Housing activity in Western Washington ranges from “red hot” to “slowly healing”
KIRKLAND, Wash. (May 6, 2014) – Brokers report some skittishness among both buyers and sellers, but the latest statistics from Northwest Multiple Listing Service indicate the housing market is continuing to rebound. Both the number of pending sales and the number of new listings added to inventory during April reached their highest levels in 11 months.
Closed sales of single family homes and condominiums were slightly below the year-ago volume, while the median sales price rose slightly (up about 1.9 percent).
“The residential market is red hot,” reported J. Lennox Scott, chairman and CEO of John L. Scott Real Estate. He said multiple offers are the “norm” for new listings, with about two-thirds of homes near job centers selling in the first 30 days. That’s about twice the normal rate, according to Scott.
Many areas outside the Greater Seattle job centers also show signs of positive activity, but at a more moderate pace.
“The real estate market continues to show positive signs both locally and nationally,” stated John Deely, one of the directors of Northwest MLS.
MLS members reported 9,590 pending sales of single family homes and condominiums during April, about even with the same period a year ago when brokers tallied 9,600 mutually accepted offers. Last month’s total marks the highest level since May 2013 when the MLS reported 10,045 pending sales across its 21-county area.
Improving inventory is helping to boost sales, but MLS officials say the number of distressed sales in some areas, and shortages of the “right kinds” of inventory persist, are causing some drag on activity. Some brokers also expressed concern about the sluggish pace of new construction.
Members added 11,043 new listings to inventory during April, about 700 more than a year ago for a 6.7 percent gain. At month end, there were 21,390 listings system-wide, up nearly 7.9 percent from twelve months ago when active listings totaled 19,826.
“A lot of potential sellers who would like to move up are reluctant to list due to uncertainty that there will be something on the market they would want or be able to purchase,” said Northwest MLS director Diedre Haines. Changes in the new construction segment are also affecting activity, she suggested.
Other brokers had similar comments about current inventory.
“We are still desperate for inventory in spite of statistics indicating we have more listings,” commented MLS director Kathy Estey. Inventory is being held back because potential sellers fear they will sell their home and not find one to move into, said Estey, the managing broker at John L. Scott in Bellevue.
The result is a catch-22 situation “because nearly no one will accept a contingent offer,” according to Estey. Also, she explained, “bridge financing is scarce and risk tolerance is low” as a result of the hangover from the recession.
The imbalance between supply and demand is reflected in the market indicator known as months of supply, a ratio of active listings and sales. Industry experts say a balance occurs (favoring neither buyers nor sellers) with four-to-six months of supply. The National Association of Realtors® tends to use six months of supply as its gauge.
MLS figures show there is slightly less than 3.5 months of supply area-wide, but amounts vary widely around its service area. Eight counties are below the 6-month threshold, including three counties with less than four months of supply: King (1.74 months), Snohomish (2.47) months, and Pierce (3.6 months).
Tight inventory is creating bidding wars in some sought-after neighborhoods, resulting in some price escalation.
The median price on last month’s sales area-wide was $275,000, rising from the year-ago figure of $269,950 for a gain of nearly1.9 percent. Twelve counties reported year-over-year increases. For single family homes the median price was $287,500, up about 2.7 percent from a year ago. The median price for condos that sold last month jumped nearly 8.3 percent from a year ago, rising from $203,000 to $219,750.
In the Puget Sound region, price changes for sales of single family homes and condos were mixed. King County had the sharpest gain at 9.7 percent versus a year ago, followed by Snohomish County, up about 7.6 percent. Prices dipped slightly in Pierce County (down 0.9 percent) and were basically unchanged in Kitsap County (down 0.15 percent).
Deely, the principal managing broker at Coldwell Banker Bain in Seattle, noted a surge of sales of high-end properties in King County. His analysis of year-to-date sales shows the number of closed units is up about 25 percent, rising from 377 for the first four months of 2013 to this year’s total of 473. He cites research by Core Logic that shows a correlation between million dollar homes sales and stock market gains. “We are experiencing that effect here as well,” he remarked.
