Region's Housing Activity Still "Speeding Along"
pace slowing as seasons change
NWMLS, Kirkland, October 4, 2013. September tested the housing market's resilience around Western Washington with fluctuating mortgage rates, record-setting rains, and persistent inventory shortages in some areas. By month's end, however, both pending and closed sales outgained the same period a year ago, according to the latest figures from Northwest Multiple Listing Service.
Prices also increased compared to 12 months ago, but fell slightly from the previous month. Year-to-date figures through nine months show prices for homes and condominiums that have sold in the 21 counties served by the MLS are up 12 percent from a year ago.
With uncertainty about the duration of the government shutdown, brokers say the positive momentum could stall.
Asked about the shutdown, Northwest MLS director OB Jacobi said, "Nobody has a crystal ball, but in some instances, lenders will face challenges verifying information from various federal agencies, like the IRS, which impacts their ability to approve and close home loans."
Noting all except one government agency (USDA) involved in housing finance remain open, Jacobi, the president of Windermere Real Estate, explained the shutdown affects various functions that are part of the financing process. "On a macro level, we don't expect this to have a significant impact on the housing market," he stated, while cautioning, "This will largely depend upon the length of the shutdown and its effect on consumer confidence."
The shutdown was preceded by four weeks of falling mortgage rates, which brokers credit with boosting September sales. Improving inventory also help spur activity. Brokers reported September's inventory was up 2.1 percent compared to a year ago, marking this year's first year-over-year gain for that measure.
Dick Beeson, principal managing broker at RE/MAX Professionals in Tacoma, described the South Sound market as "still speeding along, just not as high and mighty as it was." Noting inventory has now matched or surpassed year-ago levels and closed sales are up more than 21 percent, he said it's been an "amazing run-up" for both indicators. He expects the 4th quarter to be near normal levels, but adds, "A lot depends on several unknowns," mentioning monetary policies, job formation, a shrinking number of first-time home buyers, and the government shutdown.
Traffic at open houses and at builder sites, although challenged by the wettest September in recent memory, "has remained steady and buyer interest remains high," according to Beeson.
In neighborhoods close to job centers, brokers are reporting brisk activity.
Northwest MLS director John Deely said the Seattle market shows no signs of slowing down and house-hunters seem undaunted by soggy weather. "Buyers continue to flood open houses and multiple offers rain down on competitively priced properties," he commented.
Deely, the principal managing broker at Coldwell Banker Bain in Seattle, said one newly listed home had 25 potential buyers show up at a midweek brokers open house to get a first glimpse at it. "Multiple offers are still prevalent," he said, citing an example of one appropriately priced listing receiving 11 offers, and ultimately drew a bid of more than 20 percent above list price. Other new listings in Seattle are experiencing similar activity, according to Deely. "Buyers with all cash have decreased and financed offers now outpace cash offers," he stated.
MLS figures show mixed activity across its service area:
- September's volume of new listings increased nearly 17 percent compared to a year ago, pushing the total number of active listings slightly ahead of 12 months ago (up 2.1 percent). However, of the 21 counties the MLS serves, 11 reported having fewer listings than a year ago.
- Pending sales (mutually accepted offers) rose 4.6 percent area-wide; 14 counties had double-digit gains, while three counties reported declines.
- Closed sales for September increased 21.2 percent year-over-year, rising from 5,536 to 6,711.
- While selling prices area-wide are up 8.7 percent from a year ago, prices were below year-ago figures in five counties. Conversely, seven counties notched double-digit gains. The area-wide median price for last month's closed sales was $278,000, up 8.7 percent from the year-ago figure of $255,745, but $5,000 less (down about 1.8 percent) from August.
- Prices on closed sales of single family homes (excluding condos) rose 8.2 percent, while condo prices surged 12.3 percent.
"We are currently experiencing a mini power surge of sales activity, the third such event this year," said J. Lennox Scott, chairman and CEO of John L. Scott Real Estate. He attributes the bursts to interest rates. "With interest rates suddenly coming off their peak for the year, we're having another surge of activity, which is keeping the inventory at the shortage level in both King and Snohomish counties."
MLS figures show King County has less than two months of supply (1.95 months). Snohomish County is slightly better at 2.32 months. System-wide, there is 3.32 months of supply, well below the level of 4-to-6-months that is generally accepted as an indication of a balanced market.
In Kitsap County, where there is a more balanced market (4.3 months of supply, up from 3.4 months in August), the pace of sales and price appreciation are both moderating. Well-priced properties are still drawing considerable activity.
"As is typical at this time of year, September's pace slows a bit compared to August as families focus on back to school and all the activities that go along with that," observed Frank Wilson, branch managing broker at John L. Scott in Poulsbo.
"We continue to see buyers who are negotiating against several other buyers on a house they like," said Wilson, a member of the Northwest MLS board of directors. He noted well priced homes are drawing offers in the first few weeks of being listed, while listings that are getting no showings most likely mean they're at least 5 percent high on pricing. "Homes that are priced correctly will receive showings and offers," he emphasized.
Northwest MLS director George Moorhead, the branch manager at Bentley Properties in Bothell, said market activity "waned just a bit" towards the end of August and during September, a pattern he said is normal with students going back to school and last-minute vacations. He expects interest rates will climb to 5 percent by summer 2014, and says the big message is "If you want to capitalize on the current lower interest rates, don't delay any longer."
Other comments on the government shutdown
Wilson said the government shutdown is a concern in Kitsap County, which has several military installations. "It may affect our market in several ways, some of which may be unintended consequences." He noted USDA loans (for residences in qualifying rural areas) will not be funded. Also, veterans who need certificates of eligibility may need more time to get them from the VA and the overall confusion may make buyers think twice before moving forward with a purchase.
Another consequence of the shutdown could affect furloughed employees. Wilson said for those in the process of buying a home, the lender may need to slow down the loan, thereby affecting closing dates and interest rate locks.
"On some level everyone - buyers, sellers, brokers, lenders, appraisers, inspectors -- are uncertain what the government shutdown will mean to the market," Beeson stated. With the IRS closed down, funding of any new loans will not occur, and that will slow and even halt the closing process, he explained. He is hopeful the resolution is "only one vote away," but recognized that vote might not occur until November 5 (Election Day).
Moorhead believes the government shutdown will be short lived and pose only a temporary hardship on buyers and sellers. He suggests buyers can sidestep unnecessary challenges by avoiding FHA, VA or USDA loans as delays could be encountered with a protracted shutdown.
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.