Seattle’s hot real estate market begins to slow

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Real estate markets, including Seattle’s, are seeing a dramatic slowdown, according to an analysis by Redfin.

Seattle was one of 14 metro areas in the country this spring where half or more of the homes listed for sale between March 5 and April 29 went under contract within two weeks.

But things are changing, at least for now.

By mid-September, spring’s fastest-selling markets, including Seattle, saw big declines. About 35 percent of homes for sale in Seattle were off the market in two weeks or less over the summer – a drastic change from spring, when 72 percent were off the market within two weeks.

According to Redfin Chief Economist Daryl Fairweather, sellers are waiting longer for offers and many are having to drop their list price to attract buyers.

There are a few exceptions. Omaha, Nebraska; Grand Rapids, Michigan; and Boise, Idaho are still seeing more listing go pending faster than a year ago, though the markets have slowed since spring. The common factor, Redfin points out, is they’re smaller cities away from the coast where homes are more affordable.

“This points to a lack of affordability as potentially the biggest factor in why the previously red-hot markets have slowed so much this year,” the report states.

King County and much of the Puget Sound region saw housing inventory break past two months for the first time since January 2015, according to a recent report.

Housing inventory – or how long it would take to sell all homes on the market – sat at 2.83 months in King County, which is a 78 percent increase over last year. Snohomish (2.18 months), Pierce (2.01 months), and Kitsap (1.93 months) counties all saw increases in inventory as well.

Inventory in King County has steadily risen about 40 percent since May.

~King5 News

How backyard cottages could open up Seattle’s housing market

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Seattle City Council took a step closer toward legislation that would make “accessory dwelling units” easier to build, helping to offset mortgage costs for Seattle homeowners.

This comes hot on the heels of a study released by the City Council, evaluating “the potential environmental impacts of proposes changes to the City’s Land Use Code intended to remove barriers to the creation of accessory dwelling units (ADUs) in single-family zones.”

In layman’s terms, the city is looking to simplify and streamline the process for homeowners to build ADUs on their properties, known colloquially as backyard cottages or in-law units.

Homeowners would then be able to rent these units out, providing an additional source of income that could then be put toward anything from day-to-day living to mortgage payments. Alternatively, it also opens up more housing options for renters.

“We believe that backyard cottages will allow homeowners to increase the number and variety of housing choices in single-family zones,” said Councilmember Mike O’Brien in a press release announcing the release of the study.

Imagine buying a home with a mortgage outside of your price range, but being able to balance that out — or even completely cover the mortgage cost — by collecting rent from a backyard cottage. Opening up zoning requirements to make that easier is the goal for the City Council, touting it a small, creative fix to help offset Seattle’s ballooning housing market.

A planned bill would “remove some barriers to building ADUs, including changes to off-street parking rules, owner-occupancy requirements, and design standards.” The Seattle Times estimates that this would add approximately 2,500 ADUs in the next 10 years, and prevent 500 houses from being torn down to build “McMansions.”

Up until recently though, the City of Seattle has been charging an arm and a leg in zoning fees for anyone trying to build an ADU on their property.

“Most of the municipalities in the Pacific Northwest are in the fee-generating business,” noted KIRO Radio’s Ron Upshaw. “What this entire thing has been structured for up until this point is for them to collect fees.”

Hopefully, homeowners are about to see some relief once the City Council finally settles on new legislation.

Between this, and a promising report from Northwest Multiple Listing Service (MLS), it seems as though the local housing market could finally be softening for new buyers on a budget.

“In the South Sound the market has shifted into neutral and is idling at the moment,” Dick Beeson of RE/MAX Professionals said in the Northwest MLS report. He went on to point out how housing availability improved in Pierce and Thurston counties, “but nowhere near what King County has experienced.”

“Buyers are taking deep breaths as they survey this new territory,” said Beeson, claiming that potential buyers will soon see more homes available for sale for the first time in three years.

If homeowners are made able to both offset their own costs and provide additional housing to renters, that can only mean good things for anyone looking to buy in Seattle in the near future.

~My Northwest

Condo prices in Seattle continue to speak to the strength of the real estate market

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You may have heard Seattle is experiencing a cool down. Not so fast.

The market is definitely slowing within the city (if not Thurston County), but that doesn’t mean that prices have dipped all that much. The median closed sale price fell by about $45,000 from the month before, but it was still up $30,000 from the same time last year, according to the latest Northwest Multiple Listing Service report.

