KIRKLAND, Wash. (Oct. 5, 2011) – With inventory at its lowest level since May, members of Northwest Multiple Listing Service report “stiff competition for move-in ready homes” in some neighborhoods. Other key indicators in the latest statistical report from Northwest Multiple Listing Service show upticks in sales and some leveling off on prices.
Pending sales for the Northwest MLS service area, which encompasses 21 counties, are up more than 20 percent from a year ago. Following typical August-to-September patterns, the volume of pending sales (mutually accepted offers) tapered off last month (down 9.6 percent) compared to the previous month.
Brokers reported 4,988 closed sales during September, beating the year-ago volume by 991 transactions for a gain of almost 25 percent. The number of completed transactions in the four-county Puget Sound region (King, Pierce, Snohomish and Kitsap) jumped 32 percent from twelve months ago.
Northwest MLS members added 7,923 new listings to the database last month, the fewest since February. At month end, with those additions, there were 35,254 active listings in the MLS service area, almost 6,900 fewer than a year ago (a decline of 16.4 percent).
“This market is proving to be challenging, but not for the reasons you might think,” said OB Jacobi, president of Windermere Real Estate Co. He pointed out interest rates are low, affordability is high, and confidence in the housing market is improving. “These are all good things, but the result is an influx of motivated buyers in a market where inventory levels have not yet caught up to the demand.” Jacobi, a member of the Northwest MLS board of directors, said one consequence is “stiff competition for move-in ready homes that are priced right, especially in neighborhoods close to Seattle.”
“In Central Puget Sound, 90 percent of sales activity is taking place in the more affordable and mid-price ranges, where the inventory level of homes for sale is low to healthy,” said J. Lennox Scott, chairman and CEO of John L. Scott Real Estate. “Historical low interest rates combined with lower adjusted prices are attracting home buyers and investors at a healthy sales activity level,” he observed.
The median price on last month’s closed sales of single family homes and condominiums (combined) was $233,945, down about 9 percent from September 2010. Compared to six months ago (March 2011), prices area-wide have declined 3.7 percent, while a comparison to three months ago (June 2011) shows a price dip of 2.9 percent.
Distressed homes selling at deep discounts account for much of the drag on prices, according to data from the National Association of Realtors®. Its statistics show distressed homes – foreclosures and short sales – accounted for 31 percent of sales nationwide in August, the latest period in the NAR analysis.
Locally, industry veterans are encouraged by the combination of shrinking inventory and year-over-year gains in sales.
“Historically, low inventory at these levels has led to stable or slight increases in home valuations,” said Northwest MLS director Joe Spencer, COO and president of John L. Scott Real Estate. “It’s too early to tell,” he added, “because there are a lot of crosscurrents in the economy, but it’s encouraging seeing positive trends in sales activity and listing inventory.”
Realistic pricing is paramount in today’s market, according to Northwest MLS brokers.
“Historically low interest rates may get more buyers shopping but buyers are very well educated,” reported NWMLS director Darin Stenvers. “Before they ever leave their homes they have a good idea of which homes are priced correctly,” he explained. Conversely, he added, “Many sellers are not taking into consideration the effects of extremely tight appraisal guidelines and heightened credit requirements.”
Stenvers, the managing broker at John L. Scott’s Bellingham office, said homes are selling if sellers will look at the comparable sales that brokers and appraisers need to use as guidelines when bringing a home to the market. Many unrealistic sellers still think they can get what they “need” or “what they have invested,” but the buyers simply will not overpay, he emphasized. “Properly priced homes are selling, overpriced homes are not, it is that simple,” he stated, suggesting if a frustrated seller is not getting showings or offers they should ask their broker for new “comparable solds” and adjust their listing price.
Jacobi reported seeing an influx of cash buyers in the $800,000 to $1.2 million price range, especially on the Eastside areas around Bellevue. “Although prices have declined from their peak in 2007, financing for jumbo loans remains tough, so cash buyers have the upper hand in negotiating the best deals,” he observed. “The buyers are not looking at housing as a red hot investment,” he said, “but rather as a place for long-term value and a possible hedge against inflation. Like many of us, they’ve experienced first-hand the effects of falling stock prices and rising inflation. But unlike equity investments, these buyers figure that at least they can live in their home while they wait for the global economy to figure itself out.”
Commenting on the national picture, NAR Chief Economist Lawrence Yun said the market is underperforming given a pent-up demand in household formation. “We continue to experience a pattern in which financially qualified home buyers, willing to stay well within their means, are being denied credit – a factor in elevated levels of contract failures,” he said, suggesting buyers may be able to find more favorable credit terms with community and small regional banks.
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 22,000 real estate brokers. The organization, based in Kirkland, Wash., currently serves 21 counties in Washington state.
See below for statistical summary by counties