It’s All About Inventory: “Exceptionally Low” Inventory Results In Steep Price Hikes Around Greater Seattle Region.
Posted by Cary W Porter on Monday, January 8th, 2018 at 10:48am.
KIRKLAND, Washington (January 5, 2018) – The year 2017 may be in the books and for many members
of Northwest Multiple Listing Service it was a memorable one with December’s activity being no
exception. Brokers reported historic lows for inventory and year-over-year price gains in most areas
- Historic lows for inventory
- Inventory down 19 percent
- Lowest level of homes for sale in a decade
- King County prices up nearly 16%
- System wide prices up 11.4%
“I’ve never seen inventory this low in Kitsap County in 27 years,” remarked Northwest MLS director
Frank Wilson, branch managing broker at John L. Scott Real Estate in Poulsbo. That county’s number of
active listings last month plunged nearly 40 percent from year-ago levels.
At month end, there were only 397 active listings in Kitsap County (down from the year-ago total of 659),
a level Wilson described as “exceptionally low,” even accounting for seasonal factors. “A normal
inventory in Kitsap County used to be 1,500 to 1,700, but we have not seen this number of active listings
in several years,” he lamented (Northwest MLS data show the last time inventory topped 1,500 in that
county was in July 2014 when there were 1,503 listings at month end).
For the MLS area overall, inventory shrunk 19 percent, from 10,569 active listings at the end of 2016 to
last month’s figure of 8,553. That’s the smallest selection for any month in the past decade. For the fourth
time this year, monthly inventory dipped below the 10,000 mark, a level not reached at any other time
during the 10-year comparison.
Despite the paltry supply, last month’s sales remained remarkably strong, with closings up slightly (0.88
percent) from a year ago. Northwest MLS members reported 7,642 closed sales, about the same volume
as a year ago when completed transactions totaled 7,575.
Year-over-year pending sales of single family homes and condos (combined) fell about 3 percent, from
6,390 to 6,198, but far outgained the number of new listings added to inventory (4,053).
“December, which has historically been a slower month, picked up momentum and never let up,” reported
George Moorhead, designated broker at Bentley Properties. Unlike October through November, which he
described as slower than what had been seen the past three years, “December drew aggressive buyers,
some motivated by expectations of a flattening market, with others trying to beat anticipated interest rate
hikes.” Purchasers were from all buying demographics, noted Moorhead, a member of the Northwest MLS board of directors.
Several MLS leaders commented on the consequences of depleted inventory, including OB Jacobi,
president of Windermere Real Estate.
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“While pending sales are down double digits in King County, it’s not because there are fewer people
buying, it’s because there is far less to buy,” according to Jacobi. “That’s why home prices tell the true
story of this market and the huge discrepancy between supply and demand. As long as this imbalance
remains, prices will continue to see steep increases, just as they did in December and throughout 2017.”
Northwest MLS statistics show prices rose 11.4 percent system-wide for the 7,642 completed sales of
homes and condos. Thirteen of the 23 counties in the report had double-digit price hikes from a year ago.
Two counties reported price drops: Chelan (-11.2 percent) and Douglas (-6.5 percent).
Within the Puget Sound region, King County registered the sharpest escalations at nearly 16 percent.
Year-over-year prices jumped from $505,000 to $585,000. For single family homes in King County, the
hike was similar (about 15.5 percent), rising from $550,000 to $635,000 at year end.
Condo prices surged 28 percent in King County over the past twelve months, from $315,000 to $402,000.
During the same year-over-year period, active listings fell from 346 units to 206 (down more than 40
percent), leaving only about 10 days of supply (0.35 months of inventory).
System-wide, there is a little more than a month’s supply (1.12 months) of homes and condos, with the
shortages most pronounced in the four-county Puget Sound region. Three of those counties – King, Kitsap
and Snohomish – have less than a months supply; Pierce County is somewhat better off with 1.1 months.
“While all year we’ve been bemoaning lack of inventory and escalating prices, the statistics show 2017
was a banner year in many respects for real estate in the Puget Sound region and throughout the
Northwest,” stated Mike Grady, president and COO of Coldwell Banker Bain. He cited year-over-year
gains in both prices and values, commenting “As a result of this strong market, homeowners are
experiencing bountiful gains in property values.”
Brokers expect momentum to continue despite uncertainty about interest rates and taxes.
J. Lennox Scott, chairman and CEO of John L. Scott Real Estate believes the Central Puget Sound
housing market will remain one of the strongest in the nation. “It will be another happy new year for real
estate activity.” As the new year unfolds, he expects buyers “will emerge from winter holiday hibernation
in big numbers” in part thanks to the Seahawks. “Without the Seahawks in the football playoffs, the 2018
housing market will be more intense earlier in January rather than heating up after the Super Bowl,” Scott
remarked.
No Price Bubbles–Even in the Hottest Markets
In 2016, the housing market broke records for speed, competition and demand, all while prices continued to rise. This has caused worry about a housing bubble in 2018, especially in West Coast markets like Seattle. However, we do not see a bubble anywhere in 2018 for two main reasons:
1) First, buyers and sellers remain on the same page when it comes to price, with a sale-to-list ratio at 100 percent or above in the most expensive West Coast markets this year. Even in area neighborhoods and cities where we’ve seen strong price increases, sale-to-list ratios are above 100. N
2) Second, in West Coast metros like Seattle where prices have now surpassed their 2006 peak, homebuyer debt has declined. The amount of mortgage debt as a percentage of the value of the home (known as loan-to-value) is a good signal that price growth will continue next year at about the same rate as 2017.
Scott also anticipates a “frenzied, multiple-offer market” in the more affordable and mid-price ranges, as
well as “good-to-strong” sales activity in the luxury market close to the job centers. Positive job growth
and attractive interest rates will propel activity, he suggests, adding “In the more affordable and mid-price
ranges, the impact of the new federal tax policy is minimal.”
Wilson also believes the new tax code will not have an immediate impact on home sales in Kitsap
County. “The majority of our purchasers are buying for lifestyle reasons such as a new job, transfer of job
or duty station, or household size expanding or contracting.” He suggests 2018 “will look a lot like
2017” but everything will be amplified due to the extreme shortage of active listings.
Grady concurred. “As we look forward to 2018 we continue to believe this is a great time to buy real
estate. We see only positive returns for homeowners and real estate investors this year and likely for
several years to come.”
Moorhead anticipates aggressive buyer activity through May, but expects some short-term flattening
thereafter with single-digit appreciation in the range of 5-to-7 percent. Builders still have memories of
2008, but with moderate activity and price increases likely to be sustained, “they are cautiously
optimistic.”
Luxury buyers seem to be undeterred by the change in the mortgage interest deduction, Moorhead noted
(the bill lowered the cap from $1 million to $750,000 for primary residences). He said they polled their
top 30 luxury home buyers regarding the change. The most common responses were “disappointment at
losing a great tax planning deduction,” Moorhead reported, but added, “Those surveyed said it would not
change the style of home or price point for the homes they are looking to purchase.”
Northwest Multiple Listing Service, owned by its member real estate firms, is the largest full-service
MLS in the Northwest. Its membership of more than 2,200 member offices includes more than 26,000
real estate professionals. The organization, based in Kirkland, Wash., currently serves 23 counties in the
state.
“Information and statistics derived from Northwest Multiple Listing Service.”
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