Housing prices dropping in places where it wasn’t supposed to keep dropping (like Seattle)

It has been well-documented that the housing crisis has had a strong effect on places like Las Vegas and much of Florida. But this report suggests the drop in housing prices has spread to places once thought to be immune to these drops, such as Seattle:

Now, though the overall economy seems to be mending, housing remains stubbornly weak. That presents a vexing problem for the Obama administration, which has introduced several initiatives intended to help homeowners, with mixed success.

CoreLogic, a data firm, said last week that American home prices fell 5.5 percent in 2010, back to the recession low of March 2009. New home sales are scraping along the bottom. Mortgage applications are near a 15-year low, boding ill for the rest of the winter.

It has been a long, painful slide. At the peak, a downturn in real estate in Seattle was nearly unthinkable.

In September 2006, after prices started falling in many parts of the country but were still increasing here, The Seattle Times noted that the last time prices in the city dropped on a quarterly basis was during the severe recession of 1982.

Two local economists were quoted all but guaranteeing that Seattle was immune “if history is any indication.”

A risk index from PMI Mortgage Insurance gave the odds of Seattle prices dropping at a negligible 11 percent.

These days, the mood here is chastened when not downright fatalistic. If a recovery depends on a belief in better times, that seems a long way off. Those who must sell close their eyes and hope for the best.

It doesn’t sound good for sellers in a lot of places.

It would be interesting to know more about why certain cities were thought to be immune. I can think of a few explanations off the top of my head: certain markets didn’t experience a big boom in prices in the 1990s-2000s so there wasn’t much room for prices to drop; certain areas attract jobs and employees so there will be more people always look for housing; and certain didn’t experience building booms so there isn’t a glut of houses or units to be sold. Does one of these explanations fit Seattle?

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