South Puget Sound seeing impact of distressed properties
Distressed properties are still influencing activity and prices in the South Sound, reported Dick Beeson, principal managing broker at RE/MAX Professionals in Tacoma. According to his analysis of Northwest MLS data, about 30 percent of April’s sales in both Pierce and Thurston counties were distressed properties, either bank owned or short sales. He noted this appears to be more than twice the ratio in King County.
Buyers are indecisive, Beeson noted, explaining, “They can’t decide if they like a bigger selection or not, especially if much of the inventory is not in the greatest physical condition, which describes many distressed properties.”
Despite the relatively high proportion of distressed properties in Pierce and Thurston counties, multiple offers are occurring on “right priced, right conditioned” listings, remarked Beeson.
Commenting on the minor price drop (down 0.15 percent) compared to a year ago, Beeson believes it is due to the high number of bank owned properties and short sales that were in the mix. He indicated his analysis revealed a median price of $240,000 for non-distressed single family homes, or about 30 percent higher than the distressed component. The gaps in King County, with a smaller proportion of distressed sales, were not as pronounced.
Snohomish County hoping for more balanced market
Haines, who is Coldwell Banker Bain’s regional managing broker for Snohomish County, said even though brokers there have seen “a slight increase in active listings, there are still shortages, especially in the south portion of Snohomish County.” Buyers, sellers, and those in the industry “long for a more balanced market,” she stated, adding, “Of course, to reach that goal, we need more inventory.”
Haines said brokers in Snohomish County aren’t seeing as many widespread multiple offers as during some prior periods. “Multiple offers do exist but seem to be located more in pockets within south and north Snohomish County,” she reported.
Opportunities abound in Kitsap County
Most of Kitsap County continues to experience a healthy balanced market with a 4.3 month supply of inventory, said MLS director Frank Wilson. “As a result our prices are stable with plenty of opportunity for buyers who wish to move to Kitsap,” he added.
Wilson also commented on multiple offers in Kitsap County where his office is located. Sales for homes priced from $200,000 to $350,000 are “pretty fast paced,” he commented, often drawing multiple offers. “Bainbridge more closely resembles the Seattle market, with only about a 2.2 month supply, and thus attracts many multiple offer situations,” added Wilson, the district manager and branch managing broker at John L. Scott Real Estate Poulsbo.
Slower pace of new construction and “buyer fatigue” worrying some brokers
In reviewing the latest MLS report, some brokers commented on changes affecting new construction.
“Most of the new construction we are seeing are by big builders who were able to buy up much of the foreclosed approved plats, raw land and new developments that were lost by the smaller builders during the recession,” noted Haines, a broker in Snohomish County. “The smaller plat developers and builders who are trying to recover and rebuild their business are, understandably so, a bit gun shy.”
Also, Haines continued, “We are seeing for the first time the big developers/builders utilizing in-house employees to manage and sell their plats as opposed to the historical practice of listing them through NWMLS by using traditional real estate firms and their brokers.”
Beeson also noted some “problematic” shifts in this segment. “New construction is mostly limited to a few large production builders,” he observed.
Other sources of worry for some MLS members are “buyer fatigue” and consequences of bidding wars.
“We are seeing some “push-back” by buyers who have seen prices rising so fast and are tired of competing in multiple offer situations,” reported Estey. For example, she noted, sellers sometimes set a “review date” for considering offers. Buyers preview the house but may wait to make an offer until that date passes. “In some situations the day to review comes, but offers do not. Then one or two days later, several offers materialize.” This same phenomenon took place late last spring, according to Estey.
In markets where multiple offers are common, “it is even more imperative that sellers demand that their home be exposed to the full market,” Wilson urged. Such full exposure to all MLS brokers and active buyers will help ensure sellers receive full market value, he explained.
Despite some anxiety, Beeson characterized the market as “stable and slowly healing, save new construction.” Despite a shaky start, he said he expects “a smooth real estate ride into 2015, as excitement builds in Pierce County and beyond when the men’s U.S. Open Golf Tournament will take place at Chambers Bay, a public course owned by Pierce County. Organizers project the event will have an economic impact of $144 million.
Multiple Listing Service, owned by its member real estate firms, is the largest full-service MLS in the Northwest. Its membership includes more than 21,000 real estate brokers. The organization, based in Kirkland, Wash., currently serves 21 counties in Washington state.