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April 2013

Housing indicators - "spring market to remember"

NWREporter April 2013

By NWREporter

April 2013

NWMLS, Kirkland, WA, March 5, 2013 - Real estate brokers around Washington state agree today's market is far different than two years ago, with one industry veteran summing it up by saying key indicators "are in perfect alignment for a spring market to remember."

On the plus side, closed sales during February jumped more than 9 percent from a year ago and median sales prices are up 13 percent according to new figures from Northwest Multiple Listing Service.

Last month's pending sales across the 21 counties served by Northwest MLS also increased, but only slightly (1.7 percent) due in part to depleted inventory.

"In my 37 years working in the real estate industry, I have never seen inventory this low," remarked Diedre Haines, regional managing broker for Coldwell Bank Bain-Snohomish County and a member of the Northwest MLS board of directors.

The number of active listings system-wide is down 29 percent from a year ago, with three counties reporting even more contraction: Snohomish County (-47.7 percent); King County (-45.3 percent); and Clark County (-44.7 percent).

Compounding the shortage is the fact that about one-fourth of the MLS inventory is classified as "distressed," meaning they are short sales or bank-owned. Such homes are sometimes in need of significant repairs or have prolonged transaction times, which may make them less desirable.

"The market is struggling to provide enough inventory for anxious buyers seeking to take advantage of low interest rates," reported Dick Beeson, principal managing broker of RE/MAX Professionals in Tacoma. Also, he lamented, considering 25 percent of the selection is distressed, "It leaves some buyers with tough choices."

Northwest MLS brokers added 7,497 new listings to inventory during February, for a slight increase from a year ago when they added 7,390 single family homes and condominiums to the database. 

With the additions during February, the selection at month-end totaled 18,114 active listings. That compares to 25,510 offerings at the same time a year ago for a 29 percent decline.

"Low supply and high demand continue to drive our market," stated Northwest MLS director John Deely. He said multiple offers are the "rule rather than the exception" for new listings in core urban areas that are priced well. Deely, the principal managing broker at Coldwell Banker Bain in Seattle, noted a new listing in North Seattle recently drew 12 offers and the property was bid almost 10 percent above its listing price.

OB Jacobi, president of Windermere Real Estate Company, noted the month's supply of homes in King County has dipped to about 1.2 months, well below the six-month threshold that many in the industry consider to be "normal." Jacobi, who is also on the MLS board of directors, noted supply is at its lowest level since May 2005 during the peak of the housing boom. "The impact of low inventory levels is stiff competition among buyers, often resulting in homes selling for well over asking price," he remarked. Also, he added, the imbalance also leads to rising median prices.

J. Lennox Scott, chairman and CEO of John L. Scott, Inc., attributes surging sales and prices to several factors, including positive job growth, historically low interest rates and fewer homes being listed.  "This restriction of homes for sale is prevalent in the price ranges where more than 90 percent of activity is taking place, causing prices to rise," he stated.

Area-wide, the median sales price of single family homes and condominiums that sold last month was $247,500.  That represents a 3.4 percent gain over the previous month (January) and a 13 percent increase from a year ago. Ten counties reported double-digit year-over-year increases.

For single family homes (excluding condos) the median price was $255,000, up about 11.4 percent from the year-ago figure of $229,000.  Homes in King County commanded a median price of $365,000, rising from $308,125 for a year-over-year gain of about 18.5 percent.

Condo prices jumped 22.7 percent area wide (from $150,000 to $184,000) and more than 31 percent in King County, which accounted for nearly two-thirds of the transactions. Condos that sold last month in King County had a median selling price of $210,000; a year ago it was $159,950.

"We have plenty of buyers and desperately need more sellers," proclaimed Mike Gain, CEO and president of Prudential Northwest Realty Associates.  He said open houses are "packed with buyers," with most of them being serious and ready to buy. Gain also reported inventory in the lowest price ranges is disappearing in all areas. "The recovery in housing is firmly under way," he stated.

Echoing those comments was Mike Grady, president and COO of Coldwell Banker Bain. "The seller's market remains strong as demand continues to outweigh supply at unprecedented levels," he commented. He thinks homeowners may be staying on the sidelines because they are unaware of the potential equity they're holding. "This trepidation is understandable," Grady acknowledged, but stressed now is "a great time for homeowners to assess the current value of their homes," adding "We're in a far different market than 24 months ago." 

MLS director Deely reported sellers are prioritizing cash offers ahead of those with financing, while many buyers are trying to improve their position by eliminating or minimizing contingencies. For example, he said buyers are conducting pre-inspections "so they can remove their inspection contingencies with a modicum of due diligence."

Haines, also of Coldwell Banker Bain, said there are fears of an "artificial bubble" being created. "Many of the sales that are occurring are cash buyers, tenants already living in the homes they are buying, investors and investor groups purchasing in bulk," she explained. Also, she reported, "We are beginning to see an increase in for sale by owner transactions."  Consequently, she noted, many sales are not in the NWMLS database which can skew the numbers of actual sales, a situation that is occurring in other markets as well as here.

Another Northwest MLS director, George Moorhead, said buyers are being very cautious and price sensitive, noting, "We are not seeing the same energy level as we saw in 2012."  Like other MLS officials, Moorhead, the managing broker at Bentley Properties in Bothell, points to inventory ("it's holding everyone back") and other factors as restraints on activity.

