The number of homes for sale in August increased dramatically over the same time a year ago. This is the result of a moderate increase in new listings and a much slower pace of sales. Homes are staying on the market longer, giving buyers more choices and more time to make an informed decision. While home prices are up compared to a year ago, the rate of increase was in the single digits rather than the double-digit surges of past months. It’s still a seller’s market, but sellers need to have realistic expectations about pricing their homes as the market softens.
King County experienced yet another flood of inventory with the number of homes for sale jumping 65 percent over the previous year. Despite the growth, the county has just 1.9 months of inventory and remains a seller-oriented market. The market has slowed but it remains fast-paced, with 62 percent of the properties here selling in fewer than 15 days. While home prices were up 3 percent from a year ago, the median price of $669,000 represented the third straight month of declines from the record-high of $726,275 reached in May.
The median price of a single-family home on the Eastside was up nearly 10 percent from the same time last year to $935,000. Home prices have declined each month from the all-time high of $977,759 set in June. Inventory increased 73 percent over last August. With supply soaring and home prices moderating, sellers need to work with their broker to price their home to meet the current market conditions. A year ago 47 percent of the homes on the Eastside sold for over list price. This August that number was down to 29 percent.
After leading the nation in home price growth for nearly two years, Seattle is finally cooling off. The median home price in August was $760,000, up just 4 percent from last year and down from the record $830,000 reached in May. Inventory soared in August, but the city still has just two months of supply, far short of the four to six months that is considered balanced. Bidding wars are becoming less common and price drops more common. Sellers must adjust their expectations to what appears to be a long waited moderating of the market.
Mirroring the market slowdown in King County, Snohomish County also experienced a cooling off in August. The median price of a single-family home was $492,000, up 8 percent from a year ago but down from the record high of $511,000 two months prior. Inventory increased nearly 30 percent, but at just 1.6 months of supply the market remains very tight and sales are brisk. Sixty percent of homes here sold within 15 days.
This post originally appeared on the WindermereEastside.com Blog.
The following analysis of the Western Washington real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions.
The Washington State economy added 83,900 new jobs over the past 12 months, representing an annual growth rate of 2.5%. This is a slowdown from the last quarter, but employment growth remains well above the national rate of 1.6%. Employment gains continue to be robust in the private sector, which was up by 2.8%. The public sector (government) grew by a more modest 1.1%.
The strongest growth sectors were Retail Trade and Construction, which both rose by 4.8%. Significant growth was also seen in the Education & Health Services and Information sectors, which rose by 3.9% and 3.4%, respectively.
The State’s unemployment rate was 4.7%, down from 4.8% a year ago. Washington State will continue adding jobs for the balance of the year and I anticipate total job growth for 2018 will be around 80,000, representing a total employment growth rate of 2.4%.
Home Sales Activity
There were 23,209 home sales during the second quarter of 2018. This is a drop of 2.3% compared to the same period a year ago.
Clallam County saw sales rise the fastest relative to the same period a year ago, with an increase of 12.6%. Jefferson County also saw significant gains in sales at 11.1%.
The number of homes for sale last quarter was down by a nominal 0.3% when compared to the second quarter of 2017, but up by 66% when compared to the first quarter of this year. Much has been mentioned regarding the growth in listings, but it was not region-wide. King County saw a massive 31.7% increase in inventory, though all but three of the other counties covered in this report saw the number of listings drop compared to a year ago.
The takeaway from this data is that while some counties are seeing growth in listings — which will translate into sales down the road — the market is still out of balance.
As inventory is still fairly scarce, growth in home prices continues to trend well above the long-term average. Prices in Western Washington rose 12.2% over last year to $526,398.
Home prices continue to trend higher across Western Washington, but the pace of growth has started to slow. This should please would-be buyers. The spring market came late but inventory growth in the expensive King County market will give buyers more choices and likely lead to a slowing down of price growth as bidding wars continue to taper.
When compared to the same period a year ago, price growth was strongest in Mason County, which was up 17.4%. Eleven other counties experienced double-digit price growth.
Mortgage rates, which had been rising significantly since the start of the year, have levelled off over the past month. I believe rising rates are likely the reason that inventory levels are rising, as would-be sellers believe that this could be the right time to cash out. That said, the slowing in rate increases has led buyers to believe that rates will not jump soon, which gives them a little more breathing room. I do not expect to see any possible slowdown in demand until mortgage rates breach the 5% mark.
