June 13, 2009
*Inventory Shrinking, Sales Rising and Prices Stabilizing in Some Northwest MLS Areas*
KIRKLAND, Wash. (June 4, 2009) – Summarizing May, 2009 activity. Shrinking inventory (about 20 percent fewer listings than a year ago), double-digit increases in the number of pending sales (up 17.7 percent from a year ago) and signs of stabilizing prices (eight of the 19 counties in the report show price gains since January) may indicate an improving market.
Northwest MLS brokers notched 7,160 pending sales during May. That total out-gained the year-ago tally by 1,075 transactions (up 17.7 percent) and improved on April’s total by 242 sales for a 3.5 percent increase. For the four-county Puget Sound area, pending sales jumped 21.5 percent from a year ago, rising from 4,526 to 5,498 transactions.
Buyers had fewer choices during May than at this time a year ago. At month-end, member-brokers reported 41,318 active listings throughout the NWMLS service area. A year ago, there were 51,817 active listings. Current inventory includes 11,278 single family homes and condos that brokers added during May. For the same month a year ago, brokers added 14,176 new listings to inventory.
Kathy Estey, a real estate broker in Bellevue, Washington, said affordable homes inventory is down to the levels of a normal market and reaching for a sellers’ market. “Multiple offers are common in the under $400,000 range when the home is priced well, shows nicely and is marketed professionally,” she remarked. “Buyers who are waiting for prices to come down more have missed the bottom,” Estey believes.
Close in markets are the most active, with rural areas still lagging, but Estey says there is now some activity where little to none had existed in the first quarter. She believes prices have adjusted and completed new construction is still a very attractive purchase. “Builder inventory is being absorbed and there are fewer incentives. In January builders were giving away the farm, by March it was only half the farm and now they may just give away a chicken or two in order to make the deal.”
Prices are showing signs of stabilizing, according to NWMLS data. Prices area-wide are down around 10 percent from twelve months ago, but a comparison to January shows price gains in eight of the 19 counties in the NWMLS report. System-wide, prices for single family homes and condominiums that closed last month are up about 2.6 percent since January.
In King County, prices dipped about 12 percent from twelve months ago and have declined about 3.5 percent since January, but a closer look shows considerable variation within sub-areas. Prices in southeast King County fell 20 percent from a year ago, but since January are down only about 2.8 percent in north King County.
Condominium activity remains slow. Pending sales are down about 15 percent from a year ago. The median sales price of $240,000 is about 7.7 percent lower than a year ago. Condos in King County sold for a median price of $270,450 last month, which compares to the year-ago price of $287,925, a drop of about 6 percent).
Demand for high-priced homes is also tepid. According to Estey, there are “amazing opportunities for buyers with good credit scores and 25 percent down payment in the $900,000- plus marketplace.”
While cheered by the more vigorous activity, brokers note short sales and foreclosures continue to be a drag on the market. Such properties, often sold at deep discounts, may take extraordinary time to close once there has been mutual acceptance of an offer.
NWMLS director Meribeth Hutchings, broker/owner of Windermere Real Estate/Lake Stevens Inc., said her office represents the buyer of a short sale that has been pending since October. The buyers who hope to purchase the home in Mukilteo have been very patient, but are becoming less so and are ready to move from the small apartment where they have been living with two large dogs. “Every time we think we are getting close, the lender changes what they want,” Hutchings stated.
Another NWMLS director, Pat Grimm, reported similar experiences with a short sale. “We just closed one in Montlake on May 28 — after the parties to the transaction reached mutual acceptance on Feb. 10, said Grimm, a Windermere Real Estate owner/broker in Seattle, WA. (NWMLS defines a short sale as a transaction that does not produce sufficient funds to cover the existing monetary encumbrances against the property, closing costs, real estate commissions, and other financial requirements of closing.)
A Windermere Real Estate broker in Tacoma, Washington, Dick Beeson, said he has several agents deeply involved in handling short sales since Pierce County is so hard hit. He estimates around 25 percent of all properties for sale are either bank owned or short sale, and one of every three pending sales is one or the other.
“Short sales play a big role in what many buyers are looking for,” according to Beeson, who also noted these buyers often fail to realize the extraordinary length of time it takes to close a sale – generally twice as long as a conventional sale. “Many get discouraged after 60 or 90 days and withdraw from a sale, never having received notice form the underlying lender what they are willing to take for the property. Many properties end up going to foreclosure because of the inefficiency of the banks in providing answers to offers,” Beeson commented.
The recent uptick in pending sales, both locally and nationally, is a hopeful sign that we’re putting the worst of the market behind us, suggests Ron Sparks, managing vice president of a real estate brokerage in Seattle, Washington.
“As you would expect in a recovering market, not all neighborhoods are uniformly performing, and for home sellers particularly, there are plenty of challenges that remain.” However, he observed, “In many neighborhoods where just a few years ago broad affordability had all but vanished, lower prices, flexible terms and very low interest rates are pushing inventory absorption for single family homes to levels not seen since 2007.”
Sparks said multiple offers for the best listed properties are occurring everywhere, including Pierce and Snohomish counties. “Improving sales in one neighborhood helps dwindle inventory, and can push motivated buyers to search for homes in other neighborhoods. This process typically occurs before prices start to stabilize,” he explained.
Has that stabilization begun? “As my old Magic 8-Ball used to tell me: signs point to yes,” according to Sparks, who noted eight counties served by the NWMLS have seen price increases since January. “The sales volume in my Bellevue office is now roughly 10 times what it was in February, with expanded sales in almost every price category. Overall inventory levels have dropped substantially as well. Does this mean the optimal time for home buyers to take full advantage of favorable market conditions has passed? I’d probably defer that to the Magic 8 ball also…“Ask again later.”
Recent fluctuations in mortgage rates have brokers and buyers alike wondering if rates will escalate as inflation worries return.
“While rates now are wonderfully low, waiting has cost buyers. Loans recently available for 4.75% are now 5.25%,” according to broker Kathy Estey. On a $400,000 loan, that means the monthly payment rises from around $2,128 to about $2,253 – and increase of nearly $125. She believes it would be wise to act now for the best selection in the affordable homes. “Who knows if we will see rates of 5% or below again anytime soon,” she wonders.
Commenting on a recent report from the National Association of Realtors showing a third consecutive month of improving pending sales, Lawrence Yun, NAR chief economist, said buyers are responding to very favorable market conditions. “Housing affordability conditions have been at historic highs, but now the $8,000 first-time buyer tax credit is beginning to impact the market,” he said. “Since first-time buyers must finalize their purchase by November 30 to get the credit, we expect greater activity in the months ahead, and that should spark more sales by repeat buyers.”
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Bob’s Bugle Real Estate Newsletter June 2009
Statistical Summary by Counties: Market Activity Summary for May 2009
4-County Puget Sound Region Pending Sales (SFH + Condo combined)
(Totals include King, Snohomish, Pierce & Kitsap counties)
This information is from the Northwest Multiple Listing Service which is the largest full-service MLS in the Northwest. Its membership includes approximately 28,000 brokers and agents. The organization, based in Kirkland, currently serves 19 counties in western and central Washington. Together, they serve 19 counties, mostly in western Washington, plus Grant, Kittitas and Okanogan counties in the central part of the state. NWMLS recently added service to Clark County with the opening of an office in Vancouver.
Bob’s Bugle Real Estate Newsletter June 2009, copyright 2009. All material contained herein is owned and protected. Any attempts to reproduce this information without the express written consent from the owner will be prosecuted.
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