Few American cities have weathered the national housing crisis better than Seattle. According to the recently released S&P/Case-Shiller Home Price Indices, home values in the drizzly gem of the Pacific Northwest have fallen a modest 4.4 percent over the past year—a cakewalk compared with former housing boom hot spots like Las Vegas (-25.9 percent), Miami (-24.6 percent), and Phoenix (-23 percent).
But that may soon change. In a recent interview with U.S. News, ZipRealty CEO Pat Lashinsky predicted that Seattle's so-far resilient housing market would suffer big losses relatively soon. Excerpts:
What makes you think the Seattle housing market is going to crash?
In Seattle, if you look at it right now, on a year-over-year basis, you will see that inventory levels [of unsold homes] are up between 45 and 50 percent. And then if you looked at prices—in the price report that just came out—it would say that prices are down in Seattle by 4 percent. This is exactly what we saw in the rest of the country six to nine months ago. We saw inventory levels starting to spike [and] properties were taking longer to sell. But the sellers were not willing to [reduce] the price; they were holding the line. And so you get into this scenario where buyers don't buy, because they have too many choices and they are trying to get a good value, and sellers are trying to hold on to their value. So now, nobody buys a home today, and then more homes go on the market tomorrow. And then all of a sudden, people have to sell or foreclosures come in. And all of a sudden it pops because everyone is competing against a significantly lower price.
So you are expecting this scenario to play out in the relatively near future?
Yeah. You'll start to see sellers [who] are unable to get their house sold that will be having to sell because of economic reasons or divorce or whatever the case may be. They will have to sell, so they will take their home price significantly lower to get it sold. Additionally, you will have more distressed housing because people [who] are in short sales or are having their loans reset are not going to be able to get out of their homes because nobody is willing to buy it because the price is too high. And so those will start to drop. This is just what's played out across the country. Then once those homes start to drop and the prices come down, then everyone else is competing against them. So it creates this kind of downward price pressure until you get back to a norm that buyers are more comfortable with. Right now, Seattle is literally following exactly what the rest of the country did. The supply-and-demand curve has definitely gotten out of whack.