Balance "finally returning" to housing market as buyers welcome more choices, moderating prices
KIRKLAND, Washington (October 4, 2018) - Housing inventory continued to improve during September while the pace of sales slowed in many counties served by Northwest Multiple Listing Service. "Balance is finally returning to the market, and with it, slowing home price growth," stated OB Jacobi, president of Windermere Real Estate.
A new report from Northwest MLS shows double-digit increases in inventory in several of the 23 counties it serves, led by a 78 percent year-over-year gain in King County. Despite improving selection in the central Puget Sound region, a dozen counties reported drops in the number of active listings compared to last year.
System-wide, the month ended with 2.56 months of supply of single family homes and condos, well below the 4-to-6 months analysts use as an indicator of a balanced market between sellers and buyers. The current level is the highest since February 2015 when member-brokers reported 3.56 months of inventory. In King County, supply exceeded two months for the first time since January 2015.
Condo inventory remains sparse, with only 0.34 months of supply area wide, despite improving inventory (up nearly 70 percent from a year ago). The shortage is expected to ease as construction progresses on several recently-announced high-rise projects.
Brokers added 10,458 new listings of single family homes and condos to the MLS database during September, slightly more than the year-ago figure of 10,120. At month end, buyers could choose from 19,526 listings, a 22.9 percent improvement from twelve months ago when selection totaled 15,888 listings.
Commenting on the wider selection, Mike Grady said buyers "are at long last now seeing properties that stay on the market longer." Listings that are priced appropriately, "and not based on the feverish market we saw just a few months ago are still selling quickly, and home prices are still showing 8 percent appreciation year-over-year - more than double the rate of inflation," added Grady, the president and COO of Coldwell Banker Bain.
With improving inventory, some brokers suggest the market may be showing signs of pausing, if not softening. A market shift may be under way, but they believe activity will stay strong.
J. Lennox Scott, chairman and CEO of John L. Scott Real Estate, encouraged would-be buyers to "put extra focus on October," which he described as the last great month for new listings until March 2019. "Over the winter, new monthly resale listings will lower by approximately 50 percent compared to summer months." He also noted interest rates, currently in the upper 4 percent, are projected to rise in the coming months.
"This is a more traditional yearly market cycle taking the place of the unusually overheated real estate market of the past several years," said John Deely, principal managing broker at Coldwell Banker Bain.
"Given there doesn't appear to be an end in sight related to the region's job growth, with employees moving here and not enough units being built to accommodate them, we believe this market normalization will continue," stated Grady. (For every six new jobs created in the Seattle/Tacoma/Bellevue region, there was only one single-family permit issued, according to data from the National Association of REALTORS®.)
Northwest MLS director Robert Wasser reported the recent re-balancing of the market "has led to fewer listings with offer review dates and pre-inspections," which he said is a positive for buyers hoping to retain their contingencies. His analysis of MLS statistics indicated the median marketing time in King County has risen to 14 days. Also, prices for closed sales are at 100 percent of their list price for a third straight month.
"In the South Sound the market has shifted into neutral and is idling at the moment," commented Dick Beeson, principal managing broker at RE/MAX Professionals in Gig Harbor. Noting inventory has improved in both Pierce and Thurston counties "but nowhere near what King County has experienced," Beeson said buyers can see more homes available for sale for the first time in three years. "Buyers are taking deep breaths as they survey this new territory."
Beeson thinks the "new normal" at two-plus months of inventory is "healthy and long anticipated." He also believes the steep curve of ever-increasing prices and scarcity of properties has crested.
Ken Anderson, another Realtor in South Puget Sound, noted the bigger selection for buyers is good timing with interest rates on the rise. "We are finding buyers eager to get into homes this fall to take advantage of the still incredibly low borrowing rates." Sellers need to be mindful of softening sales, he suggested, adding "they'll have to keep a sharp eye on this trend and have a pricing strategy to match."
Anderson, the president/owner and designated broker at Coldwell Banker Evergreen in Olympia, said sales remain robust, describing last month as the "second best September on record for closed sales." Even though pending sales "softened a bit" he said they remain high by historical standards and says "we remain solidly in a seller's market" but are trending toward balance. "This is welcomed as prices here have risen much faster than our market's long-term trend line."
Pending sales (mutually accepted offers) were down nearly 14 percent area-wide, with about half the counties in the MLS report showing double-digit declines. Members notched 8,913 pending sales last month, a slippage of 1,435 sales when compared to the same month a year ago.
Closed sales also reflected slower activity. Members reported 7,630 completed transactions during September, down 18.6 percent from the year-ago volume of 9,371. Through nine months, this year's closings are down 4.4 percent compared to 2017.
Prices across the 23 counties in the Northwest MLS report are up about 5 percent from a year ago, with ten counties reporting double-digit gains. The median price for last month's completed sales of single family homes and condos system-wide was $400,000, up from the year-ago median price of $381,000. Last month's price was down $15,000 (-3.6 percent) from August and $25,000 (-5.9 percent) from the year's peak (so far), which occurred in June when the median price was $425,000.
For the four-county Puget Sound region, the median price for September's completed transactions was $455,000, up about 5.8 percent from a year ago.
Despite slower sales, Northwest MLS spokespeople remain upbeat.
"The housing market close to the job centers has gone from a historic extreme-frenzy market in the spring down a few levels of hotness to a strong level of pending sales activity for new listings," said Scott.
"Rising interest rates and slowing home prices are affecting the psychology of the region's housing market, and causing some to speculate that we're heading towards another housing crash, but that's definitely not the case," commented Jacobi. Noting it's been more than 15 years since this area experienced a "normal" market, Jacobi suggested "people have just forgotten what it looks like. As long as the local economy remains strong, there's little cause for concern about the shift we're experiencing."
He believes "there's little cause for concern about the shift we're experiencing," so long as the local economy remains strong.
Northwest Multiple Listing Service, owned by its member real estate firms, is the largest full-service MLS in the Northwest. Its membership of around 2,200 member offices includes more than 29,000 real estate professionals. The organization, based in Kirkland, Wash., currently serves 23 counties in the state.
Statistical Summary By Counties
Market Activity Summary and 4-County Puget Sound Region Pending Sales (PDF)