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Originally published Wednesday, December 31, 2008 at 12:00 AM

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Seattle sees steep slide in home prices

Just like December's snow, Seattle-area home prices keep drifting downward. But will they stick? Economists say it depends whether historically...

Seattle Times business reporter

Just like December's snow, Seattle-area home prices keep drifting downward.

But will they stick? Economists say it depends whether historically low mortgage rates can entice would-be homebuyers spooked by a crumbling economy or paralyzed by falling prices: Who wants to buy a house only to watch it drop in value?

"Everyone's just looking for that bottom," said Matthew Gardner, a principal in Gardner Johnson, a Seattle land-use economics firm.

Home prices across the country fell faster than ever in October, according to a closely watched 20-city index released Tuesday, providing fresh evidence the nationwide housing slump is nowhere near the bottom.

Seattle, Portland and Atlanta recorded their first double-digit annual declines in October, with Seattle down 10.2 percent, according to the Standard & Poor's/Case-Shiller index of existing single-family home prices.

The survey of 20 large metro areas reported an 18 percent dive from the previous year, marking 22 consecutive months of price drops.

Phoenix posted the worst decline, with home prices falling 32.7 percent. In all, 14 of the survey's 20 cities showed annual declines of 10 percent or more, in each case a record rate.

For the seventh month in a row, no city in the survey saw prices increase, and six metro areas suffered their worst monthly price declines on record. They were Atlanta; Charlotte, N.C.; Detroit, Minneapolis, Tampa, Fla.; and Washington, D.C.

As for this area, prices likely will continue to fall due to thousands of layoffs in recent months at companies ranging from Washington Mutual to Paccar's Kenworth trucking plant to Zillow, the real-estate Web site.

"It looks like the Seattle market, which had been holding on through the early part of this year, is now beginning to buckle," said Lawrence Yun of the National Association of Realtors.

He predicts it won't be before spring when we see what impact low mortgage rates and the government's $700 billion financial bailout have on prices, plus any type of stimulus package that may emerge from the incoming Obama administration.

Dick Conway, of Conway-Pedersen Economics, which turns out the Puget Sound Economic Forecaster, says the region is beginning to grope for the bottom.


"I think we could see another pretty good drop in home prices in the fourth quarter as a result of the stock market collapse, because that just took the oomph out of almost everybody," he said.

"But I think we're getting to the point where if the money were available and it appeared that home prices were not going to fall much more, that people would start buying," Conway said.

He said the turning point in prices will come when declines slow to a trickle.

Karen Gaudette: 206-515-5618 or Cox Newswires contributed to this report.

Copyright © 2008 The Seattle Times Company

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