Marisa Ormando & Stan Chang
KIRKLAND, Wash. (July 5, 2012) – June may have been cooler and wetter than normal, but weather did not seem to deter home buyers and sellers around western Washington. "Close-in Seattle neighborhoods have been experiencing the most intense buyer activity since 2006," one broker remarked.
Figures just released by the Northwest Multiple Listing Service show 8,577 sellers accepted offers on their homes and condominiums last month. That volume of pending sales across 21 counties was 13.8 percent higher than the same month a year ago, according to the MLS report.
Closed sales also reflected signs of a recovering market, with upticks in both volume and prices. Through the first six months of 2012 closings are up 14.4 percent (29,777 versus mid-year 2011 figure of 26,034 closed sales).
MLS members reported 6,214 closed sales of single family homes and condominiums during June, an improvement of 11.7 percent from twelve months ago, and the highest total since September 2007.
Prices on last month’s completed sales increased more than 5.8 percent from a year ago, with the median price area-wide rising from $240,950 to $265,000. Single-family home prices (excluding condos) jumped 7.3 percent, while the median selling price on condominiums fell 1.7 percent from a year ago.
Northwest MLS directors credited several factors for contributing to brisk activity, with many of them mentioning inventory shortages. "Consumers bothered by the lack of inventory are ready to make sure they do not miss out on the shift in the market," stated MLS board member Darin Stenvers, office managing broker at John L. Scott in Bellingham.
Frank Wilson, another MLS director, believes a unique aspect of this market is "artificially low interest rates" and said waiting to buy a home "could result in a double financial impact."
"With inventory at such a low level, we are seeing buyers make multiple offers on well-priced homes as they come onto the market," reported George Moorhead, branch manager at Bentley Properties in Bothell. This lack of inventory is providing price support in many areas, and, he added, "giving sellers, who were originally on the fence, the confidence to market their home – something that has been lacking since 2008."
Moorhead said buyers may not fully realize the favorable conditions. For example, he said the recent Fed action to purchase $270 billion more in long-term bonds resulted in more favorable mortgage rates to help offset rising values. As one client told him, "that knocking at our door was opportunity, and we almost missed it!"
Inventory compared to a year ago is smaller by 10,326 listings. At month end, Northwest MLS inventory stood at 26,545 listings. That compares to 36,871 active listings for the same month a year ago, a drop of 28 percent. The sharpest drops occurred in Snohomish County (down 48 percent), King County (down nearly 42 percent) and Pierce County (down 31 percent).
MLS data indicate there is less than a two-month supply of homes in both Snohomish and King Counties, well below the figure of 5-to-6 months that many analysts use as a gauge of a balanced market.
MLS director Diedre Haines, regional managing broker in Snohomish County for Coldwell Banker Bain, said bank owned (REO) property listings are nearly nonexistent compared to a year ago and "buyers are losing interest in making offers on short sale listings" due to the extended time it takes for such transactions to close. She said nearly every sale is a multiple offer situation, "driving the price higher than the list price."
A "critical shortage of listings" is causing multiple offers and escalating prices in all price ranges, especially under $500,000," according to MLS director Mike Skahen, the broker who described buyer activity as the most intense he has seen since 2006. "It is not unusual for more than 50 buyers to come through open houses and it’s become common now to hold listings open on both Saturday and Sunday," added Skahen, the owner/designated broker at Lake & Co. Real Estate in Seattle.
Skahen noted – with some amusement -- a recent housing market report on the front page of a national newspaper. It gave Ballard a positive ranking and featured a 1930s brick Tudor in that community that drew 10 offers and sold for 10 percent over the asking price. The publication referred to the home as being near a "historic maritime village," which Skahen said made him smile.
Joe Spencer, area director for Keller Williams Northwest Region, cited two factors for continued low inventory. "Low interest rates are prompting existing owners to refinance, while the negative equity position of another 20-to-30 percent of homeowners makes them unable or unwilling to sell," yet, he observed, the market continues to improve.
A "fear factor" is also contributing to the crimped inventory, suggests Haines, the broker from Snohomish County where inventory is nearly half of the year-ago levels. "Sellers who are interested in selling are reluctant to list their homes due to a fear of having few choices for replacement regardless of whether they are moving up or downsizing," she remarked.
Several current conditions are advantageous to buyers, according to Northwest MLS brokers.
