Opinions vary on possibility of a housing slowdown, but numbers show solid activity
Some brokers from Northwest Multiple Listing Service detected a slowdown in housing activity during August, "but nowhere near what is typical," according to one industry veteran. Among MLS leaders who commented on the service's latest report, expectations for the remainder of 2015 ranged from one who predicted "we're on the cusp of a slowdown," to others describing activity as "torrid" and saying "sales will continue at a fast pace."
Newly released statistics show solid gains for several indicators used to track activity, including pending sales, closed sales, and median prices.
For the fifth month this year, pending sales system-wide outpaced the number of new listings added to the inventory. During August, members reported 10,603 mutually accepted transactions and 9,921 new listings. That new listing total for the 23 counties in the MLS service area was the lowest level since February.
"The velocity of sales activity continues at a very fast pace with pending sales eclipsing new listing inventory. This sales activity is keeping the selection of available properties at historic lows," commented John Deely, principal managing broker at Coldwell Banker Bain. He said the low listing inventory continues to impact some sub-markets, including Seattle's where multiple offers and escalation clauses are "the rule rather than the exception."
Like new listings, total inventory also declined. At the end of August, Northwest MLS members reported 20,749 total active listings in its database. That reflects a slight drop from July's total selection of 21,069, but a 23.3 percent decline from the year-ago inventory when there were 27,060 homes for sale.
Supply, as measured by months of inventory, showed slight improvement in August, inching up to 2.38 months overall. That's up from July's figure of 2.24 months. In King and Snohomish counties, supply remained well under two months. Many industry analysts use a range of four-to-six months as an indicator of a balanced market.
"The biggest challenges our buyers face are the lack of inventory and the quality of homes to choose from," said MLS director George Moorhead. Sellers who have been "pushing the pricing envelope too hard are experiencing pushback from buyers as their homes sit on the market," according to Moorhead, the designated broker and owner at Bentley Properties.
Commenting on prices, which showed year-over-year gains in most areas, Moorhead reported mixed outcomes. "We have been seeing price reductions more frequently during the normal slower market times of summer, but well-priced homes in desirable areas are still drawing multiple offers and offers above the listing price," he explained.
MLS figures show last month's closed sales of single family homes and condominiums had a median selling price of $315,000 area-wide for a 9.6 percent increase from a year ago. Ten counties reported double-digit gains, including King County where the median price was $450,700. That translates to a 13.2 percent increase from the year-ago figure of $398,000.
The volume of completed sales, numbering 8,718, jumped more than 12 percent from the year-ago total of 7,775 closings. Single family homes accounted for more than 85 percent of the total transactions.
Single family homes in King County sold for a median price of $499,950, just below the figure of $500,000 the MLS reported in June, believed to be an all-time high for the monthly reports. Year-over-year prices for this segment jumped 14.4 percent.
For condos, both the volume of sales and selling prices showed sizable gains from a year ago. The overall number of condo sales rose from 1,026 to 1,248 for a 21.6 percent gain. Condo prices surged 17 percent, rising from $221,000 to $258,750.
In King County, where 60 percent of condo sales occurred, the volume was up nearly 21.7 percent. Median prices increased 19.7 percent from a year ago, rising from $249,950 to $299,250.
"I don't think any real estate market/economy can sustain steadily increasing prices like we've seen without a leveling or a drop-off of sorts," cautioned Gary O'Leyar, designated broker/owner at Berkshire Hathaway HomeServices Signature Properties and a past chairman of the Northwest MLS board.
"As Seattle home prices reach (and in some cases exceed) the 2007 peak, I believe more potential sellers will gradually consider selling," O'Leyar stated, adding, "Since the post-2007 recovery period I think many property owners have been waiting to recapture lost equity. If that has been the obstacle for some sellers to enter the market, we are reaching that point of value/equity recovery."
Another industry leader also commented on a possible leveling of activity.
"Given the seasonality of real estate and low inventory levels, I think we're on the cusp of a slowdown in the housing market," stated OB Jacobi, president of Windermere Real Estate. "The continued double digit increases in home sales simply cannot be sustained unless we see inventory growth," he emphasized. That is unlikely, he suggested, "since we're entering the time of year when fewer people list their homes.
