In a surprising turn of events marking the end of the housing downturn, Seattle home prices rose 30% yesterday. The unexpected spike in home prices was attributed to a data calculation error that has persisted in Seattle housing data since 2007.
Housing analyst Deborah Downer discovered the error in her spreadsheet late yesterday and promptly issued corrected data for the last 3 years. Downer tracks and calculates housing price averages throughout the Puget Sound region for all of the major banks, real estate companies and other financial institutions in the area. Asked about the error, Downer mentioned that she “had messed up the formula in one of the cells in her spreadsheet, placing a minus sign where there was supposed to be a plus sign. As soon as I fixed it, I realized that home prices in the Seattle area were actually 30% higher than what I had been reporting.”
Downer’s employer, Housing Analysis, Inc., apologized for the error, indicating that they will review her numbers more thoroughly before they get published in the future. “We thought Deborah was pretty adept at spreadsheets, but we’ve decided to send her to an Excel training class to make sure this doesn’t happen again,” said Housing Analysis CEO Jon Trainer.
Sellers rejoice at news
Home sellers in the Seattle metro area were jubilant at the news. At the end of 2010, Zillow estimated that 34.3% of homeowners in King, Snohomish and Pierce counties were “underwater” on their mortgages, owing more than the home was worth. With the 30% increase in prices, that number has gone essentially to zero. (Zillow recalculates its data on a weekly basis, so it will take a number of days before the error is corrected on their site.)
Local brokers reported a brisk, almost panicked pace of activity from sellers looking to get their homes on the market. According to Seattle real estate broker Kevin Lisota of findwell, “Lots of sellers have been waiting for the market to improve. I have received calls from 23 sellers so far today who want to get their homes listed this week. We’re going to be busy!”
Some local real estate companies have built their entire business out of helping homeowners to sell their home via a short sale, but with the sudden rise in prices, seemingly there are no more short sales to be had. Local company Short-Sales-R-Us has quickly closed up shop today, stating that they “can’t make a go of it in the improved market.”
Buyers fret at higher prices
Local buyers are struggling to come to terms with the new housing prices. A $500,000 home they were looking at yesterday is now worth $650,000. Surely this is going to affect the purchasing power of home buyers, but many seemed resigned to the new reality.
“I was excited that home prices in Seattle had come down so far in the past few years,” said prospective home buyer Tamara Hammer. “But I knew that it was too good to be true. Seattle was supposed to escape the housing downturn in the rest of the country, and now it turns out that we actually did. Local brokers were right. Seattle is a special market.”
Mortgage giants Fannie Mae and Freddie Mac were also reportedly scrambling to revise loan programs for Seattle, with rumors that they will raise conforming loan limits in the area as soon as this week to reflect the new pricing. Treasury Department officials are also quickly winding down their Making Home Affordable loan modification programs in Seattle, with one official already promising to pass along the budget savings from the programs to “other cool initiatives for the citizens of Seattle, maybe a new NBA team or something.”
Housing pundits are tongue-tied
Local housing analysts and bloggers seemed flustered by the news, particularly by how long it took Downer to discover her spreadsheet error.
“I have been blogging about inflated home prices in Seattle for more than 5 years,” said Seattle Bubble editor Tim Ellis. “We all rely on Deborah’s housing data, and I sure wish she had double-checked her formulas. I wasted 5 years talking about a housing bubble in Seattle that didn’t really exist. I guess I’ll have to look at repurposing my blog. Do you think folks would like a blog with cat photos and funny captions?”
Local housing economist Clarence Nuy quickly released a statement as well, pointing to population trends being the real driver behind the sudden run-up in prices. “If you look at the numbers more closely, you’ll see that there is a large spike in Generation Y home buyers that are coming of age. I totally saw this coming, even without the data errors,” said Nuy.
Local real estate agents also had difficulty coming to terms with the new reality in housing prices. “I’ve been telling my buyers for years that there has never been a better time to buy,” said local broker Michael Clozier. “Clearly yesterday would have been a great time to buy, with an instant 30% gain on your investment. Is it still a great time to buy? I thought about it for a little bit, and even now, there has never been a better time to buy, with low interest rates and everything. There are no housing cycles here in Seattle. Things will keep going up-and-up.”