Until recently, Puget Sound in Washington State was regarded as a great place to either raise a family, or settle down to enjoy retirement in a sightseer’s paradise of peaceful bays and waterways.
Sadly, that’s no longer always true. One in four households who chose to settle there now find themselves underwater with the balance owing on their homes greater that their current market value. That’s not an easy pill to swallow for the thousands of Americans who put their roots down at Puget Sound with the intention of enjoying their homes, the fruits of often life time labor, indefinitely.
The question is – what will become of them? Will they be able to hang on, and ride out the storm? And, if not, will they be able to re-enter home ownership again at some time in the future, a way of life that is so basic to America?
In the past twelve months average house values have dropped by almost 6% to an average of $290,000 or thereabouts. The market has responded with total sales during the same period up 5.7%. But demand is never infinitely elastic meaning that prices are continuing to slide to the extent that 20% of houses are currently being sold at a loss.
The fact that this is better than the national average of 32.4% is scant comfort to the residents of Puget Sound – they know that their economy trails the national rate, but likely will catch up. Currently foreclosed sales in King, Snohomish and Pierce Counties contribute just over 20%, a tad down from the national average of 22.2%. Pierce County is worse off at 35%, with Snohomish and King following with 25% and 13.6% respectively.
Local market experts expect the trend to continue as the area moves through the economic cycle, especially as those on the three month trial modification program stumble, and succumb to the inevitable – one insider even described the latest HAMP ideas as holding pens for foreclosures. Current thinking is that housing prices will bottom out before the end of the third quarter of 2010, although tardy Puget Sound may only follow a few months later.
A local realtor I chatted to was more positive. “A lot of market fundamentals are psychologically driven. To the extent you see some markets stabilize, that tends to buoy the psychology in other markets,” she said. “Theoretically the cycle in Puget Sound is likely to be shorter.”
Is it time to cash in your chips, or buy bargain real estate in Puget Sound? Although nobody knows for sure.
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