King County home sales surge in September, but prices continue to fall year-over-year

Matt and Priscilla Karwoski bought their first house last month: a new, three-bedroom town house in West Seattle. One factor: the $8,000 tax credit the federal government approved for first-time buyers this year.

Would the Karwoskis have bought without it?

That's hard to say, Matt said: "We certainly wouldn't have ended up with the same place."

Without the credit, he said, they probably would have had to settle for something less expensive, probably smaller and older.

If they hadn't found anything in that lower price range that met their needs, they probably would be in their old apartment near Green Lake.

The $8,000 credit has helped fuel a surge in home sales, nationally and locally. Closed sales of single-family homes in King County were up 14.3 percent in September from the same month last year, the Northwest Multiple Listing Service reported Monday.

It was the fourth consecutive month of year-over-year gains.

But the tax credit is scheduled to expire Nov. 30. After that, some observers say, home sales could drop again, just as auto sales plummeted after the federal "cash-for-clunkers" program ran its course.

"The current apparent 'strength' in the housing market is due entirely to massive government intervention," Tim Ellis, editor of the real-estate blog Seattlebubble.com, said in an e-mail.

But others say the $8,000 credit is only one factor in the recent increase in sales. Lower prices and historically low interest rates also are attracting buyers.

There may be some drop-off when the credit expires, said Jordan Malloch of Windermere Real Estate, the Karwoskis' agent.

"But I'm not terribly worried," said Malloch, who estimates half his business comes from first-time buyers. "There's still a lot of pent-up demand."

The local market is better able to withstand the credit's expiration now than it was 18 months ago, said George Rolfe, director of the Runstad Center for Real Estate Studies at the University of Washington.

Relatively few new houses are being built, he said, and an imbalance between supply and demand has been largely corrected.

In addition to the continued increase in sales, the September statistics also suggest home prices could be starting to stabilize.

The median price of a King County single-family home that closed in September was $382,160. That's down 7.9 percent from September 2008 — but the year-over-year decline in every other month in 2009 has been in the double digits.

In Seattle, the median price in September was down only 3.6 percent from the same month last year. In Northeast Seattle, the median price actually was up 4.7 percent.

Ellis said he expects prices, too, will decline more precipitously once the $8,000 credit expires. Prices will stay this high or increase only if the tax credit becomes permanent, he wrote.

The National Association of Realtors has proposed that the tax credit be extended through 2010.

Several bills in Congress would push back the expiration date and extend the credit to all buyers, increase it to up to $15,000 and remove income restrictions.

Joe Brannon, associate broker with ReMax Performance Plus in Renton, said his first-time-buyer clients seem to be more aware of the credit now that the deadline is looming.

Real-estate professionals say buyers have only a few weeks to have offers accepted and be certain they close before Nov. 30.

"It certainly is sparking interest, that's for sure," Brannon said.

Matt and Priscilla Karwoski, burdened with student loans, figured homeownership was out of the question when they moved back to Seattle last year after several years in graduate school in Chicago.

But they began to reconsider in the spring, Matt said, after they talked with friends who had bought recently and watched prices continue to drop.

The couple bought their town house for $325,000, according to county records — significantly less than the original asking price, Matt said.

As for the $8,000 tax credit, it wasn't the decisive factor, he added — but it was a factor.

The Karwoskis like their new neighborhood, near California Avenue Southwest and Fauntleroy Way Southwest.

Matt, a lawyer, takes the bus to work in downtown Seattle. Priscilla, a child and family therapist, works in Renton.

One of the bedrooms in their new home soon will be a nursery: The Karwoskis' first child is due this month.

Eric Pryne: 206-464-2231 or epryne@seattletimes.com