The NWMLS report writes, nearly 60 percent of the current inventory of homes and condos has an asking price of $750,000 or higher, making affordability an ongoing concern. And while the single-family home is still king in Seattle and King County, condos are also seeing higher prices.

The median closed sale price for condos in Seattle during August (the last month for which information was available) was $504,500. That’s a 6.21 percent increase from the same time last year.  Area-wide, that jump looks more like 8.1 percent, while across King County the jump in median condo prices was 11.3 percent.

Some good news is that condo prices are going through the same market-wide cool down as single-family homes: Active listings jumped nearly 58 percent, and closed transactions dropped off by about 15 percent.

But that’s not necessarily enough to turn what was once seen as a “starter home” into an affordable option. It’s also not a sign of a pending bubble or rapid inflation, as far as brokers can tell; like all the other changes in the city, blame it on the strong local economy.

“Even with some doom and gloom about sales being down in many counties, inventory doubling in some areas, and appreciation holding at around 8 percent for the year, our market is still very healthy and recovering from the depleted inventory of the past three years,” George Moorhead, designated broker and owner, Bentley Properties, Bothell said in the report.

~Zosha Millman, Seattle PI

Rent vs. buy: Millennials take a different path to homeownership

should-you-rent-or-buyAs more millennials move up the earnings ladder, get married and start families, housing is increasingly taking center stage.

Though millennials have a higher number of college graduates than Gen Xers and Baby Boomers, they’re less likely to own a home, according to the Urban Institute. In fact, their rate of homeownership was about 8 percentage points lower than Gen Xers and baby boomers at the same age.

Among the barriers to homeownership, according to the study: delayed marriage, student debt, and choosing to live in high-cost cities. What puzzles analysts is that in many of these cities the cost of renting versus buying a home is about the same.

An analysis by CoreLogic found that the median rent and median home prices in cities with a significant millennial population didn’t show meaningful disparities. In fact, in many markets, the monthly mortgage at the current 4.5 percent interest rate was around the same amount as renting. Of course, it’s important to keep in mind that buying a house encompasses more than just monthly payments, so things like coming up with a downpayment and maintenance costs can be a barrier.

Bigger cities, bigger paychecks, bigger price tags

People who live in expensive cities tend to earn more but they also devote more of that income to housing.

One financial rule of thumb is to spend under 2.5 times your gross income on a house. That means if you or you and your spouse earn a total of $100,000 per year, you generally shouldn’t buy a house that costs more than $250,000. This could be challenging to impossible in places like San Diego and Boston.

“Your cash flow out should be no worse than what you would pay in rent. Now, if you’re paying 50 percent of your income in rent and 45 percent in a house, then I’d say looking at a house is probably worth it,” says Richard Green, director of the USC Lusk Center for Real Estate.

“Three years ago, when interest rates were lower, buying was better from a cash-flow perspective than renting was. But, now that interest rates have gone up, that’s not the case anymore.”

The up-front costs are tough for millennials

Even if you can afford monthly payments, pulling together a down payment is a problem for many young homebuyers.

In Washington, D.C., where millennials make up 35 percent of the population, programs like the Home Purchase Assistance Program, or HPAP, are popular with young singles and families, says Polly Donaldson, director of the DC Department of Housing and Community Development, or DHCD.

HPAP provides up to $80,000 in gap financing and up to $4,000 for closing costs to eligible residents. These interest-free loans don’t have to be paid back immediately.

The chart below shows the cities with highest millennial populations and median home price and rents.

