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King County home prices drop 2.6 percent from 2009
The value of homes has dropped 2.6 percent in the Seattle area in one year, according to the Case-Shiller home price index released last week by Standard and Poor’s.
Home prices hit a big low in 2009 after the housing market crashed, but home prices slowly increased toward the end of 2009. Now, Case-Shiller shows a downward trend in home prices year-to-year between September 2009 and September 2010, the latest month for which data is available.
That one-year decline is seen by many as bad news — but that may depend on what homeowners base their personal wealth.
Highline Community College economics professor James Peyton said that those who bought a home as an investment may be hurt by this decrease. Thus, a decrease in home values could affect how a family spends money.
“One of the big impacts of home prices is on family wealth,” he said. “The impact of that decrease in perceived wealth (affects) spending behavior of households.”
Those who bought a home as a long-term investment might be worrying about price decreases.
“If you're looking at your house as a retirement savings vehicle, and it loses 50 percent of its value, you might feel more pressure to find other ways to save for retirement,” Peyton said.
“For people holding on to properties, the prices will start to creep back up based on the attractiveness of the Puget Sound region as an employment center,” he said. “If you're not planning to sell your house until 2020, the price fluctuations won’t really matter.”
If households must find new ways to save, it might mean less spending on consumer goods. Recent reports have shown consumer spending is up. On the other hand, lower home prices may be an incentive to buy.
“Then, it’s actually a great time,” he said.
Home prices are not uniform around King County. According to data from Trulia.com, home prices in Federal Way average between $252,000 and $314,000. Meanwhile, average home prices are topping $600,000 in Bellevue as well as neighborhoods in Seattle like Queen Anne, Montlake and Magnolia.
On the other side, decreasing home values may have an affect on property tax collection. King County Chief Deputy Assessor John Wilson said that his office last year decided to lower assessed values by 7.5 percent to account for housing market fluctuations. Property tax bills set to arrive in February will reflect that decreased valuation. However, local levy rates determine how much residents pay in property taxes.
And while in other states decreased property values might mean less state, local and county revenue, Washington has a system that allows levy rates to be raised and lowered. Each taxing entity has a levy rate cap — so if an entity has hit its cap, decreased home values could be bad news.
“The risk you have is in some neighborhoods where home values have dropped, but their taxes have gone up,” Wilson said. “There are also situations where certain smaller tax districts can't adjust rates any higher. If the values go down, so does the amount of revenue.”