Housing market rebound continues, with “slow, unprepared buyers” settling for “2nd choice” homes
Posted by The Cascade Team Real Estate on Thursday, October 4th, 2012 at 10:33am.
KIRKLAND, Wash. (Oct. 4, 2012) – Home sales around western Washington continue to outpace activity of a year ago while inventory remains thin, according to new figures from Northwest Multiple Listing Service. Brokers say that combination is resulting in disappointment for buyers who are slow to accept the reality of a recovering housing market.
Commenting on September data from Northwest Multiple Listing Service that shows upticks in sales and prices, broker Frank Wilson said buyers who make unrealistic offers and requests are "back on the street looking at their second choice home." Meanwhile, some sellers with well-priced, well-prepared homes are receiving multiple offers according to Wilson, a member of the Northwest MLS board of directors and the managing broker of John L. Scott Real Estate in Poulsbo.
Northwest MLS figures for September show the pace of sales slowed from the past six months, but still outgained activity of a year ago. Members reported 5,535 closed sales, which compares to the year ago total of 4,988 for an increase of nearly 11 percent. Thirteen of the 21 counties served by the MLS reported double-digit gains in the number of completed transactions.
Through three quarters of 2012, closed sales are up 14.6 percent from a year ago (48,022 versus 41,906).
Prices on last month’s closed sales rose 9.2 percent from twelve months ago. The area-wide median price on single family homes and condominiums that sold last month was $255,500.
Prices on single family homes (excluding condominiums) increased more than 12 percent, rising from $240,000 to $269,000. The most expensive homes sold in San Juan County, which reported a median sales price of $380,000, and in King County, where the median selling price was $375,000.
Brokers added 7,300 new listings to inventory last month, the fewest number since January. With those additions, there were 25,476 active listings in the MLS system at the end of September. That total is down 27.7 percent from the year-ago selection that encompassed 35,254 listings.
The sharpest drop in active listings occurred in Snohomish County, which has about half the inventory of a year ago (2,187 currently versus 4,308 active listings at end of September 2011). Northwest MLS figures show year-over-year prices there jumped 14.6 percent.
The imbalance between supply and demand is "wreaking havoc" with some buyers and sellers, said Northwest MLS director George Moorhead, branch manager at Bentley Properties in Bothell. Some sellers are lamenting "missed opportunities," but he believes positive momentum will continue with the combination of below-normal inventory, record-low interest rates and changing views on home ownership. "We are seeing clients’ views change from a home being a short-term investment vehicle to being a place where we raise and teach our families," Moorhead remarked.
MLS members tallied nearly 600 more pending sales last month than a year ago. Brokers reported 7,494 mutually accepted offers for an increase of 8.7 percent from the year-ago total of 6,897 pending transactions. Sales results were mixed across the MLS market area, with 12 counties reporting increases, eight reporting declines and one unchanged.
The rapid pace of sales in some areas coupled with dwindling inventory means below-average months of supply in some counties. Area-wide there is about 3.4 months of supply, with five-to-six months considered to be average. King, Pierce and Snohomish counties all report levels below three months.
All cash buyers are returning to the entire market, observed MLS director Darin Stenvers. "Cash offers are being made across the price spectrum, including the million dollars-plus ranges," he added.
Stenvers, the office managing broker at John L. Scott, Inc., in Bellingham, said the ingredients are in place for "a perfect buying season," citing rapid absorption of inventory and well-priced homes as two factors. How long such conditions will last is "the $64,000 question," he stated, noting pent-up demand in some areas has buyers feeling the pressure to move quickly to get their offers accepted.
New home construction will continue making a rebound, Stenvers believes. He said builders are moving cautiously in most markets, being careful to build only the sizes and quality of homes that are likely to sell before completion, and not starting too many foundations at one time.
Despite brisk activity, Stenvers noted foreclosures and owners who are delinquent on mortgage payments remain a concern. The number of owners nationwide who are 90 days or more late in making payments is again on the rise, a situation that will continue to affect foreclosure rates, he explained.
"The lack of foreclosed homes not coming on the market has successfully stabilized prices but also created a lack of homes for buyers to buy," Stenvers stated.
Buyers are also weighing the pros and cons of renting or buying. "The rent versus buy conundrum is still the biggest obstacle facing buyers today," Stenvers reported.
Referring to new reports on recent and planned rent increases and low availability of good rentals in some areas, Stenvers said home ownership is "a better investment in many areas even if buyers are thinking of holding the home for a relativity short time frame." It is hard for someone to move into an apartment after having the freedom of a larger home, so displaced home owners are looking to rent homes first, he reported, adding, "This alone is driving investors back into the housing market," he stated.
MLS director Wilson said while the story of a few years ago has flipped, the path to ownership remains constant. "We used to say the seller who priced and staged their home the best would get buyers. Today we’re saying buyers who are most realistic with their offers and pre-approved with a lender, and who are the most aggressive might get the house they want."
"This is what a normal market looks like -- buyers and sellers negotiating fairly with each other and each feeling they may have left a little on the table," Wilson remarked. One of the benefits of a "normal" market is that it is not all about sale price, he explained, noting closing costs, type of loan, closing date, possession date and work orders are all things that balance out a normal transaction.
Setting up buyers for success remains the paramount goal, according to Wilson. A buyer’s path for success includes pre-approval with a lender, sufficient funds to pay their own closing costs, and the patience to wait through the closing process, especially if they are buying a short sale or bank owned home, he explained.
George Moorhead, another MLS director, echoed that advice, saying "Smart recovery is what everyone should be considering as we heal from the neglected financial actions of the past."
Current buyers are cautiously optimistic, Moorhead reported. Clients in general are united in debt reduction, building up savings and reserves, spending more wisely than they ever have, and have an optimistic outlook of the economy as a whole.
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.
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