Food For Thought: The High End Still Isn’t Moving; The Months-Supply Breakpoint

For all that we have made a lot of progress in our housing market, most of that progress has been in the low to middle price range.  The high end still isn’t moving in the greater Seattle/Bellevue area.  A couple of months ago we talked a bit about how Months Supply suddenly jumped from about 6 months in the low and middle price range to about 15 months or more on the higher end.  The break point seemed to be in the $600,000 – 800,000 range.  Recently a friend of mine who lives in east Bellevue asked me to figure out if there really is a fairly sharp break point in that Months Supply curve that might be useful to Buyers and Sellers who are working in that price range.  So being a registered data junkie, I decided to give it a try.  The chart below suggests that there really is a fairly pronounced break in market, and it does seem consistent with my earlier analysis of the King County market overall. The conclusion: there really does seem to be a pretty sharp break at about the $750,000 area.  Why is that?  My only useful speculation is that is about the price point for maximum conventional mortgage (i.e. good interest rates) of $567,500 + 20% down = $709,000 purchase price.  A possible explanation is that buyers start choking when they have to come up with more than about $150,000 – $200,000 down, or they have to look at loans costing a full point more – there’s a lot of difference between the payments on a 5.5% conventional loan and a 6.5% jumbo loan.  At that level of down payment, the market is probably mostly move-up buyers, not first time buyers, but there still seems to be a limit on how far they are willing (or are allowed) to stretch these days.  So the break point may strongly affected by the transition from good rates to significantly higher rates.  Seems to make sense.  Other ideas welcome J The under-6 months supply at the lower end of the market might reflect the extra boost from that ‘First Time Homebuyer Tax Credit’  – if that program goes away as expected, that end of the market might slow up a bit.