Home buyers are in “full sprint” mode while sellers are stalling, according to brokers from Northwest Multiple Listing Service. As a result, MLS members are juggling severe inventory shortages and multiple offers in many Seattle neighborhoods and beyond.
MLS figures for May show double-digit drops in inventory compared to a year ago and double-digit gains in both sales and prices. Commenting on the numbers, Northwest MLS director Dick Beeson said “The crush between the lack of inventory and desperate buyers may soon generate the next TV reality show! The stressed market is exhausting everyone in its path, with no relief in sight.”
Last month’s volume of 11,425 pending sales across the 23 counties in the latest report nearly matched the number of new listings added to the database (11,862). At month end, the total number of active listings stood at 19,515, a drop of more than 18 percent from a year ago when members reported 23,917 active listings. Only two counties (Douglas and Ferry) reported year-over-year gains in inventory.
George Moorhead, another director with Northwest MLS, said multiple offers are commonplace for well-priced homes in desirable areas. “We are definitely feeling the squeeze on inventory levels with sellers holding off until they can find a home,” commented Moorhead, the designated broker and owner at Bentley Properties.
MLS figures for May show supply has dwindled to about 1.2 months in King County and 1.6 months in Snohomish County. Several neighborhoods near Seattle’s job centers have less than a month of supply.
For the MLS service area overall, there is about 2.4 months of supply – well below the 4-to-6 month figure used by many industry watchers as an indicator of a balanced market. About half the counties reported less than four months of supply.
Beeson, the principal managing broker at RE/MAX Professionals in Tacoma, noted supply in Pierce County has slipped to record lows, at just over 2 months. For sellers, there may be little solace. When they decide to sell they’ll need a replacement home “which may or may not be there,” he explained.
Pending sales jumped more than 10 percent in May compared to the same month a year ago, rising from 10,373 mutually accepted offers to 11,425. Last month’s pendings rose slightly from April’s total of 11,384. For the Central Puget Sound region encompassing King, Kitsap, Pierce and Snohomish counties, the MLS recorded 8,620 pending sales – the highest total for the month of May in at least 15 years.
J. Lennox Scott, chairman and CEO of John L. Scott, Inc. called 2015 “the best start ever for sales activity.” Citing MLS figures, he noted cumulative pending home sales in the four-county Puget Sound area for the first five months of the year are outpacing the previous record year of 2005. “This time,” he emphasized, “the housing market is built on a strong foundation of qualified buyers.”
“This is a supply-demand-distance type of market,” said Frank Wilson, branch managing broker at John L. Scott in Poulsbo. “They have run out of inventory in the Seattle market so now it’s just a matter of how far a buyer needs to drive to find a home that is available and affordable. Kitsap is seeing that demand increase with a bit of a lag as the market rolls from east to west into Kitsap and beyond,” said Wilson, another director on the Northwest MLS board.
With demand exceeding supply, prices continue to climb. MLS statistics show an area-wide year-over-year gain of more than 11 percent. The median price for last month’s 8,229 closed sales, including single family homes and condominiums, was $317,000. That compares to the year-ago median sales price of $285,000 for the 7,187 completed transactions.
In King County, the median sales price for single family homes and condos (combined) was $434,000, an increase of 9 percent from twelve months ago when brokers reported a median sales price of $398,000. Prices on single family homes (excluding condos) that sold in King County jumped to $480,942, about the same as April ($480,000), but up nearly 8.8 percent from the year ago figure of $442,250.
“Locally, home prices are continuing to rise at a steady pace, and they continue to outpace both inflation and wage gains,” observed Mike Gain, CEO/president at Berkshire Hathaway HomeServices Northwest. Pent-up demand is pushing inventory lower, he notes. Gain believes the supply challenges could be alleviated if more sellers put their home on the market. “Sellers may never see a better time to be a seller,” commented Gain, a former chairman of the Northwest MLS board.
OB Jacobi, president of Windermere Real Estate, echoed comments about the supply. “We’re still in desperate need of inventory. The irony is that there are plenty of people who want to sell, but won’t put their home on the market until they can buy something new. But they can’t buy something new until there are more homes on the market. It’s the proverbial chicken and egg situation for which I see no end in the near future.”
Demand exists across the price spectrum, fueled by renters, high wage earners and investors.
Gain noted renters are re-entering the housing market as they find they are better off buying than continuing to pay rent. “They are finding their monthly payment to be less than their rent payment for a similar home. They also like the fact their payment will remain the same. And they’re finding there are numerous low down payment assistance and no down payment mortgages available at incredibly low interest rates.”
Luxury home buyers are also active participants in the current market. A check of MLS statistics shows 887 single family homes priced at $1 million or more have sold during the first five months of the year. That compares to 696 for the same timeframe a year ago for a jump of more than 27 percent.
The segment of distressed properties is also rebounding. Moorhead cited figures showing 57 percent of REO (bank-owned) listings sold at or above 100 percent of list price.
Given the fast pace of housing activity, Northwest MLS brokers urged buyers and sellers alike to make sensible decisions and to take advantage of assistance from professionals.
Sellers should avoid the temptation to be greedy suggests Moorhead. “Our message to sellers is to be cautious with pricing or it will cost you thousands by over pricing.”
Frank Wilson advises sellers to refrain from agreeing to “select showings.” “To maximize on this market sellers should be sure their listing is exposed to all brokers in the Northwest Multiple Listing Service,” he explained.
Wilson also offered advice to buyers to avoid disappointment. “We are still seeing buyers who think getting a loan is like it was in the old days: fog a mirror and get a loan. That’s no longer the case,” he said, adding these misinformed buyers are offended when they are asked for documents and verifications all the way through closing. “Buyers need to be ready to buy on day No. 1,” he emphasized. “This means getting approved with their lender, being clear about what they want in a new home, becoming educated about the market, and being ready to write a strong offer when they find the right home.”
Mike Gain expects historically low interest rates, a growing economy, improving consumer confidence and consumer finances will continue to fuel activity and push up the numbers. “Anyone who can buy a home today at today’s prices with today’s low interest rates should do it. In my opinion, prices and monthly payments will never be lower than they are today.”
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 23,000 real estate brokers. The organization, based in Kirkland, Wash., currently serves 23 counties in Washington state.