Market Update

Home sales stay strong, but prices approaching “affordability ceiling” for some buyers

Pending sales of homes around Western Washington surged more than 13 percent in September compared to a year ago, and listing activity picked up slightly, fueling both broker optimism and words of advice for sellers.

Along with increases in the number of mutually accepted offers, the latest report from Northwest Multiple Listing Service shows year-over-year gains in the number of closed sales (up 4.6 percent) and prices (up 2.5 percent). Inventory for its service area, which encompasses 21 counties in Western and Central Washington, declined slightly (just under 1.2 percent).

Commenting on September’s activity, industry veteran Gary O’Leyar said he expects the Greater Puget Sound real estate market will maintain a “healthy glow” in 2015 so long as there is no radical increase in interest rates. “I foresee a general leveling off in overall market activity as prices approach the affordability ceiling for many buyers,” remarked O’Leyar, the designated broker/owner of Prudential Signature Properties in Seattle.

Northwest MLS members reported 8,875 pending sales during September to outpace the year-ago total of 7,839 pendings. The volume tapered off about 5 percent from the August figure of 9,342 mutually accepted offers. All but one of the 21 counties served by the MLS reported year-over-year increases.

The number of closed sales for September also rose, climbing from 6,711 a year ago to 7,020 for a 4.6 percent increase. Prices on those sales were up 2.5 percent.

The median price on last month’s closed sales of single family homes and condominiums was $285,000, which compares to the year-ago figure of $278,000. Five counties reported double-digit increases (Grant, Jefferson, Kittitas, Lewis, and San Juan). King County prices jumped 9.1 percent from twelve months ago, rising from $384,925 to $420,000.

The median price for September’s single family home sales (excluding condos) rose more than 2.2 percent, increasing from $291,000 a year ago to $297,500. In King County, the surge was 9.5 percent.

OB Jacobi, president of Windermere Real Estate, noted luxury home sales in the Greater Seattle area have been very strong, with agents reporting stiff competition in certain segments of the market, especially for homes over $2 million. “I attribute this to Seattle’s economic boom, which is attracting an increasing number of high-paying, executive level professionals and international interest,” he remarked.

Despite keen interest in high-end homes, overpriced homes will not draw offers, cautioned Northwest MLS director Diedre Haines. “It is extremely important for sellers to know if their house is overpriced, it may not garner offers and will eventually sell for below market,” she declared, adding, “This is an absolute that has always been the case, in all market conditions, and all locations!”

Haines, who is regional managing broker for Snohomish County at Coldwell Banker Bain, described some of the newer inventory as not saleable or overpriced. “Today’s buyers are more savvy and educated regarding market values, so correct pricing has become the key factor in selling a home.”

(Industry insiders say poorly maintained homes, homes in undesirable locations, and overpriced properties are sometimes considered unsalable.)

Another MLS director, George Moorhead, expects to see slight value increases, but slower sales volume as the year winds down and into 2015. “What we are seeing is market correction and a balance of pricing, inventory levels and overall market health,” commented Moorhead, the designated broker and owner of Bentley Properties/America’s Home Caretakers in Bothell.

Brokers added 8,878 new listings to inventory (359 more than a year ago), but offers were made on nearly the same number of homes (8,875), so supply remains tight in many areas. At month end, Northwest MLS members reported 25,717 active listings, slightly fewer than twelve months ago when inventory totaled 26,014 listings for a decline of nearly 1.2 percent.

Supply (months of inventory) remained below the four-to-six month level that many industry experts say reflects a balanced market.

For the market overall, MLS figures show about 3.7 months of inventory. In King County, there is only about 2.3 months of inventory, and in Snohomish County it’s slightly more than 2.8 months.

Frank Wilson, a MLS director in Kitsap County where there is about 4.1 months of supply, said his analysis shows about one-third of homes sell in the first 30 days after being listed, but about 30 percent of homes don’t sell after six months.

“Even though the market has picked up, it is still important to price your home at or close to market value, otherwise buyers move on to purchase another home,” Wilson suggested. “We are seeing a trend of buyers who are much more discriminating about what they are buying. Despite not having a lot of choices, buyers are willing to step aside from a transaction after an inspection if the home is not perfect.”

Even though buyers are becoming more selective, Wilson said traffic at open houses remains robust. Commenting on activity, he said they experienced some slowdown in August, “then our market picked up again after school started.”

Moorhead also commented on supply, noting bank owned inventory levels (REOs) have become “lackluster and not anywhere near the investment value they were between 2008 and 2012.”

Northwest MLS director Dick Beeson echoed Moorhead’s observation. “With fewer REOs on the market and fewer investors buying lower-end properties, the median price is ticking up, helping sellers as well as appraisers justify values.” Beeson, the principal managing broker at RE/MAX Professionals in Tacoma, suggested the Federal Reserve’s actions bear watching as it continues “tapering” its bond-buying program (QE3, or quantitative easing) to stimulate the economy, possibly leading to rising interest rates.

Northwest MLS representatives also commented on the impact of international buyers, recent layoffs and new construction on housing activity.

“The influx of buyers from China is very real,” observed O’Leyar, who said these buyers are making “very significant purchases of prime properties,” with particular interest in homes east of Seattle.

Beeson agreed, saying he expects the international connection between the Northwest and Far East will continue to grow. He believes the widely reported increase in interest from Chinese buyers is partly the result of the Vancouver BC market being so expensive. “Like the San Francisco Bay area, Vancouver was their location of choice,” but skyrocketing values in those cities are prompting some to look elsewhere, including Puget Sound.

Parents who are purchasing homes for the kids are another segment contributing to the uptick in sales, according to one MLS director. “We’ve noticed an increase in parents purchasing rental properties for their children attending local universities as the demand for rental properties has pushed rents to all-time highs,” reported John Deely, principal managing broker at Coldwell Banker Bain in Seattle. “Many of the only available rental options are sub-standard or compact, micro-sized ‘apodments’ ” (a term sometimes used to describe compact, one-room housing units).

Commenting on emerging interest in micro-housing, O’Leyar expects some “amicable balance” will be found to accommodate the rapidly accelerating demand for close-in city housing. “Many buyers for these types of micro-housing are very much walking- and non-automobile oriented,” O’Leyar noted, adding “that can be a good thing for the environment and traffic congestion.”

Haines also commented on new home construction, pointing to activity in Snohomish County. “In 2015 it looks like new homes built by small local builders, as opposed to the national developers/builders, will be on the rise. This is something we have all been waiting for and are excited to see happening,” she stated.

MLS officials seem unconcerned about recent layoffs announced by Microsoft, Boeing and other local employers.

  • “My observation is the Microsoft layoffs are mostly within the Nokia division,” commented O’Leyar. “I think given the strength of the Eastside market if there is any impact at all it would be a minimal ripple, maybe only a slightly cooling effect, not any major shift,” he stated.
  • Moorhead agreed. “Area employment reductions with companies have had a negligible effect on home inventory and pricing,” he reported.
  • “The fourth quarter is expected to remain strong despite reports of the region losing jobs from both Boeing and Microsoft,” said Haines, who noted reports of employers having difficulty filling several high-paying tech industry jobs. (In July, the CEO of the Washington Technology Industry Association said about 5,000 computer science positions are currently unfilled in the state.)

Another industry expert, J. Lennox Scott, chairman and CEO of John L. Scott Real Estate, shared the optimism about the housing recovery. “As we head into the fall, we expect sales to remain strong — and market conditions are already shaping up for a brisk market starting the first of the year.”

Statistical summary follows.

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