Millennial Cities: Cost of Buying vs. Renting
METRO AREA PERCENTAGE OF MILLENNIALS MEDIAN HOME PRICE MEDIAN RENT
Sources: The Brookings Institution (population); CoreLogic (home and rent prices).
Washington, D.C. 35% $430,000 $2,200
Austin-Round Rock, Texas 27% $309,000 $1,700
San Diego-Carlsbad, Calif. 27% $560,000 $2,300
Urban Honolulu, Hawaii 26% $570,000 $2,100
Boston, Mass. 25% $504,000 $2,500
Houston-The Woodlands-Sugar Land, Texas 25% $240,000 $1,600
Los Angeles-Long Beach-Glendale, Calif. 25% $615,000 $3,200
Orlando-Kissimmee-Sanford, Fla. 25% $241,000 $1,600
Seattle-Bellevue-Everett, Wash. 25% $550,000 $2,600
Chicago-Naperville-Arlington Heights, Ill. 24% $250,000 $1,900
Dallas-Plano-Irving, Texas 24% $290,000 $1,800
Las Vegas-Henderson-Paradise, Nev. 24% $275,000 $1,400
Minneapolis-St. Paul-Bloomington, Minn. 24% $258,000 $2,000
New York-Jersey City-White Plains, N.Y.-N.J. 24% $465,000 $2,300
Phoenix-Mesa-Scottsdale, Pa. 24% $260,000 $1,500
San Francisco-Redwood City-South San Francisco, Calif. 24% $1,300,000 $4,500
Atlanta-Sandy Springs-Roswell, Ga. 23% 225,000 $1,600
Philadelphia, Pa. 23% $170,000 $1,600
St. Louis, Mo. 23% $160,000 $1,300
Charlotte-Concord-Gastonia, N.C. 22% $230,000 $1,500
Detroit-Dearborn-Livonia, Mich. 22% $95,000 $1,300
Miami-Miami Beach-Kendall, Fla. 22% $300,000 $2,000

Seattle, both expensive and millennial dense, is one of the highest-priced housing markets in the country. Median home prices are $550,000, so finding an affordable home is no easy feat. Although there are down-payment assistance programs, they only go so far in a place where home prices are prohibitively expensive for most homebuyers.

“The city has remained really committed to helping first-time homebuyers, but we’ve also recognized that even our down-payment assistance programs is a challenging model,” says Jennifer LaBrecque, program manager for the City of Seattle Sustainable Homeownership & Weatherization program. “We provide $55,000 in deferred down-payment loans to buy a home, but if you look at what a low-income person can afford and what a house costs, that money goes toward closing that gap but not all the way.”

The down payment is just the beginning. Buyers should also factor in property taxes, insurance, applicable association fees and repairs. The average homeowner’s insurance premium, for example, is about $1,000.

Although homeownership is alluring for a number of reasons, Green says, it’s not right for everyone. Here are some questions would-be homeowners should first ask themselves:

Where will you be in the next 5 to 10 years?

If you’re not planning on sticking around in the same house for at least five years, then you should consider renting, says Ilyce Glink, author of “100 Questions Every First-Time Home Buyer Should Ask.” This is a real estate principle known as “the 5-year rule.”

“It’s really hard to break even in less than five years, unless you buy a really ugly property, fix it up and the market is right, then you might get lucky and make money. But you can’t count on it,” says Glink.

It typically takes five years to get ahead because selling a house is expensive. Home values typically don’t increase fast enough to offset closing costs if you sell too quickly. These costs can eat away at your bottom line if you don’t have sufficient equity built up.

“In the end, buying and selling is going to be about 10 percent of the value of the house right there — it could even be more than that,” says Green.

The five-year rule is especially important for young buyers who aren’t sure if they’re going to change careers, want more space or start a family.

The opposite is true for millennials who plan to live in the same house for many years. These folks should consider buying because, over time, the house will likely appreciate in value.

“You still have to pay to live somewhere. For most Americans the biggest portion of their net worth, where their retirement cash will come from, is in their house,” says Glink. “And the way they get there is by paying down their mortgage every year, the faster the better. What they do — without even thinking about it — is they stockpile this huge amount of savings.That’s where homeownership becomes a better deal.”

Do you have an emergency fund saved?

Renting is advantageous because the fixed costs are relatively inexpensive compared to owning a house. When you rent, you don’t have to worry about costly repairs.

“You need to make sure you have some money put away if a furnace or an HVAC system dies. That could be $10,000 right there. Boom,” says Green.

“You have to ask yourself: do I have access to that kind of money? The driveway needs paving. The roof needs replacing. And even in good homes these systems wear out every 15 to 20 years.”

Homeowners who don’t have rainy-day funds run the risk of accruing debt by using credit cards or taking out loans. This could cut into  the financial benefits of owning.

Millennials have to ask themselves, says Glink, what are they willing to sacrifice to be homeowners?

“Owning a home costs money and millennials are very focused on experience. That’s eating out or traveling to everybody’s weddings or international travel. Are you prepared to give that up? Are you prepared to give up your weekly massage? Where are you willing to trade off?” says Glink.

Do you want flexibility or stability?

Your lifestyle is another factor in whether you’ll be happy as a homeowner. People who don’t want to be pinned down to one city might find homeownership a burden. It’s difficult to accept a job offer in another state when you have to sell your house first.