Days on Market
The average number of days it took to sell a home dropped by seven days compared to the same quarter of 2017.
King County continues to be the tightest market in Western Washington, with homes taking an average of only 13 days to sell. Every county in the region other than Clallam saw the length of time it took to sell a home drop when compared to the same period a year ago.
Across the entire region, it took an average of 41 days to sell a home in the second quarter of this year. This is down from 48 days in the second quarter of 2017 and down by 20 days when compared to the first quarter of 2018.
Although we did see some inventory increases when compared to the first quarter of the year, we are essentially at the same level of homes on the market as a year ago. The market has yet to reach equilibrium and I certainly do not expect to reach that point until sometime in 2019.
This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors. For the second quarter of 2018, I have moved the needle very slightly towards buyers, but it remains firmly a seller’s market. This shift is a function of price growth tapering very slightly, as well as the expectation that we should see more homes come on the market as we move through the balance of the year.
Matthew Gardner is the Chief Economist for Windermere Real Estate, specializing in residential market analysis, commercial/industrial market analysis, financial analysis, and land use and regional economics. He is the former Principal of Gardner Economics, and has more than 30 years of professional experience both in the U.S. and U.K.
This post originally appeared on the Windermere.com Blog.
As home prices in King County have reached record highs, some people are wondering whether we are approaching another housing bubble.
While it’s true that home prices here have surpassed the last peak hit during the housing bubble, that doesn’t mean we are in bubble territory today. The last bubble was fueled by faulty mortgage practices. Today, loans are granted on much more sound principles.
More importantly, the local economy is flourishing. Seattle has the fastest growing population of any major city in the country. The demand for homes, and historically low inventory, have been the catalyst for rising home prices here.
Still not convinced that there is no bubble? Let’s take a look at the statistics.
King County Median Sales Price
According to data from the Northwest Multiple Listing Service, the median home price in King County rose steadily since 1993 (the first year the NWMLS reported median home figures), fell during the crash, and has risen since 2012.
Now, let’s assume there was no housing bubble and crash in the mid-2000s and that home prices appreciated at normal historic levels for King County, which has been an average annual rate of 6 percent for many decades. This graph compares actual home prices (blue bars) with what prices would have been with normal appreciation (orange bars) over the same period.
King County Median Sales Price
Bottom Line: Had there not been a boom and bust, based on historic appreciation rates home values would be close to where they are right now. However, there is no doubt that home prices have risen rapidly the past few years, and that rate of appreciation can’t be sustained over the long term. If you are considering buying a home today, make sure you can afford the payments, and choose a location that will appeal to you for years to come.
This post originally appeared on Windermereeastside.com.
The Seattle real estate market is Hot, Hot, Hot – home inventory is scarce, and buyers are plenty. Home sellers will likely find they’re in the catbird seat. Unlike in years past, sellers have more options at their disposal – and one of the most common strategies, is encouraging all buyers to perform (and pay for) a “Pre-Inspection” before they place an offer to purchase your home.
The primary advantage of a buyer-performed pre-inspection is that it allows the seller to keep the home “Active” and on the market for other potential buyers to also consider placing offers. In an exceptionally tight market where multiple offers can be expected, this will likely allow the seller to review offers which have waived an inspection contingency. Once an offer is accepted, this means it’s likely the only remaining roadblock to closing is financing, unless it’s an all-cash purchase.
A Call To End Pre-Inspections
Earlier this week, I read a blog post by another successful Coldwell Banker agent here in Seattle, in which they propose an end to buyers performing pre-inspections. In the post, the author cited a recent sale where the seller attracted multiple offers and a higher price by allowing the traditional Pending Inspection period after going under contract. The sale apparently closed successfully, and everyone was happy – which is perfect of course. But, this left me wondering, “what if” the buyers had walked? (I elaborate more on this below.)
I’m in 100% agreement with the call to “take a deep breath” in this too-often crazy real estate market – and not get carried away. However, I respectfully disagree with the suggestion that pre-inspections are a disservice to the seller.
Without a doubt, “yes” – a home in the current seller’s market will likely attract more offers without encouraging buyers to perform pre-offer inspections. I mean – I’m not usually as “blunt,” but let’s cut to the chase… one would expect nothing less when buyers have no actual “skin in the game” when placing the offer, beyond their signatures that is (which these days, is often done with a few mouse clicks or screen taps). Moreover, it’s a sad fact in this type of market, that too many poorly written offers are submitted just in hopes that “something sticks.” That’s a waste of everyone’s time, on all sides.
