Home sales sizzling around Western Washington, with volumes reaching 10-year high
KIRKLAND, Washington (July 6, 2015) - Temperatures around Western Washington were not the only thing sizzling during June. Northwest Multiple Listing Service members reported 11,453 pending sales last month, the highest volume since August 2005 when members notched 11,546 mutually accepted offers. Last month also marked the fourth consecutive month of 11,000-plus pending transactions.
MLS members credit first-time buyers, an influx of relocating workers, and escalating rents for part of the surge.
"First time buyers are returning to the market, but cautiously and with more knowledge based on market values and trends," said George Moorhead, designated broker and owner at Bentley Properties in Bothell.
"Educated buyers today are no longer just dipping their toes in the water. They are diving right in," reported Mike Gain, CEO and president of Berkshire Hathaway HomeServices Northwest Real Estate. Gain, a past chairman of the Northwest MLS board, said in his 38 years in the industry he's experienced "good years, bad years and everything in between," but he's never seen a market as complex as the current one. "It's been challenging for everyone involved in a real estate transaction, whether buyer, seller or agent."
Gain and many of his colleagues bemoan the lack of listings. "The only real problem we are experiencing today is the lack of inventory," he said.
Brokers added 11,581 new listings to inventory during June, about the same number as a year ago (11,541), but pending sales outgained the same month last year by nearly 16 percent, depleting the selection. At the end of June, the number of active listings across the 23 counties in the MLS report totaled 20,333. That compares to 25,342 for the same month a year ago for a drop of 19.8 percent.
OB Jacobi, president of Windermere Real Estate noted some improvement in inventory over the past three months. "I'm happy to see the total number of homes listed has grown by nearly 20 percent since March. That's still down compared to last year, and well below historic averages, but we are trending in the right direction," he remarked.
Most counties in the MLS service area reported double-digit drops in inventory compared to a year ago. In King County, the number of active listings is down almost 24 percent compared to a year ago, while in Kitsap County the volume plummeted nearly 35 percent.
The imbalance between listings and sales means shrinking "months of supply," an indicator of sales velocity. Industry experts use a figure of four-to-six months of supply as one gauge of a balanced market. For the Northwest MLS market overall, only 2.2 months of inventory existed at the end of June. In King County it was down to less than 1.2 months. Snohomish County had about 1.7 months of supply at month end. Both Pierce and Kitsap counties reported about 2.2 months of inventory.
"Kitsap house sales are hotter than a firecracker," observed MLS director Frank Wilson, the branch managing broker and Kitsap district manager at John L. Scott Inc. in Poulsbo. "Despite heat, vacations and holidays the market has not slowed. We continue to see good open house traffic, low market times and multiple offer situations," he stated.
Multiple offers are common throughout the Central Puget Sound region.
"We see many multiple offers on properties," reported Dick Beeson, principal managing broker at RE/MAX Professionals in Tacoma, who described sales activity as "phenomenal." For first-time buyers, the competitive bidding can be daunting, which he suggested underscores the importance of relying on experienced brokers. Anxious buyers have a sense of urgency as prices rise, he noted. "They need a great real estate broker to help guide them through multiple offer situations," added Beeson, a member of the Northwest MLS board of directors.
Rising prices are prompting some house-hunters to broaden their search beyond primary job centers.
"More and more buyers are starting to chase the market northward as prices increase in King County, especially around Seattle," said Diedre Haines, principal managing broker-South Snohomish County at Coldwell Banker Bain in Lynwood. "Open house activity, despite buyers' fatigue and slight increases in interest rates, remains robust," added Haines, a past chairman of the MLS board.
Median prices continue to trend upward, according to Northwest MLS figures.
The area-wide median price for last month's 9,163 closed sales of single family homes and condos was $321,500. That's up 7.4 percent from a year ago, when the median price was $299,335 and up 1.4 percent from May's figure of $317,000. Since January, prices are up 13.6 percent.
In King County, the median price for sales that were completed during June was $450,000. That compares to a price of $410,000 for the same month last year for a year-over-year increase of nearly 9.8 percent. Compared to May, prices in King County are up about 3.7 percent.
For single family homes only (excluding condos) in King County, the median selling price for sales that closed during May was $500,000, an increase of 10.3 percent from the year-ago figure of $453,500.
Rising prices are prompting some worries about affordability. Broker Dick Beeson believes the growth rate in jobs and the "sheer numbers of people flowing into the state make this market appear to be sustainable for the long term," despite some uncertainty around reaching the upper limit in pricing and the likelihood of rising interest rates.
Referring to a list compiled by Forbes magazine that rank the Seattle-Bellevue-Everett area as an "overpriced area," MLS director Moorhead suggested it's a matter of value. "An experienced real estate broker will be invaluable in navigating through the buying and selling process" and understanding value as inventory levels balance out and interest rates increase.
Appraisals are also concerning to some. Low appraisals are a big challenge, according to Beeson. Other MLS brokers agreed. "We are beginning to see a resurgence of low appraisals, most are small gaps between sale price and appraised value adding to frustration for both buyers and sellers," reported Diedre Haines. "Kitsap is also beginning to see a higher incidence of low appraisals," said MLS director Frank Wilson.
Several brokers were surprised the record-setting temperatures in June didn't deter activity.
"The hot weather has not cooled the market," exclaimed Kathy Estey, branch managing broker at John L. Scott, Inc. in Bellevue. "Buyers still struggle with multiple offers and escalating prices. It seems the excellent opportunity for employment, the beautiful Northwest climate, recreational opportunities and the low interest rates are continuing to fuel demand. It is an excellent time for those who own a home and want to move up to do so," she added.
J. Lennox Scott, chairman and CEO of John L. Scott said "We are experiencing a heat wave of sales generated by home buyers wanting to buy today and lock in low interest rates."
Gary O'Leyar, the broker/owner at Berkshire Hathaway HomeServices Signature Properties also commented on the weather's impact on activity while offering advice to sellers and buyers. "It's been my observation that when the thermometer goes up, the market cools down a bit. Hint to buyers: while the waters and beaches are full, there are sellers wanting to sell. This season could be an opportunity in disguise for buyers who have been frustrated by the recent overheated market," added O'Leyar, a past chairman of the Northwest MLS board.
Rising rents are another contributor to brisk sales. "The cost of renting versus buying is another force that is fueling strong sales gains," explained Mike Gain. "In most cases buying a home costs significantly less than renting and the good news is the monthly payment will remain the same as rents continue to rise. Numerous renters are entering the home buying market. Many who are renting today think they can't afford a home. They need to think again and get pre-qualified for a loan to see just what they can afford."
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)