service (NWMLS) was $185,600 and the average sale price was $231,100. The information in this letter is geared to agents and bankers involved in the housing market priced at $200,000 or less in King, Pierce and Snohomish Counties.

I have examined the strength of 36 different geographic areas of the housing market in King Pierce and Snohomish Counties, using the Strand™ Index. This study represents activity in the bottom ½ of the housing market and indicates that there are wide spreads in market strength and prices among the 36 areas examined.

Please note that in order to be included in this study, the geographic areas had to have been located within the three counties mentioned above and had at least 20 houses available for purchase (active listings), that were priced at $200,000 or less as of the third week of August, 1999. Areas such as Puyallup and North and east Snohomish County each had hundreds of houses available under $200k.

Price: The median prices of the 36 areas studied ranged from a low of $90,000 in Southeast Tacoma, to a high of $185,000 in the Woodinville/Juanita area. The median of the 36 price medians was calculated at $156,500. The data sample includes six months of closed sale activity ending the third week of August, 1999.

Demand: The demand ratios varied from 86% on the low end in Central Tacoma, to a high of 98% in the Greenlake/Ballard and Maple Valley/Black Diamond areas. The median of the demand ratios was 95/. A higher demand ratio will produce a higher Strand™ Index rating. Check the pages that discuss Strand™ Index methodology for more details.

Supply: The number of days of supply in this group varied from a low of 21 days in Northeast Seattle to a high of 120 days on Camano Island. A lower number of days of supply will produce a higher Strand™ Index rating.

Strand™ Index: The lowest index rating of the 36 areas studied was found in the Camano Island market, registering a Strand™ Index of 733. The highest was found in NE Seattle, with an index of 4,607. The median index of the 36 areas examined was 2,020.

Look through the table and graph below. This can be helpful for agents to study when working with first time buyers. The areas with higher index ratings would justify more aggressive offers to purchase. This is also relevant data for banks to present when undergoing Community Reinvestment performance audits. According to the Federal Reserve Board, the Community Reinvestment Act is intended to "encourage depository institutions to help meet the credit needs of the communities in which they operate, including low- and moderate-income neighborhoods."

If your financial institution is involved in mortgage activity in any of the areas with Strand™ Index ratings lower than 2,000 for this group of transactions, the CR programs should be monitored for appropriate recognition of the relative risk involved.

Please note that, from a buyers' perspective, it is quite possible to make safe purchases in the areas with lower Strand™ Index ratings. But, be particularly cognizant of supporting values in the specific neighborhoods of your interest and integrity of the houses on which you submit offers.

Regards,

Robert E. Rothstein