When inventory is effectively almost “zero” in some neighborhoods, it’s a given that there will be ample interest for new listings in the most sought-after price ranges. In such cases, a seller would be smart to “limit the pool” of potential buyers by strategically attracting home buyers who are willing to perform & pay for a pre-inspection, and then submit their highest & best offer after inspection – which includes waiving any home inspection contingency.
What About the “Win-Win” Scenario?
Of course, I represent buyers too – and I fully understand that a hectic seller’s market can be extremely frustrating to navigate… I certainly don’t “enjoy” the situation either. Moving beyond emotional concerns however, the fact remains that sellers hold a very enviable position these days – it’s simply the current reality. During such times, it behooves a seller to maintain their advantage in the market throughout the selling process. The seller should not be “overly concerned” with the buyer’s best interests or desires. This is when I believe the so-called “win-win scenario” is being taken a bit too literally.
This is not to say that buyers & sellers – or their agents – should take an “adversarial” position. Absolutely not! Digging-in one’s heels unjustly, or acting arrogant can derail a transaction – regardless of market conditions. With that said, there’s positively nothing wrong with buyers or sellers fully-leveraging the market to be in their favor – and we owe it to our clients to suggest they take advantage of the nuances in every type of real estate market. For sellers, depending on the circumstances of course, this may mean encouraging buyers to perform home inspections prior placing an offer.
“Pending Inspection” – The Buyer is in Control
In the “typical” scenario, a home goes under contract “Pending Inspection.” The buyer hires an inspector and discovers several issues – not necessarily anything “major.” According to the inspection contingency as written, the buyer is in control at this point, and has absolutely nothing to lose by asking the seller for repairs, or to otherwise amend the monetary aspects of the contract.
When the seller receives the buyer’s inspection response, at this point the seller has two choices – they can either make repairs and/or financially amend the contract, or they’ll decide not to negotiate further, at which point the buyer may choose to terminate or proceed with the purchase. If buyer decides to terminate, the home goes back on the market.
The Seller’s Inspection Conundrum
Despite a “hot” market, this scenario presents a conundrum for the seller. Even if the seller has an offer accepted in back-up position, they must disclose any issues discovered in the inspection which they were made aware of. Each and every inspection item – regardless of severity – is a potential point of negotiation between the buyer & seller, placing the seller at a disadvantage. Savvy buyers will be advised, that sellers would rather avoid placing the home back on the market with an “inspection stain” on the listing, and instead would prefer to work with buyers who are already in contract, and more committed to a deal.
Of course, some sellers may refuse to budge on inspection items – but regardless, it’s definitely not an “ideal” position for the seller to be in. Having been in that position myself numerous times as a seller, I can assure you the inspection period (also known as the “Option Period” in Texas) can make you a nervous wreck, as future plans remain in limbo for what feels like an eternity. Would I personally take advantage of the opportunity to skip an inspection contingency completely? Absolutely – yes – without a doubt!
Other Inspection Contingency Hazards
Buyers Have Moved On: Meanwhile, while the inspection contingency clock is ticking, other interested buyers have moved on to new opportunities. Buyers have absolutely no time to waste in a hectic seller’s market – it’s less likely in these times that motivated buyers are going to “hang around” on the sidelines, because in doing so, they may miss other options. Sure… new buyers will definitely come along if inventory is severely limited. But the issue remains, that if the contract terminates due to the inspection, “doubt” will be raised by the buyer, and the seller & their agent must disclose the inspection items which have not been repaired. Disclosing isn’t an option – it’s the law.
All Returns Accepted – No Questions Asked!: The typical inspection contingency in the Seattle market is entirely subjective… no evidence what-so-ever is required in order to terminate. When a home falls out of contract during the inspection period, it’s not necessarily an indication there are any issues with the home – but buyers & agents will think otherwise.
Shopping the Options: Termination could indicate the buyer found another home – a very real hazard in a tight market when a buyer may do most anything to “lock-up” a home using an inspection contingency, while contemplating their options. (Extreme example… but we recently became aware of a situation where a buyer had locked up 3 homes Pending Inspection, using 3 different agents, and 3 different names – personal and corporate entities.)