Brokers in Snohomish County were mostly upbeat about the market.
"There were slight slowdowns but nowhere near what is typical," remarked Diedre Haines, whose experience in the industry dates to 1976. "Multiple offers continue, interest rates are still low, economic forecasts for Snohomish County remain strong and inventory is still needed," she reported.
"Recent volatility in the stock market has had little if any negative impact on our local real estate activity," stated Haines, Coldwell Banker Bain's principal managing broker for South Snohomish County. More and more investors are returning to real estate as being the best investment they can make, she noted. Commenting on a clause from the preamble to the Realtor® Code of Ethics, which states "Under all is the land" she added, "As we all know, it is impossible to create more of it!"
David Maider, owner/broker at Windermere Real Estate in Everett, said the market in Snohomish County "continues at its torrid pace," bolstering his observation by citing MLS data. The latest numbers show pending sales in that county increased more than 17 percent from a year ago, with closed sales jumping nearly 24 percent.
Maider, a member of the Northwest MLS board of directors, said the primary market drivers include a general lack of supply across all price points (less than two months worth of inventory), historically attractive interest rates, and a very tight rental market. "Multiple offers are commonplace," he reported, suggesting buyers should be prepared to be decisive and to propose compelling terms to the seller. "This is not a market for sitting on the fence," he emphasized, adding, "We are seeing a very active market, even in higher price points."
Dick Beeson and J. Lennox Scott echoed the optimism.
"The number of buyers in the market place today leaves little doubt that third quarter sales will continue at a fast pace," stated Beeson, principal managing broker at RE/MAX Professionals in Tacoma.
"Conditions are optimal for the home buying surge in the Puget Sound Region to continue, due to job growth and historically low interest rates," suggested J. Lennox Scott, chairman and CEO of John L. Scott. "We can also expect the severe shortage of homes for sale close to job centers, and in the more affordable and mid-price ranges in all Puget Sound markets, to persist," he added.
Scott suggests the fall season will create new challenges for home buyers. He expects price appreciation to remain consistent as inventory continues to decrease, noting new listing inventory historically drops about 50 percent in the winter months.
Northwest MLS brokers continue to remind sellers about the consequences of overpricing and to caution would-be buyers about the pitfalls of overextending themselves.
"Accurate pricing remains critical," emphasized Deely, a director with Northwest MLS. "The market is reacting quickly to accurately priced listings but overpriced ones are sitting with little activity."
Looser lending criteria is one such pitfall. "One trend we are seeing, sadly enough, is a return to some of the 'no doc/low-doc' programs with insufficient verification of a borrowers' income, assets or employment.
"Yes, these programs may help less qualified buyers attain the dream of homeownership, but they could also be their downfall if they stretch too far without enough foundation to maintain financial security," he suggested.
Buyers, sellers and brokers are expressing some frustration with the fast-paced market.
Getting offers accepted, and then getting the transactions to close can be frustrating, according to Haines. She expects forthcoming changes affecting mortgage lending will offer "more positives than negatives."
"Finding a buyer for a property remains the easy part. Getting a sale to closing remains very difficult," said Beeson. "More often than not, lenders, appraisers, inspectors and new Federal RESPA (Real Estate Settle Procedures Act) regulations appear at times to do all they can to ensure closing doesn't occur. Brokers sometimes overcome tremendous obstacles to help the buyers and sellers get to closing. . . Success comes after a lot of hard work," he added.
Speculation around the direction of interest rates may also be fueling activity, according to some brokers.
"With the Federal Reserve reticent about raising rates due to international instability, U.S. homeowners will enjoy the benefit of continued low single-digit rates," said Beeson.
"There is a general conversation -- and expectation -- that interest rates will be on the rise, and that is spurring buyers even more to find the perfect home before rates go up," said Moorhead. He expects interest rates will be one percent higher a year from now. "That will continue to push buyers to aggressively find the right home which will continue to push inventory levels downward."
Some potential purchasers may be retreating to the sidelines in hopes the competition will ease.
"Some buyers are becoming discouraged and calling it quits after losing in the multiple offer market. However, positive housing news like dropping mortgage rates continues to bring new prospective home buyers and sellers into the market," reported Deely.
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)