Pent-up demand boosting Western Washington home sales and prices
Pent-up demand continues to fuel home sales around Western Washington with millennials, military families and relocating workers vying for limited inventory. Brokers from Northwest Multiple Listing Service say they're not seeing a typical summer slowdown.
Commenting on a new report from Northwest Multiple Listing Services summarizing July activity, J. Lennox Scott, chairman and CEO of John L. Scott, Inc. said, "The Puget Sound housing market is sizzling hot, with the best July on record." He expects inventory shortages will continue into the summer of 2016.
Northwest MLS members reported 9,424 closed sales during July, easily surpassing the year-ago total of 7,878 transactions for an increase of 19.6 percent. Last month's volume of closings also outgained June when members reported 9,163 closings.
This market is "atypical," remarked Diedre Haines, Coldwell Banker Bain's principal managing broker for South Snohomish County. "We're not yet seeing any signs of the typical summer slowdown." She attributes the lack of inventory as a key factor in the abnormalities.
"Small increases in interest rates do not seem to have any noticeable impact on activity," said Haines, adding, "We are still experiencing multiple offers in most of our market areas, heavy open house traffic, and moderate to high appreciation in values."
Prices for last month's completed sales rose 6.4 percent area-wide from a year ago, with considerable variation across the 23 counties served by the multiple listing service. The median price system-wide for last month's closed sales of single family homes and condominiums (combined) was $319,250.
Among counties in the central Puget Sound region, Kitsap County registered the largest year-over-year increase at 9.2 percent, and King County registered the smallest gain at 3.3 percent. The median sales prices in the four-county area ranged from a low of $245,000 in Pierce County to a high of $439,000 in King County.
July's single family home prices (excluding condominiums) rose 4.1 percent compared to a year ago, but dipped slightly from the previous month. The area-wide price on last month's closed sales was $327,950, up from the year-ago figure of $315,000, but down from June's figure of $330,000. Year-over-year prices were up in 22 of the 23 counties in the report, while seven counties reported small drops from June.
"The challenge with a sellers' market is that some sellers tend to spend too much time reading the headlines, which pressures them to overprice their homes," suggested Frank Wilson, branch managing broker at John L. Scott in Poulsbo. Noting cash transactions tend to draw news coverage, he emphasized "they are still in the minority when compared to conventional, FHA or VA financing. At the end of the day you still need to attract a ready and willing buyer who is offering a price that an appraiser will confirm," Wilson added.
Wilson also noted prices are escalating at a faster pace in Kitsap County than in King County. MLS figures indicate the median price in Kitsap County has surged 22.4 percent since January, which compares to a 12.6 percent jump in King County.
MLS director George Moorhead described the market as a "vicious cycle," with signs of moderating somewhat as inventory levels fall and buyers become discouraged. "Multiple offers are still very real," he stated. Buyers are using a variety of creative ideas in hopes of making their offers stand out, according to Moorhead, the designated broker and owner at Bentley Properties.
Broker say some sellers hesitate to list their home for fear of not being able to find a replacement. Despite that reluctance, Northwest MLS members added 11,198 new listings to their database last month, marking the fourth consecutive month of replenishing inventory at the level of 11,000 or more.
"This market is frustrating for buyers, homeowners who are considering a move, and brokers," admitted Northwest MLS director Kathy Estey. "Buyers are tired of making offer after offer and being defeated by a higher or cash offer," she lamented.
"Fear of not finding the right home before selling is creating reluctance by owners to list their property," stated Estey, the branch managing broker at John L. Scott in Bellevue. "In spite of some work-around options for these potential sellers, many feel no urgency," she added.
Despite adding nearly the same number of new listings to inventory as a year ago (11,198 vs. 11,437), the volume of pending sales outgained activity of 12 months ago by a wider margin (11,216 vs. 9,615), resulting in supply shortages. The number of total active listings at the end of July stood at 21,069, a drop of 21.4 percent from the year-ago selection that numbered 26,813 properties.
Northwest MLS figures show only about 2.2 months of inventory system-wide, well below the 4-to-6 months that many analysts say constitutes a balanced market. King County continues to have the tightest supply with less than 1.2 months of inventory. Several neighborhoods have less than a month of supply.
In Pierce County, where there is 2.2 months of supply, new construction and the millennial generation are driving sales, according to Bobbie Petrone Chipman, principal managing broker at John L. Scott in Puyallup. Noting sales of newly-built homes are up significantly from a year ago, she said "it is undoubtedly driven by the fact that bordering counties are struggling to find developable, affordable land for new construction."
With the median price of a single family home at about half the cost in King County ($247,000 versus $485,000), Chipman said Pierce County is attracting first-time buyers, including millennials, as well as buyers who are returning to the market.
Preparation is key, brokers emphasize. "Our brokers are helping their buyers get 'buyer ready' so they can act instantly when a new property comes on the market. More likely than not, they will find themselves in a multiple offer situation in order to get the home," said Scott.
Neither buyers nor brokers seem worried about the possibility of rising interest rates, but several emphasized the importance of being poised to act. Moorhead said rising rates could slow the market and help replenish inventory, but added, buyers and sellers are commenting about "higher payments, less inventory and not really getting what they want, but they're willing to settle for something close."
"In today's market, sellers should understand the need to fully expose their home to the market to allow the current pool of buyers the opportunity to see it, structure offers, and possibly conduct a pre-inspection," suggested Estey, another member of the MLS board of directors. She also recommends proper preparation, meeting with a lender, and being "buyer ready" the moment the "right" house hits the market.
Veteran brokers tend to dismiss speculation of another housing bubble.
Commenting on the possibility of a "bubble market," MLS director Darin Stenvers believes it is unlikely. "With broader government controls and enforcement of new banking/loan programs, the underlying instability is now gone." Buyers are feeling confident that "home ownership is still the best investment they can make right now, and homes are still within reach for most segments of the market," added Stenvers, the office managing broker at John L. Scott in Bellingham.
"This market is a bit unpredictable in that one day you can see multiple offers on a correctly priced home, buyers who lose out on a home because they won't offer full price, and price reductions on homes that are overpriced," reported MLS director Wilson. Although the sentiment is "it is a great real estate market," he said it comes with its own challenges.
Low appraisals are one of those challenges. They're still an issue with some creating buyer and seller frustration due to differences between sale price and appraised value, said Haines. Nevertheless, she thinks "All indicators are that the current momentum in sales volume will be sustainable throughout this year and well into 2016. In short, we remain very busy with five or six qualified buyers for every saleable listing." Those buyers include families who are relocating due to employment transfers and military families who were based here and have decided to make the Pacific Northwest their home, Haines noted.
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 23,000 real estate brokers. The organization, based in Kirkland, Wash., currently serves 23 counties in Washington state.
Statistical Summary By Counties
Market Activity Summary and 4-County Puget Sound Region Pending Sales (PDF)