Home prices in Puget Sound declined last year for first time since 1991

Kathleen Kennedy hopes the third time's the charm for selling her family's house in Issaquah on the plateau. After losing a high-paying job last year, she can't afford to wait any longer.

Twice since August she's lost potential buyers. Now she's offering it at $438,000, down nearly $200,000 from the price her agent suggested early last summer.

"We moved here at the height of the market. I remember them saying they really thought we would be immune to any real-estate problems because of Boeing and Microsoft," Kennedy said. She's moving back to the Midwest, "where we can afford more."

For the first time since 1991, the average price of single-family homes in King, Snohomish and Pierce counties declined from the previous year, ending nearly two decades of continuous appreciation.

Annual housing-sales numbers released Thursday by the Northwest Multiple Listing Service also show the median price of single-family homes, a figure tracked only since 2002, likewise dipped in 2008. Median price is the midpoint: Half the homes sell for more, half for less.

Last year's median price for a single-family home in King County — $429,950 — sank 5.51 percent from 2007's median of $455,000. In Snohomish, the number fell by 7.01 percent to $345,000. Kitsap's median fell 8.73 percent to $265,000 and Pierce by 8.32 percent to $281,400.

Condominiums had mixed results. The median price for a condo in King County in 2008 was $280,000, down 2.25 percent from $286,438 in 2007. Snohomish County's median rose 2.92 percent from $239,999 to $247,000. Kitsap County's median condo price plummeted 38 percent from $337,400 in 2007 to $209,250 last year. In Pierce County, they fell by 9.43 percent to $197,950 from $337,400.

All of the prices include new and existing homes.

"We're in the middle of a very deep recession in housing as well as economically so I'm not surprised by the numbers," said Matthew Gardner, principal at Gardner Johnson, a Seattle land-use economics firm. "I think it just demonstrates the fact that we're not isolated from the rest of the country."

The good news for homeowners? Median single-family-home prices remain more than 50 percent higher since 2002 in King, Snohomish, Pierce and Kitsap counties.

That's small comfort for families like Kennedy's, who are trying to unload homes in a down market after layoffs at the region's largest employers, including Boeing, Starbucks, Washington Mutual, Paccar and now Microsoft. Despite tax credits, a growing selection of homes and low mortgage rates, many buyers remain on the fence, wondering whether the market has hit bottom and if their own jobs might be in jeopardy.

A national credit crisis, cracked nest eggs and plunging consumer confidence dragged down the real-estate industry last year.

Foreclosures are on the rise around the country, with Pierce County the hardest hit locally. One in 457 homes was in the foreclosure process in December, nearly triple the number from 2006, according to a report released earlier this month by RealtyTrac, a national foreclosure-information firm.

Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University, predicts 2009 will be a challenge "from beginning to end." Adjustable-rate mortgages are resetting substantially higher for many who bought at the height of the market, which could nudge more homeowners toward foreclosure.

But he latched onto a bright note in the report: The number of homes for sale has declined in the past few months, a first step in bringing supply and demand back in equilibrium and eventually, prices.

"The economy in Washington needs a vibrant housing market. Research that we've done suggests that housing, both resale transactions and newly constructed homes, represents something between 15 and 20 percent of economic activity in the state of Washington. We need that back."

Karen Gaudette: 206-515-5618 or kgaudette@seattletimes.com