The fact is, that an Inspection Contingency allows the buyer the opportunity to “kick the tires” for an agreed-upon duration – during which time they can change their mind for any reason. Of course no one would argue against a buyer’s legitimate desire to fully inspect the property – before or after contract. The question is, why would a seller want to risk a contract being terminated due to inspection issues, when/if it can be avoided?
What Should You Do?
Of course, our job when listing a home for sale is not to “instruct” the seller as to their direction. Rather, we provide guidance and options – and just as in this blog post… discuss the pros and cons of all potential contractual issues, including the Inspection Contingency.
No matter the current market conditions, rarely are there any “easy answers.” Ask a lot of questions of your agent! Being fully informed prior to listing your home for sale will better protect your interests, and pave a winning path towards closing.
Blog found at Realtor.com
Buying a home may be the American dream, but it’s also a monumental task: You have to clean up your credit, apply for a mortgage, scrape together a down payment, and then move all your worldly possessions in after you close on the deal. Phew! So then why do millions of Americans go through the trouble? Because they know that whatever headaches and hassles they must endure are far and away outweighed by the many benefits of buying a home has to offer, check out this top 10 list of perks that will repay your hard work from now well into retirement.
Predictable monthly housing payments
A landlord can raise your rent whenever a lease expires—and often by as much as he pleases. But as a homeowner, you can lock in a predictable mortgage payment for as long as 30 years. Bonus: Your housing budget goes toward your homeownership, not your landlord’s.
Owning a home will provide you with a valuable asset and financial stability. By purchasing a home, you’ll have an asset that, in many cases, will appreciate in value over time. A $400,000 home today should see an increase in value to $450,000, $500,000, or more. This makes your home one of the best investments you can make and a way to establish a financial foundation for future generations (aka your kids).
The many expenses of owning a home—like property taxes and accounting costs—are tax-deductible. The largest deduction is generally the interest you pay on your mortgage. This allows you to keep more of your hard-earned money.
Freedom to make modifications
What renter hasn’t thought “I’d really love to paint/alter/knock down this wall to…”? Well, to do whatever the hell you want to do. But, of course, you can’t—not without the landlord’s blessing. And if you are allowed to renovate your rental, it’s the landlord who will ultimately benefit. (Especially if you do a really awesome job at it.) Homeowners, on the other hand, don’t need permission. They can paint any room any color, replace the cabinets, add a deck, or do any other modifications they wish.
Sure, there’s the upfront cost of the down payment and closing.
After that initial down payment, the monthly expense of owning a home is much less than paying rent in the majority of markets in the U.S. According to ReatlyTrac, buying is the more affordable choice in 58% of U.S. markets (figure out costs in your area with the Rent Vs. Buy Calculator). Plus, mortgage rates are currently low, making it an economically wise choice to purchase a home sooner than later.
Some rentals are constructed of inferior building materials like plywood or shoddy drywall. If your house, townhouse, or condo is built of concrete and stucco, it will provide a greater sound barrier from your neighbors.
Built-in rainy day fund
Homeownership provides you with the opportunity to borrow money on the equity you eventually build up by consistently paying your mortgage. Securing a home equity loan at a relatively low interest rate will condition you to get financing for an emergency, large project, or other expense.
Owning a house you plan to stay in for a while also allows you to have an impact on your community with your taxes benefiting local infrastructure, schools, and organizations. You’ll also have a voice—if you wish—in how things are run in your area.
A secure retirement
A home can be the ultimate nest egg, providing you with a great investment for retirement. The longer you own a house, the more it should eventually be worth. If you plan on staying in a home for 30 years, it’s most likely it’ll appreciate 100%. As you get older, you can sell the home and use the proceeds to purchase or rent something smaller. Another option: Rent out the house to maintain a steady income stream so you can travel or use for other recreational activities.
This may seem fairly obvious, but it’s worth emphasizing: With a rental, you run the risk of getting kicked out at the end of your lease. With a home, you can live there indefinitely. And isn’t there something comforting in knowing there’s a place where you’ll always have a roof over your head?
No matter how much you love your home, sooner or later there may come a time when you want to sell and move on, but what are the 3 things that can speed up a sale?
How to sell a home fast
While many factors that affect how long it takes to sell a home are beyond your control, there are some things you can do to speed up a sale.
- Competitive pricing: Your home will sell faster if you price it on the lower end of the averages in your area.