"Buyers have more buying power on their side, thus they feel more confident making offers on homes in a higher price bracket and in better condition than they could months ago," Stenvers stated.
J. Lennox Scott, the chairman and CEO of John L. Scott Real Estate, attributed the lively activity to a combination of factors. "The favorable conditions that initially attracted residential investors to the market place have now drawn a resurgence of exuberant local home buyers ready to take advantage of the lower adjusted prices and historically low interest rates," he commented.
MLS figures indicate prices may have bottomed out, particularly in areas close to job centers. In King County, for example, 23 of the 29 map areas Northwest MLS tracks had year-over-year price gains – and 13 of those areas experienced double-digit increases.
"Prices have been stabilizing in most markets and increasing rapidly in others, so buyers need to know the statistics for where they are buying to avoid costly mistakes," said Stenvers.
Northwest MLS director Frank Wilson, the branch managing broker at John L. Scott’s Poulsbo office, agrees. In Kitsap County, where his office is located, prices are up about 5 percent from a year ago. "This does not mean, however, that sellers should increase their prices by 5 percent," he cautioned, noting prices in some areas are lagging.
Sellers can ensure getting a fair price by following some proven tips, Wilson advised. They include reviewing a comparative market analysis (CMA) with their broker and having it updated every 30 days. Buyers also need to "set the pride of their home aside" and" look at the home and its value through the eyes of a buyer."
Especially important is that sellers "price and stage their home correctly right out of the gate," Wilson emphasized, noting most activity and interest in a home typically occurs within the first week to 10 days after a home is listed.
Buyers need to be realistic during the market recovery, according to MLS brokers.
"Buyers are expressing frustrations with not getting a home with offers they thought would be acceptable to a seller," Stenvers reported, adding "These buyers are misinformed and think all sellers are struggling and that is simply not true."
Stenvers said the lack of the "shadow inventory" that was long predicted has not yet materialized and has led to a faster recovery for the conventional seller.
Haines agreed: "We have not seen the materialization of what has been called ‘shadow inventory’ of bank owned properties," she commented, adding, "Moreover we don’t expect to see it anytime soon."
A recent Bloomberg news report stated "the so-called shadow inventory of homes that are seriously delinquent, in the foreclosure process or owned by banks and not listed for sale tumbled in April to the lowest level in more than three years."
The MLS directors who commented on the latest market report also acknowledged some challenges, including:
Problems with low appraisals. "It appears the appraisers have not yet caught on to what is actually happening in the marketplace," said Diedre Haines.
Artificially low interest rates, as noted by Frank Wilson. "Usually when we see real estate markets recovering, the economy is also improving, which means interest rates are usually adjusted upwards to stave off inflation. Today’s interest rates are being held down due to world economic conditions as well as political reasons," he stated. This will not last forever, he believes, explaining when interest rates move up by as little as one half of one percent (.5%) the monthly payment will go up by about 6 percent. "Waiting to buy a home could result in a double financial impact. A home price increase combined with an interest rate bump will add a significant cost to your monthly payment," he stated.
Buyer hesitancy and changing expectations. "What we find interesting today is the move away from a home being just an investment, but rather a long-term look at a specific neighborhood and how it complements a lifestyle," remarked George Moorhead, noting buyers are looking more at costs for utilities, maintenance, and taxes. "Everyone we have interviewed still feels real estate is one of the best investments one can make, but they also realize it too has a downside. Therefore, you just cannot throw caution to the wind anymore," he commented.
Homes in less than move-in condition."Many of the properties that are currently on the market in the $200,000 to $250,000 price range are in need of repair," Haines reported. "The sellers have little room monetarily for making those repairs, most of which are required by the lenders to be completed prior to closing. This is leaving buyers in a position of having to decide if they want to invest money in a home that they do not yet own."
Newly built homes. "New homes construction is beginning to develop in some markets but is needed in all markets to benefit buyers and sellers and to create a healthy housing environment," said Darin Stenvers.
Although the housing recovery is a slow process, Stenvers expects it will continue the rest of the year and through 2013. "Being an election year should help with stable interest rates and allow for growth in the job markets; this too should continue for the next 16-to-25 months," he believes.
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 21,000 real estate brokers. The organization, based in Kirkland, Wash., currently serves 21 counties in Washington state.