Previous recessions were brought back with first-time buyers leading the way, Moorhead stated, noting today's purchasers include move-up buyers who are keeping their homes as rentals. When combined with would-be sellers who are under water and can't qualify for a short sale or lack savings to cover a loss at closing, inventory lags.  According to Moorhead, these scenarios are contributing to "a void which we have not experienced in the past."

Brokers are downplaying any immediate fallout from the federal government's budget sequestration on the local housing market:

  • "The cutback with FHA insured loans will have limited impact on buyers," predicts Moorhead.
  • Mike Gain believes cuts at HUD may cause FHA loans to become more difficult but if that really comes to pass people will adjust. "They always do." He expects other conventional mortgage products will surface. "We always find ways to satisfy our customers' wants and needs. Closing times may be a bit longer but I expect FHA will continue to be a viable method of financing. The HUD cuts to staff working with distressed property will make that process more difficult. Really a shame since these are the folks who really need the most help and the process has never been easy for them," he remarked.
  • "I think it is too soon to say how the sequester will impact our Puget Sound markets," said Haines.
  • Beeson said "Sequester may hurt some markets nationally but I think the Northwest is somewhat insulated from the fray. The cuts in FHA employees would be the biggest problem and could cause issues for borrowers."

Referring to sentiments in Warren Buffet's annual letter to shareholders, broker Gary O'Leyar said he shares Buffet's optimism for real estate.

"We've had the gas crisis, we've had the fiscal cliff crisis, we've had the meltdown of banks and the resulting loss of confidence on Wall Street, yet look at the facts," O'Leyar said. "The real estate market has not only survived, but it has shown marked improvement."  He believes if one source of lending such as HUD/FHA loses funding, another sector will rise up to pick up the slack. "I'm already seeing smaller regional savings & loans, community banks, and credit unions stepping up to aggressively offer home mortgages, which I see as a very positive trend. I'm siding with Warren Buffet whose actions have shown he is very bullish on real estate," O'Leyar declared.

Northwest Multiple Listing Service, owned by its member real estate firms, is the largest full-service MLS in the Northwest. Its membership includes more than 21,000 real estate brokers. The organization, based in Kirkland, Wash., currently serves 21 counties in Washington state.

Statistical Summary by Counties: Market Activity Summary - February 2013

Single
Family
Homes
+ Condos
LISTINGS PENDING
SALES
CLOSED SALES MONTHS
SUPPLY
New
Listings
Total
Active
# Pending
Sales
#
Closings
Avg.
Price
Median
Price
 
King 2866 3854 3138 1688 $402,626 $332,577 1.23
Snohomish 1036 1529 1236 673 $283,942 $260,000 1.24
Pierce 1216 2841 1352 714 $218,558 $195,725 2.10
Kitsap 393 1213 369 201 $259,198 $219,000 3.29
Mason 116 600 72 44 $135,994 $105,794 8.33
Skagit 182 654 142 90 $244,897 $223,500 4.61
Grays Hrbor 119 684 84 35 $116,629 $90,750 8.14
Lewis 109 553 84 38 $165,429 $160,000 6.58
Cowlitz 99 408 103 56 $152,089 $143,500 3.96
Grant 105 437 58 33 $184,922 $159,900 7.53
Thurston 336 1034 352 200 $215,056 $219,500 2.94
San Juan 38 271 13 21 $399,067 $305,000 20.85
Island 139 585 126 69 $286,449 $240,000 4.64
Kittitas 44 317 56 27 $202,550 $179,000 5.66
Jefferson 51 331 42 21 $207,033 $186,900 7.88
Okanogan 44 332 22 10 $175,090 $144,750 15.09
Whatcom 355 1160 256 143 $249,326 $233,500 4.53
Clark 52 131 76 35 $207,094 $220,000 1.72
Pacific 32 310 30 18 $134,128 $132,000 10.33
Ferry 3 69 4 0 0 $0 17.25
Clallam 65 324 47 25 $229,732 $210,000 6.89
Others 97 477 92 64 $220,919 $156,250 5.18
MLS TOTAL 7,497 18,114 7,754 4,205 $304,354 $247,500 2.37

4-County Puget Sound Region Pending Sales (SFH + Condo combined)
(Totals include King, Snohomish, Pierce & Kitsap counties)

  Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2000 3706 4778 5903 5116 5490 5079 4928 5432 4569 4675 4126 3166
2001 4334 5056 5722 5399 5631 5568 5434 5544 4040 4387 4155 3430
2002 4293 4735 5569 5436 6131 5212 5525 6215 5394 5777 4966 4153
2003 4746 5290 6889 6837 7148 7202 7673 7135 6698 6552 4904 4454
2004 4521 6284 8073 7910 7888 8186 7583 7464 6984 6761 6228 5195
2005 5426 6833 8801 8420 8610 8896 8207 8784 7561 7157 6188 4837
2006 5275 6032 8174 7651 8411 8094 7121 7692 6216 6403 5292 4346
2007 4869 6239 7192 6974 7311 6876 6371 5580 4153 4447 3896 2975
2008 3291 4167 4520 4624 4526 4765 4580 4584 4445 3346 2841 2432
2009 3250 3407 4262 5372 5498 5963 5551 5764 5825 5702 3829 3440
2010 4381 5211 6821 7368 4058 4239 4306 4520 4350 4376 3938 3474
2011 4272 4767 6049 5732 5963 5868 5657 5944 5299 5384 4814 4197
2012 4921 6069 7386 7015 7295 6733 6489 6341 5871 6453 5188 4181
2013 5548 6095                    

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