KIRKLAND, Washington (Sept. 7, 2016) - Home sales in Western Washington continued to outpace year-ago activity, but member-brokers at Northwest Multiple Listing Service say persistent inventory shortages are constraining activity.
Despite a sparse selection in many areas, an expected summer slowdown, and "appraisal conundrums," Northwest MLS members notched 11,898 pending sales during August, eclipsing the same month a year ago by 1,295 transactions for a 12.2 percent gain. There were 8,628 pending sales in the four-county Puget Sound region -- the best August for mutually accepted offers since 2005 when members tallied 8,874 sales.
Brokers added 11,411 new listings to the Northwest MLS database during August, but they presented offers for even more buyers (11,898) to keep inventory below two months of supply. At month-end, there were 18,336 active listings in the MLS system, a decrease of 11.6 percent from a year ago, resulting in only 1.9 months of supply. (Four to six months is generally considered to be a "neutral" or balanced market for buyers and sellers.)
"The market remains just as intense as July," observed J. Lennox Scott, chairman and CEO at John L. Scott, Inc. "The best opportunity for homebuyers to find a home will be in the next 60 days," he suggested, explaining the number of new listings coming on the market is likely to drop by 50 percent each month between November and February. "We expect a repeat of conditions from last winter when every available home that came on the market in areas with a shortage of inventory received quick action."
"Buyers in the Seattle area are plentiful in all price ranges, but the entry-level housing demand continues to be the highest," reported John Deely, principal managing broker at Coldwell Banker Bain. As an example, he said a recent open house for a condo listing in the South Lake Union area drew more than 100 visitors in a single day. Tech workers continue to dominate the primary buyer demographic, he said, adding that a significant number of their parents are relocating here to purchase properties close to their children.
Buyers in most of the 23 counties served by Northwest MLS can expect to pay more than they would have twelve months ago, with most areas showing double-digit year-over-year price increases. System-wide, the median price for last month's 9,767 closed sales of single family homes and condominiums was $350,000, up more than 11 percent from the year-ago figure of $315,000.
In King County, the median price on 3,656 sales that closed during August was just under $500,000. That's up nearly 11 percent from the year ago figure of $450,700, but slightly lower than July's median sales price of $505,000. Prices on single family homes (excluding condos) that closed in King County jumped 10 percent year-over-year, rising from $499,950 to $550,000.
Condo prices area-wide surged nearly 16 percent from a year ago, rising from $258,750 to $299,950. King County has the highest median sales price at $335,000, which is a 12 percent jump from a year ago. That county also has the most meager supply of condos, with only 28 days or so (0.91 months).
"We expect median prices to continue to increase, and likely at an accelerated pace through the fall," said Mike Grady, president and COO at Coldwell Banker Bain. He attributes the anticipated increase to shrinking inventories.
Grady, a past chairman of the MLS board, also noted that the price gap between homes in King County versus Pierce and Kitsap counties is narrowing. Both counties experienced higher percentage price gains than King County, while Snohomish County trailed. There is a difference of $250,550 in the price of a single family home in Kitsap County versus King County, and a gap of $265,000 when comparing Pierce County prices with those in King County, according to the latest MLS statistics. Snohomish County's prices are $150,000 lower than King County's. "It's possible demand is shifting to the lower prices of Pierce County where commuting times into King County are similar [to Snohomish County's]," he remarked.
Northwest MLS director Dick Beeson, of Pierce County, also commented on prices, noting steady gains. "For the first eight months of 2016, South Sound real estate has had quite a ride." MLS figures show last month's median price for single family homes and condos that sold in Pierce County, at $283,225, is up 18 percent since January. "These increases occurred despite the headwinds of continued inventory shortages," said Beeson, the principal managing broker at RE/MAX Professionals.
Beeson reported 2007 sales prices have once again been achieved in South Sound, adding "It took nine years of slugging our way back, but we're here. Sellers who bought in 2007 have finally stretched their necks above water."
Even though South Sound brokers have averaged monthly double-digit increases in new listings in an attempt to satisfy the buyer pool, Beeson noted strong pending sales in that region have resulted in less than two months of supply. Continued inventory shortages, strong consumer confidence, solid job creation and good salaries are factors he cited for the robust activity. "It's a good time to buy real estate and wait," he suggested.
Multiple offers are still in play, according to brokers George Moorhead and Diedre Haines.
"Well-priced homes are seeing multiple offers," reported Moorhead, a member of the Northwest MLS board of directors and the designated broker at Bentley Properties in Bothell. Unlike earlier in the year, he said sellers who have held off listing their homes are seeing buyers less willing to push up prices. Moorhead also said some buyers are expressing concerns over possible interest rate hikes. "Some buyers who indicated they would hold off until spring are now moving into the market just to beat the interest rate increases," he stated.
Haines, principal managing broker, South Snohomish County for Coldwell Banker Bain, described the market as being in the "midst of the summer slowdown - but not as slow as usual." Healthy appreciation rates and low interest rates are sustaining activity, according to the veteran broker. She anticipates a post-Labor Day uptick, but said the forthcoming election is causing "confusion, distraction and frustration" with potential negative impacts for the fourth quarter.
Along with low inventory resulting in multiple offers on some listings, Haines said brokers continue to struggle with low appraisals. "Given the current market demand these low appraisals are extremely hard to understand and accept," she remarked, adding, "The delays are creating closing date extensions and added stress for buyers, sellers and lenders -- and in some cases, failed sales. These issues are hurting the overall market," suggested Haines, a past chairman of the MLS board.
Deely said some sellers are pushing the price of their properties to the upper end of the value range. "We are seeing more properties go past their offer review dates, and the resulting price reductions on overpriced properties chase the market down." He said most sellers understand that today's buyers are more cautious of properties that don't draw offers in the first two weeks so they make quick adjustments to spur offers.
MLS director Frank Wilson, the branch managing broker at John L. Scott, Inc. in Poulsbo, noted August is typically "front-end loaded" as it slows the last two weeks when families prepare for back to school and getting in an end-of-summer trip. Wilson, the immediate past chair of NWMLS, also suggests buyers can expect more open houses on Saturdays now that football season is under way and attention shifts to "Seahawks Sundays."
Washington and other states in the West are maintaining sales momentum, unlike other regions in the country. "Severely restrained inventory and the tightening grip it's putting on affordability is the primary culprit for the considerable sales slump throughout much of the country" in July, stated Lawrence Yun, chief economist at the National Association of Realtors®.
Commenting on NAR's statistics for the month of July, Yun said Realtors are reporting diminished buyer traffic because of the scarcity of affordable homes on the market. "The lack of supply is stifling the efforts of many prospective buyers attempting to purchase while mortgage rates hover at historic lows."
In NAR's latest market report, the group's president, Tom Salomone, a broker from Florida, said in addition to affordability concerns, appraisal complications are appearing more frequently as the reason why a contract signing experienced a delayed settlement. NAR figures indicate appraisal-related contract issues were the root cause of more than one-fourth of contract delays in the past three months.
Looking ahead, Beeson believes "more of the same is on the way," adding, "Buyers are fortunate to have low interest rates" and replenished inventory. OB Jacobi, president of Windermere Real Estate, said even though the market continues to favor sellers, there are signs it is slowly starting to shift. "We're still a far cry from a balanced market, but the overall direction is positive."
Northwest Multiple Listing Service, owned by its member real estate firms, is the largest full-service MLS in the Northwest. Its membership of nearly 2,100 member offices includes more than 25,000 real estate professionals. 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)
Northwest Multiple Listing Service