Western Washington Market Report
“Typical summer slowdow” may mean opportunities for frustrated house hunters
KIRKLAND, Washington (July 6, 2017) – For frustrated house hunters, there’s hope: the volume of new listings added to inventory during June (13,658) was the highest total for any single month since May 2008 (14,176 new listings), according to the latest statistics from Northwest Multiple Listing Service.
“This time of year we see more new listings coming on the market than pending sales, and June didn’t disappoint,” stated J. Lennox Scott, chairman and CEO of John L. Scott.
Noting the pace of sales is slowing and the number of multiple offers is moderating, broker Gary O’Leyar suggested a summer breather is under way (as anticipated), which could yield “the season for a successful purchase” for weary shoppers. O’Leyar, the designated broker/owner at Berkshire Hathaway HomeServices Signature Properties, said this mid-summer real estate market “seems to be following a fairly typical seasonal cycle” even though inventory is significantly lower than a year ago.
Northwest MLS director George Moorhead also commented on the “typical summer slowdown,” but said it is more noticeable in outlying areas. “The hot core areas are still quite active as buyers vie for a new home.” He also detected a slight increase in the time it is taking to market a home, and reported some cooling off in the luxury market, saying prices may be reaching a plateau.
For many brokers, rising prices are an ongoing concern, with one industry leader describing the ever-increasing prices as “startling.”
While the number of new listings was up about 7 percent year-over-year, total inventory lagged. Brokers reported 14,482 active listings of single family homes and condos at the end of June, which is down 14 percent from twelve months ago when would-be buyers could choose from 16,838 listings. Compared to the previous month, however, inventory jumped up 16 percent (12,481 vs. 14,482).
System-wide there was just over 1.4 months of inventory, but the supply varied across the 23 counties in the MLS market area. King County continued to have the tightest inventory, with less than a month of supply (0.84). Six other counties reported less than two months of supply (Cowlitz, Douglas, Kitsap, Pierce, Snohomish, and Thurston). In general, four-to-six months is considered to be a balanced market.
“Inventory continues to go lower as prices continue to climb in Kitsap County, leaving us with about 1.5 months of supply and home prices that are up more than 12 percent from a year ago,” said MLS director Frank Wilson, branch managing broker at John L. Scott in Poulsbo.
“Unlike a normal market for buyers, today’s market is not about the current inventory, rather it’s about inventory that is coming on the market,” Wilson commented. “The real story is the increased number of homes that will become available next month, and the month after.” He recommends buyers work out a success strategy with their real estate professional before even looking at their first house.
The increase in the number of new listings coupled with fewer offers for each property means more choices and a little breathing room for the backlog of buyers who have been waiting to buy a home, Scott believes. “For sellers, the market remains at a frenzy level of new listings selling in the first 30 days,” he said.
MLS brokers reported 12,397 pending sales (mutually accepted offers) during June for a gain of nearly 3.4 percent from a year ago. Compared to May, the volume of pending sales dropped slightly. Nine counties reported year-over-year decreases in the number of pending sales, with inventory shortages a likely contributing factor since most of these counties show double-digit declines in the number of active listings.
In the four-county region encompassing King, Kitsap, Pierce and Snohomish counties, MLS members notched a record-setting 9,042 pending sales, beating the previous high for the month of June that was reached in 2005. Figures show May also beat the record for that month.
“Strong job growth, price appreciation, and low interest rates continue to fuel the Puget Sound housing market,” stated Scott.
Seattle’s growing population is another likely factor. Recent U.S. Census Bureau data shows Seattle is gaining about 1,100 residents per week, an “astounding” figure, said MLS director Diedre Haines.
“June slowed a bit, probably due to it being summer – but I do not anticipate much of a slowdown this year,” remarked Haines, principal managing broker-South Snohomish County at Coldwell Banker Bain.
“In Snohomish County we are once again experiencing low appraisals,” she said, adding, “I’m not sure why this is happening, especially with regard to new construction.” Haines said new product is selling before it’s out of the ground, with many of these new homes not even hitting the market.
Northwest MLS director Scott Comey also commented on the brisk activity in Snohomish County.
“In Snohomish County, we have been seeing a lot more tech-type workers buying homes,” according to Comey, the owner/designated broker at RE/MAX Elite. “Many of my agents have clients from Microsoft, Amazon, and Google to name a few, where just a couple of years ago we rarely saw them up this way.” To get bigger bang for the buck, Comey said prospective purchasers are being pushed further north, or further south, driving up values in both Snohomish and Pierce counties. “Coupled with Boeing and other local employers doing very well, it is keeping the inventory levels under a month.”
