Improving Supply Unlikely to Reverse Rising Prices

It's an interesting world in real estate right now. Buyers may be cheered by an uptick in inventory, but the improving supply is unlikely to reverse rising prices. Of the 23 counties in the Northwest MLS service area, only six of them reported year-over-year gains in inventory compared to a year ago. King County was the only one in the Puget Sound region to notch a gain, up 13.6 percent from a year ago.

Area-wide there is 1.3 months of supply, with 4-to-6 months used as a gauge of a balanced market. Three counties - King, Kitsap, and Snohomish -- reported less than a month of supply. The condo component remains very tight with slightly more than three weeks (0.87 months) of supply.

Prices are still climbing at double-digit rates in most counties. Year-over-year prices for single family homes and condos combined jumped about 15.3 percent overall, from $360,000 to $415,000. Within the four-county Puget Sound region, King County notched the biggest gain at nearly 18.2 percent. Prices there rose $100,000 from a year ago, from $550,000 to $650,000.

While prices are still increasing, both inventory and the number of expired listings are also rising. The rising interest rates are having a "moderate impact" with buyers, forcing some to look at homes in lower price points. Buyers still want a good home in a good area but some are reconsidering just how much they want to pay, saying they don't want to be "house payment poor."

Sellers are beginning to realize the amount offered over list price may not be bankable unless buyers are willing to make up the difference. Consequently, they are being more discretionary with the offers they consider. Using local, proactive lenders, increasing and/ or releasing the earnest money, preferring verifiable cash offers or conventional over VA or FHA, higher down payments, shorter closing times, and setting some future date when they will review all offers are examples of common practices in offers.

Here are a few myths occurring in our market

  • "Seller has to take the highest offer"  - the seller can accept any of the offers that are presented.
  • Similarly, "if multiple offers are made, the seller has to take or work with the first one first," is also untrue. A seller can address any of the offers in any order.
  • "Cash is always king." - if the cash is not verifiable to the seller's satisfaction, a conventional offer may actually have a better chance of success.
  • "Pre-approval with a lender is the same as pre-underwritten," is another misbelief. The farther down the path a loan application can go, the more likely it is to be approved.

Buying or selling a home can involve nearly two dozen people so it continues to remain important that buyers and sellers work with a broker who is well-versed in the process and able to coordinate all the participants to assure a successful closing. 

First Quarter Pacific Market Report Details Continued Strong 'Frenzy' In Region

Seattle and surrounding areas continued to show brisk homebuying activity, according to Coldwell Banker Bain's comprehensive Q1 2018 Pacific Market Report released this week. The 20-page report, which covers regions all over Western Washington and Portland, Oregon, predicts a 'Spring frenzy' for Seattle and Eastside markets, as demand continues to outpace supply.  Highlights of the report include:

  • The average single-family home price - across all Seattle communities climbed well over $800k
  • Seattle's luxury market sales, $2.3 million and above, showed strong interest
  • The Seattle neighborhoods of Madison Park and South Lake Union/Queen Anne demonstrated the highest average overall sales prices in the city
  • Seattle's average condo sale price surpassed $500k
  • The average single-family home price – across all Eastside communities – surpassed $1 million for the first quarter $1,045,136. This represented a 16.5% increase over Q1 2017
  • Just outside Seattle, Bainbridge Island's average sales price exceeded $1 million dollars

    READ MORE FROM THE Q1 PACIFIC NORTHWEST MARKET REPORT HERE: 2018 Q1 Report

 

Pricing Is Still Important in Today’s Market

MLS figures for March show a surge in both new listings and pending sales compared to February as the spring market heats up. Prices overall are up about 13.2 percent from a year ago, and even more so in the four-county Puget Sound region. Among these four counties, Kitsap had the largest year-over-year increase at 19 percent, but King County homes are still the priciest. The median price for last month's sales of single family homes and condos combined in King County is $625,000, up 17.9 percent from a year ago. For single family homes, excluding condos, the median price for last month's sales was $689,950.

