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Originally published June 6, 2008 at 12:00 AM | Page modified June 6, 2008 at 10:07 PM

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Chilly May for Puget Sound-area real estate; prices keep sliding

As housing sales tanked last winter, local real-estate pros waited anxiously for the traditional spring sales surge to revive the troubled...

Seattle Times business reporter

As housing sales tanked last winter, local real-estate pros waited anxiously for the traditional spring sales surge to revive the troubled industry.

But May sales numbers, released Thursday, reveal that the surge has been more of a sputter — at least around Central Puget Sound.

Home prices remain soft, inventory remains high and interest rates are relatively low — all of which point to a buyer's market. With interest rates at their highest levels since mid-March and likely to go up, it would seem that buyers would get off the fence.

But sluggish sales say buyers remain unconvinced.

Proof is in median prices of single-family homes, which declined year-over-year in King, Snohomish, Pierce and Kitsap counties, according to statistics released Thursday by the Northwest Multiple Listing Service.

House prices also declined from April to May in three of the four counties. Snohomish County was the exception. Its median price remained flat.

King County's median house price, $440,000, reflected a 1.9 percent decline from April and a 6.2 percent drop from the previous May.

One bright spot: condo prices were up in King and Snohomish counties.

More proof the rebound has yet to begin is revealed by pending house and condo sales — those signed last month but not yet completed. They were down roughly 40 percent compared with a year earlier in King and Snohomish counties.

Pierce, with a 32 percent drop, and Kitsap, with 36 percent, weren't far behind. That type of sales activity has been status quo for several months.

Several issues cause the general sense of malaise: challenging loan availability despite generally low interest rates, recession worries, a sense that buyers are waiting for lower prices and the disappearance of marginally qualified buyers.

Still, Redfin agent Allie Howard said people, unhindered by competition, are finding that shopping now has pluses.

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The two most obvious are the wealth of properties to choose from and squishy prices.

In May, for-sale houses and condos increased 47 percent year-over-year in King County, which has the bulk of the region's listings. Snohomish County had 30 percent more available properties than the previous May.

As for prices, Howard says she hasn't made a full-price offer recently on behalf of any of the buyers she's represented.

"We're going in below list price and making deals at less than list," she said. "Three to 5 percent [off] is the range where we typically can make the deals. When you move off 5 percent, your odds are getting worse and worse."

Howard says homebuilders are more willing to cut prices. Traditionally, builders throw in extras, such as upgraded carpeting or cabinets, rather than lower the asking price.

Teresa Darragh, an agent in one of John L. Scott's West Seattle offices, said the lack of pressure is allowing buyers to make thoughtful decisions.

"They're able to take some time to look at the market and the inventory," Darragh said. She also said prices in her area are down about 5 percent.

Is that enough to cinch sales?

"When the right house comes along for the person," she said.

If there's one thing that might push more buyers into the market, it's interest rates.

Conventional wisdom says they remain low in election years. But recently they've been rising. In Seattle, the current average for a 30-year, fixed-rate loan is 6.65 percent, up from 6.31 percent two weeks ago, reports HSH, a mortgage-information provider.

Nationally, mortgage rates are at their highest levels since mid-March.

Frank Nothaft, chief economist for mortgage-money provider Freddie Mac, said they've risen "over market concerns that the Federal Reserve Board may raise short-term interest rates later this year," The Associated Press reported.

It also quoted Federal Reserve executive Richard Fisher: "I would expect a change of course in monetary policy to occur sooner rather than later, even in the face of an anemic economy if inflation grows."

Howard says her more financially savvy buyers are beginning to pick up on this message.

"The word that seems to be coming down to them is the rates are the lowest they're going to get, and they'd better jump now. That seems to be the consensus," Howard noted.

Whether fence-sitting buyers pick up on that — and Darragh said she's seeing no sign of that — remains to be seen.

But if they do decide to act, those in King, Pierce and Snohomish counties will have roughly 25,000 houses, town houses and condominiums to choose from.

Elizabeth Rhodes: erhodes@seattletimes.com

Copyright © 2008 The Seattle Times Company

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