“With interest rates still very low, we are hopeful that those who want to move up into a larger home, aren’t deterred too much,” Comey stated. Although “contingent” offers are a struggle in today’s market, he said many buyers are finding alternative methods to making the move, like bridge loans.
Reflecting strong second-quarter activity, closed sales for June topped the 10,000 mark, a first for Northwest MLS member brokers. Last month’s total of 10,094 closed sales area-wide was up almost 3 percent from the year-ago total of 9,805 closings. Year-to-date sales for the first half of 2017 are up 4.7 percent compared to the first six months of 2016.
Prices for single family homes and condos combined surged 10 percent in June compared to a year ago, rising from $350,000 to $385,000. For the four-county Puget Sound region, year-over-year prices are up about 11.4 percent. In King County, the median price of a single family home (excluding condos) jumped 13.9 percent, from $573,522 to $653,000.
Despite their upward trajectory, prices still matter, according to Northwest MLS director Dick Beeson, who cautioned sellers to “be wary” about unrealistic pricing. He reviewed more than 800 listings offered for sale in King, Pierce and Snohomish counties since January 1 that went off market as expired listings, “mainly because they were over-priced,” he suggested.
“The month-to-month price changes are startling,” remarked Mike Grady, president and COO of Coldwell Banker Bain. “Eventually we will outpace the first-time homebuyer’s ability to qualify for a mortgage and that will slow the market down somewhat,” he stated, adding, “That said, we believe the biggest challenge is that there is literally no active housing for those age 55+ being developed in the Puget Sound area. Without quality condominium development that provides a place for baby boomers wanting to downsize, they don’t move, thus blocking the next big-home buyer from moving up which in turn stops the domino effect downstream.”
“The market sizzles while sellers fiddle,” quipped Beeson, principal managing broker at RE/MAX Professionals in Gig Harbor. Noting 80-to-90 percent of sellers in the Central Puget Sound counties are accepting offers on their homes within 30 days of listing and marketing it, he acknowledged, “There is no end to the pain buyers are experiencing as they search for a home.”
On a more encouraging note Beeson urged buyers to not give up. “Diligence and prior planning are necessary to win the day. Buyers must be pre-underwritten for a loan, not just pre-approved. They must act decisively, not weakly or slowly. They must keep their composure and perseverance as they lose out on offers before finally winning.”
MLS director George Moorhead agreed. “It is not uncommon to have buyers present offers on eight or more homes before being successful; they also become more aggressive in terms of their offers.” The conversations these buyers have with their brokers also take on an entirely different level of negotiating tactics and swift decisions, according to Moorhead, the designated broker at Bentley Properties.
Buyers continue to suffer from fatigue, reported Haines. “The difference this year is that it seems buyers are more determined and not giving up. Rates have increased a bit, but this doesn’t seem to be a negative for them.” And, she added, “We still struggle with the issue of them waiving their protective rights despite our counsel not to.” Haines said sellers are starting to become adamant that they do not want multiple buyers conducting pre-inspections, but commented, “This is a trend I personally hope continues.”
Wilson also offered advice to buyers. “They need to be clear as to what they will accept, or not. Get pre-underwritten by their lender, be ready for a fast tracked inspection, strong earnest money, strong financing and amount down and put forward the most streamlined offer their situation will allow.”
Commenting on the latest MLS statistics, Grady said the numbers “tell the continuing story of a very tight market created by the situation of a region where far more jobs are being created than new housing units — whether they are apartments, condos or single-family homes. This pattern won’t change until developers can out-build net new job creation, especially in the greater Puget Sound area.”
Condos, once the path to ownership for first-time buyers, offer sparse options. Inventory is down 24 percent from a year ago. Condos currently only account for about 8 percent of all active listings, and there is less than a month’s supply.
Condo prices, while more affordable than many single family homes, continue to trend upward. The median sales price for last month’s closed sales of condos was $328,675, an increase of nearly 9.6 percent from a year ago.
Based on his analysis of MLS data, Moorhead noted condos have appreciated in the double digits for the last three years as they play catch-up to single family homes sales. “Condos are typically the next best option for first time buyers who cannot keep up with a surge in pricing from single family homes; however, even condos are being priced out of reach for many new buyers.”
The market frenzy prompts questions about a housing bubble.
“We are often asked about how long this will market last,” said Wilson. His reply? “Jobs in Seattle are still getting stronger, the economy is not yet at full strength, incomes are starting to rise, loan interest rates are low, money is relatively easy to borrow, gas prices are low, the stock market is doing well and the public’s attitude seems to be good. This could last a few years.”
Northwest Multiple Listing Service, owned by its member real estate firms, is the largest full-service MLS in the Northwest. Its membership of more than 2,200 member offices includes more than 26,000 real estate professionals. The organization, based in Kirkland, Wash., currently serves 23 counties in the state.