The market continues to trend hot with no apparent end in sight. Northwest MLS member brokers continue to scramble to replenish supply. They added 10,595 new listings during March, slightly more than a year ago when they added 10,321 properties to the selection. Last month's additions marked a big gain from February when 7,284 new listings were added.

We have returned to an extremely intense market for each new listing due to extremely strong job growth and eager buyers who want to purchase before interest rates go higher. The housing market is back to a pressure cooker situation and we are witnessing high levels of sales activity intensity for each new listing coming on the market.

The tri-county area comprised of King, Snohomish and Pierce counties added essentially the same number of new listings during first quarter 2018 as the same period a year ago, while the actual number of sales dropped slightly. Why? Because there are too few properties for sale and rental rates are through the roof. People are desperate to find a home. Housing inventory remains well below "normal" ranges based on a level of 4-to-6 months of supply used as an indicator of a balanced market. Area-wide, Northwest MLS figures show there is about 1.2 months of supply, with four counties reporting less than a month's supply. Snohomish has the sparsest selection at 0.67 months, followed by King (0.83 months), Kitsap (0.95 months), and Pierce (0.99 months).

Pricing in this market is still extremely important. In March we saw more listings where sellers pushed the price envelope causing the property to go past their offer review date with no offers in hand. It is not uncommon for buyers to consider a property on the market over 10 days as having something wrong with it. Many buyers are returning from taking a break during the winter after having lost out on several attempts to win in the multiple offer competition. Throwing caution to the wind, these seasoned veterans of the multiple offer bidding wars are pulling out all the stops (contingencies) to win.

Instead of competing in today's market, some current owners are opting to remodel. What this means on the larger scale is a continued lack of inventory coming on the market to feed the voracious appetite of the buyers in our marketplace.

Western Washington Market Continues to be Hot!

Interest rates are creeping up, inventory is still squeezed, and some feared revised tax laws would have a chilling effect on home sales, but Northwest Multiple Listing Service leaders say the local market remains competitive. Instead, the local market has been even hotter and more competitive than last year at this time.

Northwest MLS figures for last month show a slight year-over-year decrease (about 2.8 percent) in overall pending sales, a likely consequence of inventory being down nearly 12.9 percent. Other key indicators of the market - new listings, closed sales, and selling prices - all showed gains in February compared to 12 months ago.

Among the four Puget Sound area counties, Snohomish had the largest year-over-year price increase at 18.8 percent. Its countywide median price for February's sales spiked to $460,000 from $387,250, but that is $130,000 below the $590,000 median price for transactions that closed in King County last month.

For single family homes (excluding condos), prices rose 13.7 percent overall, from $343,000 to $390,000. Within King County, the median price was $649,950, with three areas (Mercer Island, Bellevue west of I-405, and Kirkland-Bridle Trails) reporting median prices of more than $1 million for single family homes.

There is about 1.4 months of supply area-wide, but both King and Snohomish counties have less than a month's supply. For condos, there is only 0.88 months of supply - and even less than that in King, Snohomish, and Kitsap counties.

The arrival of daylight savings usually triggers a burst in new listings. New construction could also help ease some of the pressure, suggests Mike Grady, president and COO at Coldwell Banker Bain. "Even though Commerce Department data show purchases of newly built single-family homes nationwide fell 7.8 percent in January after dropping 7.6 percent in December, and purchases have declined for four of the past six months, we are not seeing that trend in the Northwest."

The challenge is that the number of buyers is near record highs. The right plan, including help from a skilled broker, can help buyers find success in this fast-paced market. Buyers are coming to the harsh reality that high home prices are here to stay and they need to consider smaller homes or longer than hoped-for drive times.

30-year mortgage rates climbed slightly for the seventh consecutive weekly increase, but these small increases are not yet creating too much of a stir. Conversations with buyers are more around the cost of commuting and time away from home versus floor plan and home size. History tells us that the real estate market is cyclical, but no guess on when this cycle will change.

