house refinance

A typical house in the Seattle area is now worth less than it was worth in October 2005 or more than at the end of 2006, depending on which of two new reports one reads.

The value in King, Pierce and Snohomish counties in December 2008 decreased 3.6 percent from November, 13.4 percent from a year earlier and 16.7 percent from the all-time peak in July 2007, Standard and Poor's S&P/Case-Shiller Home Price Indices reported. It was the 11th consecutive record annual decline and second consecutive record monthly drop for the Seattle index, which goes back to the start of 1990.

Meanwhile, the Federal Housing Finance Agency reported the value of a typical house in King and Snohomish counties down just 5 percent in the fourth quarter from an all-time high in the fourth quarter of 2007 and 1.6 percent from the third quarter. Pierce County's typical value was down 5.1 percent from a year earlier and 0.8 percent from the third quarter, the agency said.

The biggest difference between the two reports is that the Federal Housing Finance Agency only looks at loans through mortgage giants Fannie Mae and Freddie Mac. It excludes "jumbo" mortgages larger than government-imposed caps or subprime and Alt-A mortgages that do not comply with Fannie and Freddie standards, said Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University.

"That's probably becoming a critical distinction," he said, adding that the magnitude of the discrepancy surprised him.

Seattle-area houses worth less than $281,354 fared worst in December, with values falling 4.2 percent from November and 15.3 percent from a year earlier, according to S&P. This boosts the argument that subprime loans are a big reason for the difference between the indexes, Crellin said.

Houses in the middle-price tier fared the best, with values dropping only 2.7 percent from November and 12.4 percent from December 2007. Houses worth more than $407,934 saw values drop by 4 percent from November and 13 percent from a year earlier.

Both reports gauge market movement by tracking repeat transactions of specific houses, rather than depending on what happens to sell in any given month. S&P looks only at sales, while the Federal Housing Finance Agency also includes appraisals for refinances.

S&P's numbers fit better with the latest report from the Northwest Multiple Listing Service, which showed the median price of a King County house that sold in January was $382,500, down 12.1 percent from a year earlier and 5.2 percent from December.

The S&P report put Seattle ninth out of 20 areas it tracks for annual decline and 16th for monthly drop. Values were down in all 20 areas.

S&P's 20-city composite fell 2.5 percent from November and 18.5 percent from December 2007, while its U.S. National Home Price Index was down 18.2 percent in the fourth quarter from a year earlier. Both were records. Nationwide prices are back to levels last seen in late 2003.

"We're going to learn a little more in the spring market when the number of transactions starts to pick up and when we see how the president's program on trying to clear up this foreclosure logjam works," said Karl Case, an economics professor at Wellesley College and one of the founders of the index. "Eventually this market will clear, but there's not a lot of signs of it here."

Case said Seattle's drop was larger than he expected.

Patrick Newport, U.S. economist at IHS Global Insight, said slowing annual declines in some areas and slowing increases elsewhere showed areas reaching a point where prices were no longer in free fall.

"With the number of homes for sale at an all-time high, housing prices will continue declining for quite a while, and quite a bit more," he said. "Indeed, just as house prices overshot on the way up, they are likely to undershoot on the way down because of the inventory overhang."

The Federal Housing Finance Agency said nationwide values, using its seasonally adjusted sales-only index, were down a record 3.4 percent from the third quarter and 8.2 percent from a year earlier. Its U.S. all-transactions index, which includes refinances, was down just 0.2 percent for the quarter and a record 4.5 percent from a year earlier.

"Price declines continued in the fourth quarter although not as rapidly as some had expected," agency Director James Lockhart said in a statement. "We are hopeful the housing initiatives announced last week by President Obama will begin to provide much-needed stability to the housing markets."

Crellin said the Seattle area could benefit from the Obama administration's initiative, which includes allowing people who owe up to 105 percent of the value of their homes to refinance into better mortgages and lowering interest rates for troubled owners to get payments down to affordable levels.

Washington has a relatively large number of troubled owners who have not yet lost their homes to foreclosure or gotten to the point at which they owe so much more than the value of their homes that they couldn't benefit from the program, Crellin said. "This could help the Washington market stabilize with not as much pain as we've seen in some of the markets to the south ... and stabilize a bit more quickly."

The Federal Housing Finance Agency said Washington values, based only on sales, were down 7.4 percent from a year earlier and 5.1 percent from the third quarter, good for 39th place among states and Washington, D.C. Changes ranged from an annual increase of 1.9 percent in North Dakota to a 28.2 percent drop in Nevada. Prices were down from a year earlier in 44 states and Washington, D.C.

The agency ranked the Seattle area 199th out of 292 areas for annual change. Changes ranged from an annual increase of 6.6 percent in the Decatur, Ala., area to a drop of 49.5 percent in Merced, Calif. The five largest drops and 12 of the largest 20 were in California. Las Vegas was the only one of those 20 areas not in California or Florida.

Among the 20 areas in S&P's report, Phoenix posted the largest drops -- 5.1 percent from November and 34 percent from December 2007. The smallest monthly decline was Boston's 1.3 percent drop, while Denver had the smallest annual fall, 4 percent.

Declines from peak ranged from 8.6 percent in Dallas to 45.5 percent in Phoenix. Total drops have topped 10 percent in 18 areas, 20 percent in 10 areas and 40 percent in four areas.