Conversely, people who want to live in a particular area for many years will likely find comfort in knowing they can’t be evicted by a landlord and that their monthly housing payments will remain constant.

“When I talk to millennials about renting or buying there’s an issue of timing and there’s an issue of money. And timing is everything. They have to ask themselves: ‘Am I going to be switching jobs and moving cities? Do I want that kind of flexibility? If they do want flexibility because they’re still figuring out where they want to live, then renting is a good solution,” says Glink.

~Natalie Campisi, Bankrate

Seattle home prices soared by 100 percent over past six years, study says

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Average home prices in the Seattle area have skyrocketed by nearly 100 percent in the six-year period after the post-recession housing market hit bottom in 2012, says a new report released Thursday.

That was the steepest price hike among the largest 20 cities in the U.S. and well above the national average, according to the study released by the real estate sales and analysis site Trulia.com.

The report found that home values in the nation’s largest metro areas increased by an average of 53.1 percent from 2012 through 2018. But in the Seattle metro area, home values shot up by 99.6 percent.

A major factor fueling the sharp home price increases in Seattle – and other metro areas that have experienced soaring home prices – has been the rate of population increase exceeding the pace of new home construction.

In the Seattle metro area, the population has grown by two people for each home construction permit issued from 2012 through 2017, which forces home prices upward.
In addition, employment has ballooned by 12.4 percent during the same period in Seattle, the report says.

The new report found that home prices in urban areas increased by more than double the rate as rural areas – 53.1 percent in cities as compared with 27.9 percent in rural counties.

The reason: many metro areas have seen robust growth in jobs while many rural areas have stagnated.

In the 100 largest metro areas, population expanded 4.8 percent, while population in rural counties fell 1.0 percent.

~Komo News

Improving supply helps slow escalating home prices in Western Washington

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House-hunters in Western Washington can choose from the largest supply of homes in three years, and they are facing fewer bidding wars, according to officials from Northwest Multiple Listing Service.

New statistics from the MLS show prices appear to be moderating (up about 6.7 percent overall), but brokers say they are not bracing for a bubble, or even anticipating a quick shift to a buyers’ market.

“There have been incremental increases in listing inventory the past few months,” noted Gary O’Leyar, the designated broker/owner at Berkshire Hathaway HomeServices Signature Properties, but, he added, “By no means have inventory levels reached a point that is deemed to be a balanced market.”

Area-wide, the number of active listings of single family homes and condos (combined) rose 16.2 percent, but 16 counties reported year-over-year drops in inventory; of those, nine had double-digit decreases from twelve months ago. At month end there were 18,580 active listings, the highest level since September 2015 when buyers could choose from 19,724 listings. Compared to July, inventory was up nearly 11 percent.

The latest numbers from Northwest MLS show wide-ranging changes in the volume of active listings when comparing the 23 counties in the report. In Clark County, inventory doubled from a year ago to lead the list based on percentage gains. King County was runner-up with a 74.3 percent increase, rising from 3,329 active listings a year ago to 5,803 at the end of August.

System-wide there is about two months of supply, but less than that in the four-county Puget Sound region – well below the “balanced market” range of four-to-six months.

Supply was replenished in part by the addition of 11,994 new listings during the month, up slightly from the year-ago total of 11,781.

A slower pace of sales also contributed to the boost in supply. Brokers reported 10,109 mutually accepted offers last month, a drop of 14.8 percent from a year ago when they tallied 11,867 pending sales.

“The Puget Sound residential housing market remains positive, though the market has transitioned from a frenzied state to one of strong sales activity,” remarked J. Lennox Scott, chairman and CEO of John L. Scott Real Estate. “We are seeing stability in the affordable and mid-price ranges in all market areas,” he said, citing “one of the best job growth markets in the nation” and favorable interest rates as contributing factors.

George Moorhead, designated broker at Bentley Properties, commented on buyers “still sitting on the sidelines despite clear indicators.” He believes, “This is the best time in three years to be aggressive in the marketplace” given rising inventory, a significant increase in the number of cancelled and expired listings, and more incentives being offered by builders. “We are now seeing price reductions in new home communities as builders try to move inventory of completed homes,” he noted.

With expanding inventories “buyers are definitely taking more time to make a purchase,” stated Mike Grady, president and COO of Coldwell Banker Bain. “This creates a declining curve in pending transactions compared to last year,” he explained. MLS figures show last month’s pending sales in the four-county region were the fewest during August since 2012.

