By some accounts, the Seattle housing market has held up very well during the last few years.  Talk to any real estate agent or loan officer in Seattle, and they still seem completely oblivious to the reality of the collapsing bubble.  But measuring objectively with actual data points tells a different story.  The Case Shiller housing value index is one widely available objective method.  The index values are measured off of the base of January 2000 prices, where all cities are given a value of 100.

According to the index, Seattle housing peaked in July 2007, with a value of 192.30.  This means that housing prices were 92% more expensive in July 2007 than they were in January 2000.  The latest available index reading is from September 2008, with Seattle showing a value of 172.84.  This corresponds to a greater than 10% housing price depreciation in Seattle in just over a year.  April 2006 showed a Case Shiller index reading of 172.28, the closest point to the September 2008 data point.  This means that that nearly everyone that purchased a Seattle home after April 2006 is now underwater.

In California, we saw that many underwater home “owners” opted to just walk away.  And by one account in Seattle, that walk away trend has already started.  The Geldpress team recently interviewed one highly paid Microsoft employee who just made his last and final mortgage payment in November.   “Mr Microsoft” (identity protected) purchased a condominium near his Microsoft employer in December 2007 for just under $350,000.


He was a first time home “buyer”, and like many first time “buyers” he didn’t put a single penny down.  His particular mortgage was a 30 year fixed with an interest rate of 6.125%.  His initial total payments, including mortgage and property taxes were $2,600.  This was a condominium, so he also paid almost $300 in association fees, bringing his total monthly outlay to about $2,900.   But several months after the purchase, he witnessed two payment hikes.  The first hike was in his monthly association fees, which were jacked up by nearly $100, as is very common with new condominium conversions.  The second hike was from the lien holding bank, who insisted he spend an additional $400 per month in mandatory flood insurance.  This brought his total monthly outlay to nearly $3,400.  For comparison, “Mr Microsoft” estimates that he can rent an equivalent size and quality apartment for only $1,500.  He now regrets his “purchase” decision, but he does not regret abandoning his mortgage payments.  He expects to live rent free for at least 6 months before eviction, and possibly up to a year.

Although Seattle housing values have held up reasonably well so far in comparison to other major cities, the recent and upcoming job losses may accelerate the down trend.  According to the data reported by the Seattle PI, Washington Mutual is shedding 3,400 jobs in the Seattle area.  The PI also reports numerous other double and triple digit layoffs in 2008, with an increasing trend inherent in the figures.  And if the rumors are correct from the Mini-Microsoft blog, thousands of high paying Microsoft job losses will be announced in January, equating to roughly 10% of its workforce.   That’s hardly the ideal condition to buck the trend of crashing home prices in the Seattle area.  Seattle may soon take over California cities for monopolizing the mortgage walk away headline news.