                                                                                                                                                                                                       - NWMLS

Home Buyers Still Competing for Sparse Inventory 

The Seattle area real estate market hasn't skipped a beat with pent-up demand from buyers stronger than ever. The report on January activity shows a slight year-over-year gain in pending sales, a double-digit increase in prices, and continued shortages of inventory. Sellers that have put their properties on the market early this year have less competition and are seeing multiple offers. Open houses are experiencing heavy traffic.

For the MLS overall, last month's 7,820 pending sales marked a slight increase compared to January 2017 when members reported 7,724 mutually accepted offers, a gain of 1.24 percent. The number of total active listings at month end stood at 8,037 homes and condos, down nearly 17.6 percent from a year ago when the selection totaled 9,750 listings. Measured by months of supply, there was only about 1.5 months overall, well below the 4-to-6 month level many industry experts use as a gauge of a balanced market.

Condo inventory is especially tight in Snohomish County (0.8 months of supply) and King County (0.92 months). System-wide there is under a month's supply (0.93 months). For the four-county Puget Sound region, there were only 427 active condo listings at month end, down almost 31 percent from a year ago.

March can't come soon enough for home buyers. In March, the number of new listings usually bumps up substantially from the low number of new listings typical for winter months. 

Within the four-county Puget Sound region, King County had the largest year-over-year gain. Prices for homes and condos combined shot up 20.3 percent in that county, rising from $475,000 to $571,250. Pierce County reported a jump of 15 percent, followed by Snohomish County at about 12.2 percent and Kitsap County at nearly 3.5 percent.

Builders are trying to respond to the pent-up demand. Seattle and the Eastside are seeing a growing number of infill homes in the core areas, some on lots as small as 3,000 square feet. Builders are doing smaller releases and setting offer review dates, and then determine price ranges for the next phase.

The luxury market is also off to a quick start in 2018. The luxury market is gaining positive momentum due to the wealth effect of the stock market, the strength of the U.S. economy, and homebuyers from the Pacific Rim, especially China. Northwest MLS figures show sales of homes selling for $2 million or more are far outpacing year-ago activity. Last month, member-brokers reported selling 55 residences at this price threshold. That's up 66 percent from the same month a year ago when brokers sold 33 such homes.

                                                                                                                                                                                                        - NWMLS

Won't You Be My Neighbor?

Article featured in the Residential Specialist Magazine 

Won’t you be my neighbor?

Imagine a grown-up version of Mr. Rogers’ Neighborhood, and that’s what Roger Morris, CRS, REALTOR® with Coldwell Banker Bain in Seattle, has done. “I wanted to do more than post property videos, which is what a lot of agents do,” Morris explains. “So I had this idea for On the Road with Roger. I’m in my car with a videographer, driving through different Seattle neighborhoods, and I talk about what makes the neighborhood unique.” The key, Morris emphasizes, is that “the neighborhood has star billing and I’m on camera a limited amount.”

  1. Each video follows a four-part template and a two-minute limit.
  2. Morris identifies himself and where he works.
  3. The featured neighborhood is geographically identified.
  4. Brief vignettes zoom in on unique neighborhood attributes.
  5. Not everything is filmed from the car. “For a portion of each video, I try to be out of the car, showing unique features of that neighborhood. I usually start and end the video from inside the car, and in between I am showing the lake, park or neighborhood feature, being part on-camera, part off-camera,” Morris says.

Holiday Shoppers Include Homebuyers, but Inventory is Still a Challenge

"Normal seasonal slowdowns" are reported by some real estate leaders with Northwest Multiple Listing Service, but other brokers say this holiday season is still drawing crowds at open houses along with competitive bidding in some neighborhoods. Both inventory and pending sales dipped to their lowest levels since April, while prices still increased by double-digits in most of the 23 counties served by Northwest MLS. Until we see a balanced rate of 4-to-5 months of supply, instead of hovering around one month, we're not likely to see much change. This time of year is actually one of the best times to find a home. There is less competition and sellers who list their homes at this time are usually motivated to make their move. Some of the best pricing can be attained from December through early February.

