Thurston County housing, and where we go from here.
A few weeks ago, Rolf Boone of the Olympian examined the rise in Notice of Trustee Sales (the legal precursor to someone losing their home to foreclosure) in Thurston County:
Foreclosures have increased in Thurston County the past few years. When the real estate market was stronger here, the notices dropped to a low of 409 in 2005, the data show. They started to rise as some borrowers began to default on riskier loans, also known as subprime loans.
Today’s foreclosures are a combination of some lingering subprime problems, combined with a slower economy, said Mark Steves, president-elect of the Thurston County Realtors Association. Other factors include the inability to refinance because the home has dropped in value or is worth less than the mortgage itself, he said.
Median home values in Thurston County have not dropped sharply but they were 5 percent lower in November 2008 compared with November 2007, according to Northwest Multiple Listing Service data.
Steves, who has worked in real estate for 30 years, is an agent in the Yelm area. In the past few months, he said 40 percent to 50 percent of his business has been fueled by distressed properties ó properties already owned by a bank, or in which lender has agreed to sell the house for less than the value of the mortgage, also known as a “short sale.”
As Notices are filed, and the sales actually take place, downward pressure on the housing prices becomes increasingly likely. Via the Thurston County Auditor’s page, I charted the monthly NTOS for each of the last 24 months. The rising trend is obvious (click to enlarge):
Steves, as head of the local real estate trade association, not to mention drawing his wages from the sale of houses, has reason to hope for greener pastures that closely resemble the status quo ante. That buyers will return, is a given:
Typically, real estate markets slow when mortgage interest rates are higher, but rates continue to be at historic lows, Steves said. He chalks it up to a lack of confidence about the economy and consumers concerned about job security.
“When buyers come back, we’re going to be busy,” Steves said.
Given the upward trend in these pre-foreclosure notices, (if only against 2007), I think it is awfully premature to begin talking about buyers returning, unless of course we plan to do it by borrowing ourselves back into the subprime, Alt A, and other exotic loans that kicked off this mess in the first place. Rising NOTS’s mean people are failing to make the payments. I imagine that this is because 1.) Incentive to pay the loan off has dropped because the mortgage is worth more than the house, or 2.) Ability to pay has been reduced by job losses and/or perhaps teaser rates recasting at levels beyond what the homeowners can afford. Likewise, with housing prices depressed, the industries that rely on a strong housing market suffers, from certain manufacturing, landscaping, and most of all construction. This costs the local economy jobs, prolonging a cycle that is already exceedingly vicious.
In any case, once the deleveraging passes there will be some light at the end of the tunnel. Paul Krugman’s recent column copied and pasted into the Olympian, poses a timely question that deserves attention regarding the still hypothetical economic recovery:
But what comes after that? Right now everyone is talking about, say, two years of economic stimulus - which makes sense as a planning horizon. Too much of the economic commentary I’ve been reading seems to assume, however, that that’s really all we’ll need - that once a burst of deficit spending turns the economy around, we can quickly go back to business as usual.
In fact, however, things can’t just go back to the way they were before the current crisis. And I hope the Obama people understand that.
The prosperity of a few years ago, such as it was - profits were terrific, wages not so much - depended on a huge bubble in housing, which replaced an earlier huge bubble in stocks. And since the housing bubble isn’t coming back, the spending that sustained the economy in the precrisis years isn’t coming back either.
To be more specific: The severe housing slump we’re experiencing will end eventually, but the immense Bush-era housing boom won’t be repeated. So what will support the economy if cautious consumers and humbled homebuilders aren’t up to the job?
I believe this is the most important question to answer. What will drive our economy going forward? Will Americans attempt resume its consumption under the ‘take, make, waste model‘, as if the economy currently in shambles before us is the commercial ideal? Or should we attempt to refashion our economic engines to meet our daily needs (e.g. food), which can only be met by a reasonably healthy planet? Either way, the next most important question is how. I think we’ll have a good idea of which we path weíll take as 2009 progresses, and it should be fascinating (if not somewhat traumatic) to observe.
Mark “Rolandovich” Derricott is a non-practicing attorney, who currently handles the real estate issues of one of our local retailers. His interests include, local community development, slow food, sustainable building, and for some inexplicable reason, Russia. You can find him blogging regularly at olyost.com.
