Real Estate Investment: Return on Investment and Cash Flow Calculation

Seattle region home sales fell by a record 10 percent in August compared with July, but still rose above last year’s level for the second consecutive month. The median sale price held at $300,000 – the same as in July – but remained 11 percent lower than a year ago, a real estate information service reported.

A total of 3,793 new and resale houses and condos closed escrow during August in the Seattle-Tacoma-Bellevue metropolitan statistical area encompassing King, Snohomish and Pierce counties. August sales fell 10.1 percent from July but were 4.6 percent higher than a year earlier, according to MDA DataQuick of San Diego. The firm tracks real estate trends nationally via public property records.

August’s sales total was the second-lowest for an August, behind last year, since 1994, when DataQuick’s complete Seattle-area statistics begin. The year-over-year gains in sales during July and August this year followed 37 consecutive months of year-over-year sales declines.

The 10.1 percent drop in sales between July and August is the sharpest on record. On average, Seattle-area sales have risen 2.4 percent in August compared with July.

Home builders continued to suffer: New-home sales were at the lowest level for an August since at least 1994, marking the 34th consecutive month of year-over-year sales declines.

Resales of single-family detached houses – which account for nearly 70 percent of all sales – fell 9.5 percent from July but rose 9.9 percent from a year ago, marking the third consecutive month with a year-over-year gain. Before June, such an annual gain hadn’t occurred since late 2005.

August resales of condos fell 13 percent from July but eked out a 0.2 percent gain over a year ago – the second consecutive month to post sales higher than last year. However, condo resales were the second-lowest for the month of August since 1996.

Compared with July, August saw little change in the distribution of sales across price segments, though the declines were sharpest for Seattle’s luxury home sales.

A total of 83 new and resale houses and condos sold for $1 million or more in August, down 15.3 percent from July and down 29.1 percent from 117 $1 million-plus sales in August 2008. Sales of $1 million-plus homes peaked in June 2007, when 293 sold. During the first eight months of this year, sales of $1 million-plus homes fell nearly 43 percent from the same period last year. The analysis is based on transactions where there was a price or loan amount of $1 million or more in the public record.

The median price paid for all new and resale houses and condos combined in August remained at $300,000, the same as in July but down 11.3 percent from a year earlier. August’s median was 17.9 percent lower than the Seattle area’s peak $365,200 median in June 2007. The overall median has fallen on a year-over-year basis for 19 straight months.

The median paid for resale single-family detached houses held at $310,000 in August, the same as in July but 11.3 percent lower than a year ago. The median stood 21.4 percent below its $394,500 peak in June 2007. It has fallen on a year-over-year basis for 20 consecutive months.

Another key price measure for resale single-family houses, the median price paid per square foot, inched up to $174 in August, up from $173 in July but down 17.7 percent from a year ago. The August figure was 27.6 percent below the peak $240 median paid per square foot in July 2007.

Foreclosure resales edged slightly higher in August: 17.1 percent of all the Seattle-area homes resold were houses or condos that had been foreclosed on in the prior 12 months, up from 16.9 percent in July and 6.7 percent in August 2008. Foreclosure resales peaked in January this year at 23.9 percent of resales.

In August, 37.6 percent of all Seattle-area buyers used government-insured FHA loans, a popular choice among first-time buyers, according to an analysis of public property records. The loans allow a down payment of as little as 3.5 percent. Absentee buyers made up 13.1 percent of all purchases – a relatively low percentage in the West. Absentee buyers include investors and second-home buyers, mainly, as well as others who indicated at the time of sale that they will have their property tax bills sent to a different address.

The use of adjustable-rate mortgages (”ARMs”) to buy homes rose slightly in August to 4.8 percent of all Seattle-area purchase loans, up from 4.4 percent in July and up from a decade low of 1.8 percent in May this year. However, August’s purchase ARM level was down from 16.9 percent a year ago and down from a monthly ARM-use average this decade of nearly 33 percent.

Seattle-Tacoma-Bellevue, WA MSA

Media calls: Andrew LePage (916) 456-7157