In the four-county Puget Sound region, pending sales were down more than 20 percent, ranging from a 12 percent decline in Pierce County to a drop of more than 23 percent in King County. Referring to King County’s sparse, 1.9 months of supply, Grady emphasized it’s “still a seller-oriented market” with prices continuing to rise at a faster clip than the rate of inflation and the historical 10-year average sales price increase of 3-to 3.5 percent annually.

Unlike most counties, Thurston County nearly matched year-ago levels for both pending and closed sales. “Last month was the second best ever for closed sales in our area,” noted Ken Anderson, president/owner of Coldwell Banker Evergreen in Olympia. He attributes the achievement to the area’s relative affordability. “We continue to present the most affordable options when compared to the other major counties along I-5,” Anderson stated, adding “Demand is very high.”

With more homes on the market in the tri-county area, growth of home prices has slowed, noted OB Jacobi, president of Windermere Real Estate. “Buyers are under less pressure to bid on any home that comes on the market,” he remarked. “Despite what some of the headlines may read, this is no cause for panic; in fact, it’s good news because it’s an indication that we are moving closer to a more balanced market,” he suggested.

The median sales price on the 9,288 completed sales of single family homes and condos during August was $405,000, up nearly 6.9 percent from the year-ago figure of $379,000. All but one county reported price gains, including a dozen counties with double-digit increases; the exception (San Juan County) had only a small 1.7 percent decrease.

For single family homes, the median sales price was $415,000 overall, a 6.4 percent year-over-year increase. Single family homes in King County continue to command the highest price at $669,000, up 2.9 percent from the year-ago price of $650,000, but down from May when a countywide median price of $726,275 was reached, the highest so far this year.

Condo prices also rose by 8.1 percent area wide and 11.3 percent in King County. That segment also experienced a slowdown in sales, with closed transactions off by about 15 percent. Inventory shows signs of improving, with active listings jumping nearly 58 percent, but there was still only about 1.7 months of supply at the end of August.

“The real estate sky isn’t falling,” said Dick Beeson, who acknowledged the “huge increase in inventory the past few months speaks volumes about the anxiety levels sellers have as they try to get all they can before the market crashes, which it won’t. The Northwest still has the best economy in America,” Beeson emphasized.

Why the run-up in listings?, Beeson asked rhetorically. Sellers have read about exorbitant prices and the need for inventory, he explained, adding “I guess we should have schooled them a bit about a phasing in process and not to bunch up at the listing house door.” The velocity of the market is still strong, with well priced and conditioned homes still selling in a matter of days or a few weeks, Beeson stated. “Only now there are just 3-to-5 offers, not 50.”

Several brokers commented on the importance of realistic pricing. “You can’t underprice a home in today’s market, but you can overprice it,” Beeson stated.

Northwest MLS director John Deely agreed. “Sellers should be careful to avoid overpricing as savvy buyers are wary of properties pushing the upper end of the market. Properly priced properties will still see heavy activity in this market. Sellers of homes that linger on the market are reducing their prices to spur activity.”

Deely also said many buyers are coming back into the market but being more cautious by presenting offers with standard contingencies such as inspection and financing provisions.

“Homes that are priced and presented right are still garnering multiple offers, but unlike the past few years, buyers aren’t having to waive protections with their offers,” Scott said.

“Pricing is becoming increasingly important,” Grady emphasized. According to his analysis, recent listings are averaging 22 cumulative days on the market, while other properties listed prior to August are now averaging almost 50 days of marketing time. “This points to pricing and how sellers may have overpriced their homes in the spring and early summer and now have to adjust their asking price.”

Affordability is an ongoing concern, particularly for first-time buyers wanting to live near job centers. In King County, for example, nearly 60 percent of the current inventory of homes and condos has an asking price of $750,000 or higher. Despite that challenge, brokers are upbeat about what Scott describes as a more “normal pace” with buyers having greater selection and availability.

“Even with some doom and gloom about sales being down in many counties, inventory doubling in some areas, and appreciation holding at around 8 percent for the year, our market is still very healthy and recovering from the depleted inventory of the past three years,” remarked Moorhead.

NW Multiple Listing Service

Nearly 2-year streak broken: Seattle no longer leads nation in home price increases

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After 21 months of leading the Case-Shiller’s home price index, the latest report shows that Las Vegas has overtaken Seattle as the nation’s hottest housing market. It reflects the mood Seattle has been seeing so far, with many realtors and reports expressing a bit of a slowdown in the market.

