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Housing Demand Defined
What defines a housing market? We have had many different markets over the years that have been defined by certain identifiable factors. Will the last person leaving Seattle- turn out the lights, do you remember that billboard from 1971? Or the global housing boom of 2005-2007 that was driven by sub-prime credit lending options (which no longer exist, thank goodness!). Our current market is defined by strong demand and low inventory – the basic economic principle of supply and demand – Economics 101! A market with 0-3 months of inventory is a seller's market, 4-6 a balanced market and 6+ months a buyer's market. The route of the 2007-2011 economic down-turn, where months of available inventory favored buyers and was as high as 13 months, seems like ancient history. Since the Summer of 2012, months of inventory has favored sellers in both King and Snohomish counties, with an average of two months of available inventory between the two counties over the last three years. There is a market divergence going on between King and Snohomish County due to some unique factors each county possesses.
First, King County's lack of inventory has been drastic. Year-to-date, it has hovered at one month of available inventory, which means that each month we are nearly selling out of homes! This is due to the fact that demand is high and inventory is down. In the last 12 months, Seattle has had 27% less homes for sale than the previous 12 months, and closed sales are up 6%. In fact, Auction.com just named Seattle the number one housing market in the nation. This is due to the city's large technology sector driving employment, low interest rates and an increase in household formation. The housing premium in Seattle is rooted in shorter commute times to job centers, high walk scores and hip urban centers. The premium is real though, with the median home price over the last 12 months in Seattle reaching $528,000 – up 13% from the previous 12 months.
In Snohomish County inventory is still tight, with an average of two months of available inventory this year. Inventory has been somewhat supported by new construction and improved equity levels for re-sale properties. The median home price over the last 12 months was $347,000 – 34% less than Seattle. Median price growth is up 9% complete year-over-year.
What should we expect going forward into 2016? In both counties there was an increase in inventory in the third quarter. This is a promising indicator that folks are feeling more comfortable coming to market due to price increases after a booming spring market and healthier overall economic environment. Where this market is different from the bubbly market of 2007 are the drivers of the strong local economy, low interest rates and job growth, versus the unsustainable lending standards of the sub-prime loan movement. I believe we will see more homes come to market, especially as we head into the spring 2016 market. Folks are ready to move on to what is next for them, and recouped prices are enabling those choices. This increase will be welcomed as it will provide more options for buyers and will start to temper price growth, which is a good thing.
Where this market has gotten a bit tricky, is where one goes once their home sells. The low inventory has made this challenging, but with any market challenge you find creative and strategic ways to maneuver through and find success for your clients. Windermere has a great Bridge Loan product to utilize, temporary moves have solved these transitions, and longer closings with seller rent-backs have also been widely used to help make seamless transitions. This an exciting market to participate in, and creative strategy is the name of the game. Please contact one of our agents if you would like to know more about the current market conditions and how they relate to your bottom line and lifestyle decisions.
Market Update – Q3 2015
Snohomish County
Seasonal patterns are returning after the market’s fall and recovery
The graph above shows a two-year history of the market, where we have clearly seen a surge of inventory from March to August. In fact we saw a 48% increase in inventory during this time period. While that is a welcome increase, inventory growth was down 1% from the year prior, all while closed sales were up 18%! Months of Inventory based on pending sales has held steady at an average of two months over the last year. Due to demand outweighing supply we continue to see above-normal price growth, with both median and average prices up 9% complete year-over-year.
South Snohomish County
Seasonal patterns are returning after the market’s fall and recovery
You can see in the graph above a clear surge of inventory came to market from March to August. In fact we saw a 53% increase in inventory during this time period. While that is a welcome increase, inventory growth was down 5% from the year prior, all while closed sales were up 19%! Months of Inventory based on pending sales has held steady at an average of two months over the last year. Due to demand outweighing supply we continue to see above-normal price growth, with both median and average prices up 9% complete year-over-year.
North King County
Price increases are strong due to high demand and low inventory
All indicators, such as sold median price, sold average price and sold price per square foot point to a 10% increase in prices complete year-over-year. The median price in North King County this September was $555,000 and the average was $609,000. Average days on market have shrunk to as low as 22 days this last month, and the list to sale price ratio was 101%. Lack of supply and high demand is the gas in this market’s engine. Months of inventory based on pending sales finally crested one month after a small surge of additional inventory in the third quarter.
Eastside
Seasonal patterns are returning after the market’s fall and recovery
The graph above shows a two-year history of the market, where we have clearly seen a surge of inventory from February to August. In fact we saw a 44% increase in inventory during this time period. While that is a welcome increase, inventory growth was down 45% from the year prior, all while closed sales were up 10%! Months of Inventory based on pending sales has held steady at an average of 1.5 months over the last year. Due to demand outweighing supply we continue to see above normal price growth, with both median and average prices up 9% complete year-over-year.
Seattle Metro
Price increases are strong due to high demand and low inventory
All indicators, such as sold median price, sold average price and sold price per square foot point to an 11% increase in prices complete year-over-year. The median price in the Seattle Metro area this September was $556,000 and the average was $639,000. Average days on market have shrunk to as low as 22 days this last month, and the list to sale price ratio was 101%. Lack of supply and high demand is the gas in this market’s engine. Months of inventory based on pending sales finally crested one month after a small surge of additional inventory in the third quarter.
South King County
Price increases are strong due to high demand and low inventory
All indicators point to strong price increases with median price up 11%, average price up 8% and average price per square foot up 8% complete year-over-year. The median price in South King County this September was $335,000 and the average was $358,000. Average days on market have shrunk to as low as 36 days this last month, and the list to sale price ratio was 99%. Lack of supply and high demand is the gas in this market’s engine. Months of inventory based on pending sales finally crested 1.5 months after a small surge of additional inventory in the third quarter.
This is only snapshots of the trends in our area. Please contact one of our agents if you would like further explanation of how the latest trends relate to you.
A Check-up on Prices & Appreciation
As we finish up the 2015 summer selling market and head into fall it is a good time to take a look at where we are at regarding appreciation. The two maps below are from CoreLogic, a global real estate data analytic company. According to the top map, Washington has seen 8.9% in appreciation over the last 12 months. When I pull those same numbers for King county the appreciation rate is 8.5% and Snohomish county is 9.2%. Appreciation has continued to be strong, but it has tempered a bit compared to the previous year, which is a good thing. The biggest driver of the strong appreciation rates is high demand and low inventory. Our robust local economy has provided a lot of opportunity for buyers, and they are out there with force. Inventory levels continue to not provide enough selection to support the amount of buyers in the market. If you look at the map on the bottom you will see how today's price levels relate to peak prices from 2006/2007. Washington State is 3.1% from the peak, which means that many folks are at healthy equity levels. Surprisingly, not everyone knows this, and I think that is why we may not be seeing the amount of inventory that would better support the demand in the market and would slow appreciation levels to more traditional (and sustainable) rates of 3-5% a year.In fact, according to a Fannie Mae survey 23% thought they were in negative equity positions when only 9% where. Further, only 37% surveyed thought they had less than 20% equity when 69% actually did! Those are big discrepancies that could be crippling to a productive decision on what to do with your real estate. If you or someone you know is ever curious about your equity position please do not hesitate to contact us to get a clear picture. Any of our agents would be happy to do a comparative market analysis (CMA) for you to help keep you informed on your biggest asset, your home.
