King County home prices dip; shutdown threatens closings
Home sales in King County were brisk in September, but the median sale price fell again and now the government shutdown could indefinitely keep some deals from closing.
Seattle Times business reporter
The housing market’s rebound slowed in September, with King County home sales sliding 14 percent and the median price dipping 2.3 percent from the prior month.
Now a federal government shutdown threatens to snarl thousands of homebuyers and sellers who are trying to close deals, say lenders and real-estate brokers.
Government agencies that verify borrowers’ identities and tax returns are closed indefinitely, leaving in the lurch those banks and mortgage companies that sell their loans to Fannie Mae and other buyers of mortgages.
Seattle-based HomeStreet Bank, for example, estimates that up to 10 percent of its in-process home loans, or up to 200 loans, may not close because of the government shutdown.
“The problem is there’s a huge ripple effect,” said Susan Greenwald, HomeStreet’s director of single-family loan operations. “The longer this goes on, the more people who are going to be affected.”
The two groups most affected, she said: Borrowers with jumbo loans (generally above $506,000 in King County) and those whose Social Security numbers must be confirmed because of past identity-theft problems or typos on their credit reports.
A third group are rural homebuyers getting full financing from the U.S. Department of Agriculture, which is closed as well.
“A lot of those borrowers don’t have large reserves,” Greenwald said. “If they’ve given notice on their apartment, and the lender isn’t able to close, that puts them in a very difficult situation.”
The shutdown will stall a growing number of closings if it drags on, said Frank Percival, president of the Washington Association of Mortgage Professionals, a trade group representing about 10,000 mortgage brokers, appraisers and title and escrow specialists.
“Our economy is just beginning to recover from an economic meltdown,” he said. “This is a stupid, foolish time to be playing these kinds of politics.”
Run-up “way too fast”
Single-family home prices in King County saw a remarkable run from January to July, when the median price hit $434,000, a 24 percent increase in just seven months.
“That’s way too fast. That’s a 2006 market,” said Dick Beeson, principal managing broker at RE/MAX Professionals in Tacoma.
The recent jump in mortgage rates took a bit of steam out of the market.
In August, the median sale price slipped almost 1 percent.
Then last month it slipped again, by more than 2 percent, to $420,000. While prices often dip in autumn, it was the second-biggest percentage drop for September in a decade, behind only the 5.7 percent drop in September 2007.
This year’s run-up in home prices, however, did persuade some sellers to get off the fence: There was a two-month supply of homes for sale in September, the highest level so far this year.
“This slowdown (in price increases) is national,” affecting two-thirds of the 100 largest metros, said Jed Kolko, chief economist at Trulia.com, a San Francisco-based online real-estate marketplace.
Both in the Seattle area and nationally, price growth is ebbing due to higher mortgage rates and more homes coming on the market, he said.
Still, King County’s housing market remains robust: September’s median price was still up 12 percent over the past 12 months.
The volume of closed sales was 22 percent higher than a year ago.
Another 2,508 home sales were pending — home-purchase contracts signed but not closed yet — a slight increase over the same period a year ago.
But those pending sales could be affected by the government shutdown, brokers say.
As the government shutdown began this week, mortgage giant Fannie Mae notified lenders it was temporarily relaxing policies that require verification of certain borrowers’ Social Security numbers and tax returns before funding a loan.
Banks cannot deliver those loans to Fannie Mae without completing those checks, but the agency said it would temporarily accept loans in which the verifications have been done after closing.
The requirement affects every bank except the few that keep loans and don’t sell them into the secondary market, said Beeson, the real-estate broker.
Borrowers who are approaching closing should confirm with their lender that the loan won’t be delayed due to the shutdown, he said.
If lenders don’t figure out a workaround, “it’ll literally grind everything to a halt,” he said. “You can’t close a sale.”
Every day that government offices remain shuttered will delay an ever-larger number of mortgage closings, industry leaders say, jeopardizing mortgage and interest-rate approvals and spooking sellers. About 15,000 new home mortgages and 18,000 refinancings, on average, are completed across the country each day.
Many mortgages were able to close as scheduled this week because the paperwork was completed before federal employees were furloughed, but some home loans have already been frozen.
“The problem is going to grow in magnitude every day this shutdown goes on, because lenders’ liability is at risk,” David Stevens, chief executive of the Mortgage Bankers Association and former head of the FHA, said after a conference call Friday with heads of a dozen banks.
Glenn Crellin, associate director of research at the University of Washington’s Runstad Center for Real Estate Studies, said these bottlenecks could cause some homebuyers to wait things out before signing a contract.
But the threat of the federal government defaulting on its debt on Oct. 17 — the next issue facing a very divided Congress — is a much bigger risk to the housing market’s recovery, experts agree.
“If we default, all bets are off,” Crellin said.
Information from The Washington Post is included in this report.
Sanjay Bhatt: 206-464-3103 or firstname.lastname@example.org. On Twitter: @sbhatt