- Completed repairs: Sprucing up your home leading up to the sale is equally if not more important than when you actually list it.
- Staging and decluttering: According to the Real Estate Staging Association, professionally listed staged properties simply look better; spend 73 percent less time on the market; typically sell for more money; even end up on buyers’ “must see” lists; are viewed as “well-maintained;” and have fewer concessions requested of the seller.
Housing demand is still exceeding supply. The low inventory has kept the market in an upward appreciation trend. Find out what the average days on market is, as well how much home prices have risen since 2015.
Washington State continues to see strong employment growth, outpacing national numbers with an annual rate of more than 3%. Interestingly enough, despite these substantial job gains, the unemployment rate remains stubbornly high at 5.8%. However, we're not overly concerned about this because it’s largely due to a growing labor force rather than a declining job market. This means that those who are unemployed who had previously stopped looking for work are now resurrecting their job searches because they have confidence in the economy.
We're expecting to see a modest drop in the unemployment rate through the balance of the year, and believe we will continue to outperform the nation as a whole with above-average job gains.
HOME SALES ACTIVITY
There were 22,721 home sales during the second quarter of 2016, up by 4.4% from the same period in 2015. We finally saw a much-needed increase in listings, which rose by 30.1% between first and second quarter. This increase in the number of homes for sale led to an increase in sales, which rose by 4.4% when compared to the same period in 2015.
Island County saw sales grow at the fastest rate over the past 12 months, with sales up by 22.1%. This is a small county which is subject to wild swings, so I take the data at face value. That said, the larger Thurston County saw sales up by an equally impressive 19.7%. Most interesting is that King County saw sales fall modestly compared to the same time period in 2015. Price—and supply—are clearly an issue in the most populous county in our state.
Overall listing activity was down by 21.8% compared to the second quarter of 2015, but the good news is that the supply side deficit is actually getting a little less than we have seen over the past few years. The total number of homes for sale was 30.1% higher than seen at the end of the first quarter. While much of this can be attributed to seasonality, it is still nice to see!
- The region is experiencing positive job growth, and with it, migration to Washington State is running at a very brisk pace. Given these factors—in addition to our lack of new home construction—it is not surprising to see demand substantially usurping supply. As I look forward, I believe inventory levels will continue to rise modestly, but it will remain a solidly seller's market for the rest of the year.
With demand still exceeding supply, we should not be surprised to see average sale prices continuing to rise, as is certainly the case in our region. Home prices rose by 8.1% between the second quarter of 2015 and the second quarter of this year. This is down from the annual rate of 10.1% that we showed in our last report, but the rate is still far higher than the historic average of 4%.
Regular readers of this report will remember that there were several counties where average sale prices in the first quarter were actually lower than seen a year before. It was suggested that seasonality was to blame and that was indeed the case, with all counties in this report now showing annualized price gains.
- When compared to the second quarter of 2015, price growth was most pronounced in San Juan County and, in total, there were nine counties where annual price growth exceeded 10%.
- The prevailing supply/demand imbalance continues to push prices higher, and persistently low interest rates are just adding fuel to the flames. If rates stay at current levels, it is unlikely that we will see much in the way of slowing appreciation for the rest of the year.
DAYS ON MARKET
The average number of days it took to sell a home dropped by 17 days when compared to the second quarter of 2015.
It took an average of 67 days to sell a home in the second quarter of this year—down from both the 86 days it took to sell a home in the first quarter of this year, and from the 84 days that it took to sell a home in the second quarter of 2015.
- The only market where the length of time it took to sell a home rose was in the notoriously fickle San Juan County, where it rose by 30 days to 196 days. In the rest of the region, the average decrease in the time it took to sell a home between the second quarter of 2015 and the second quarter of 2016 was 20 days.
- Snohomish County has joined King County as a market that takes less than a month to sell a home. At 18 days, King County is unarguably the hottest market in the region, but sales are slowing due to the lack of inventory. This imbalance is unsustainable over the long term.
This speedometer reflects the state of the region’s housing market using housing inventory, price gains, sales velocities, interest rates, and larger economics factors. For the second quarter of 2016, we're leaving the needle in the same position as last quarter. Inventory levels have improved, albeit modestly, and price growth has slowed very slightly. However, this is offset by a jump in pending sales, a slightly higher number of closed sales, and a drop in interest rates. As such, the region remains staunchly a seller's market.