Buyers seem to be undeterred by winter weather, holiday festivities or other seasonal or - for the most part -- political distractions. For those who are both prepared and patient, the holidays can actually be a great time to buy because there is usually less competition and sellers are motivated to close out the year with a sale. Strong demand is not confined to Seattle. Every time a new listing is added all eyes focus like a laser beam to see what just happened. If a worthy property comes on the market, buyers know it instantly as the information is streamed through every device known to man. Buyers step up and buy, quickly and efficiently.

Area-wide, the volume of new listings added during November rose nearly 5.6 percent (from 5,776 to 6,098) compared to the same month a year ago. Despite improvements in new listings, brisk sales kept inventory well below year-ago levels. King County is still experiencing double-digit reductions in inventory compared to this same time last year, but the shortage is even more pronounced in some outlying counties.

Measured by months of supply, there is about 1.4 months of inventory overall. In King County, supply has dwindled to 0.79 months, and only slightly better, at 0.89 months, in Snohomish County. In King County the median price for single family homes and condos combined jumped 15.6 percent, from $497,254 to $575,000. For single family homes (excluding condos), the median price was $630,750, up nearly 14.7 percent from last year. Condo prices surged 17.1 percent, due to a combination of depleted inventory (down 28 percent from a year ago) and higher prices for new condos. (In King County, the condo component classified as new construction that sold during November had a median price of $873,490.)

Brokers tended to agree some of the provisions in the widely anticipated tax reform have "the potential to negatively affect home values nationwide." All of the projections are that market conditions are set for another robust market in 2018.

Source: NWMLS

Seasonal and Tax Implications on Current Market Conditions

November and December are usually slower months. But early seasonal snow and questions swirling around the tax plan could make the usual seasonal slowdown more pronounced

Northwest MLS figures for the 23 counties it serves show members added 8,466 new listings to inventory during October, outgaining the year-ago total of 7,575 by 11.8 percent. Buyers outnumbered new listings, with 10,586 of them having their offers accepted. That number of pending sales was up nearly 8 percent from the same month a year ago.

Buyers may find themselves in a quandary as the year winds down as they contemplate limited supply, possible upticks in interest rates and tax reform. Last week's announcement of a provision in a GOP tax proposal to cap the mortgage interest deduction is concerning to buyers, brokers and builders. Imagine if the proposed plan to cap the mortgage interest deduction at $500,000 is approved in a market that is starved for homes and where the median price [for a single family home in King County] is now $630,000. Homeowners may be less likely to sell because they would be giving up their grandfathered tax credit on their current home. That's fewer homes for sale in a market where we really need them and there could also be a flood of new buyers trying to purchase before the plan is passed, adding to the already hyper-competitive market conditions.

Northwest MLS data show 66 percent of single family homes sold so far this year (Jan. - Oct.) in King County had selling prices of $500,000 or higher.

The median sales price system-wide for October was $373,000, up more than 8.1 percent from twelve months ago when it was $344,900. All counties in the four-county Puget Sound region notched double-digit gains.

For single family homes (excluding condos), the median sales price for last month's completed transactions was $381,000. Within King County prices are considerably higher. In Seattle, year-over-year prices jumped 17.6 percent, from $625,000 to $735,000. On the Eastside, the median price for a single family home rose 10 percent from a year ago, increasing from $768,000 to $845,000. Nevertheless, high prices did not seem to deter many house-hunters. The stage is set once again for a frenzy housing market after the first of the year in the price ranges where there is a shortage of active listings for sale.

Listings in Snohomish County are experiencing longer market times, fewer above-list price offers, and a noticeable increase in price reductions.

Source: NWMLS