Case Shiller’s report has a bit of a lag, this month’s report uses June numbers, so time will tell if Seattle’s summer season brought a little more frenzy to the market. But even the most recent Northwest Multiple Listing Service report (on July’s figures) has seen a steadily improving supply, and slight drop in sales.

“In Seattle and King County supply is at the highest level since first quarter 2015, which has me thinking about the longevity of seller luxuries like offer review dates, pre-inspections, and escalation clauses,” Robert Wasser, owner of Prospera Real Estate and an officer of the Northwest MLS board of directors, said in the report.

“People are taking notice of the evolving real estate landscape ̶ even my mom tells me she’s noticing more for sale signs!”

However, King County is still well below a balanced market of supply of four to five months; right now King County is boasting about 1.5 months. And in Case-Shiller’s latest report the metro area registered a 12.8 percent increase in single-family home prices in June compared to a year earlier.

But either way, the latter number dropped from 13.6 percent, and the city is now enjoying its time as number two on the hottest cities nationally according to Case-Shiller.

~Zosha Millman, Seattle PI

Buyers see some hope in cooling Seattle real estate market

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Catherine Horne and Joe Hicks rent a home in Maple Valley. And while they like it, they’d rather be homeowners.

And it’s been a frustrating couple years to be a home buyer in the Seattle market.

“It’s tough, it is,” said Horne.

“Lo and behold, it turned out it wasn’t as easy as we thought it was going to be,” said Hicks.

After losing several homes to same-day cash offers, they started to give up. They decided to spend another year renting and wait to see what the market did.

“Time and time and time again, it’d get pulled out from underneath us,” said Hicks.

They felt overwhelmed watching home prices climb.

“That was part of it, like gosh, two years ago this house was worth $400,000, now it’s $600,000,” said Hicks. “Like boy, I wish we could have got in on that.”

It’s why they’re interested to see the latest trend in the Seattle housing market – Zillow senior economist Aaron Terrazas calls it a normalization.

“Obviously, we’ve become accustomed to having the hottest housing market in the nation,” he said. “That’s rapidly shifting.”

New data from Zillow released Thursday illustrates his point. Researchers found home values appreciated 9.1 percent in the last year, down 14.2 percent from July 2017.

Terrazas noted that still above the historical average – around 5.5 percent.

“It’s still tough, yeah,” he said. “We used to be the fast housing value appreciation, now we’re number 12, so certainly things are starting to slow down.”

He predicts appreciation will continue to slow in the next year to approximately 6-7%.

Seattle has now been passed by cities like Dallas and Atlanta, he said.

“I think it’s a signal of buyers being stretched, a signal of changes in our tax laws,” he said. “Which kind of reduced those benefits to ownership, especially in inexpensive markets.”

The Zillow research also found median rent rose just .3 percent over the past year to $2,173. Last summer, rents were appreciating 5.3 percent annually. Terrazas noted that might be relieving pressure on people that might be looking to purchase homes.

There’s also more housing inventory on the market – 13.2 percent more.

~Michael Crowe, King5News

Homebuyers Encouraged,”But Still On Edge” While Sellers Face Reality Check

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“Home sellers throughout the Seattle region are experiencing a reality check and the days of multiple offers are days of the past,” was how one director with Northwest Multiple Listing Service summarized the market upon reviewing the statistical report for July.

New figures from Northwest MLS show year-over-year improvement in inventory (up 6.5 percent), but modest drops on both pending sales (down slightly more than 7 percent) and closed sales (down 3.4 percent). Despite those drops, prices rose 8.64 percent across the MLS service area that spans 23 counties.

Several industry leaders commented on the steadily improving supply. The number of active listings system-wide totaled 16,773 at the end of July, the largest volume since September 2016. System-wide there is 1.8 months of supply, the highest level since October 2016.

“In Seattle and King County supply is at the highest level since first quarter 2015,” remarked Robert Wasser, owner of Prospera Real Estate and an officer of the Northwest MLS board of directors. “People are taking notice of the evolving real estate landscape — even my mom tells me she’s noticing more for sale signs!”

“There continues to be better news for buyers,” agreed Mike Grady, president and COO of Coldwell Banker Bain. He noted the inventory in King County has doubled since March from 0.8 months to 1.5 months of supply, but added “While this is significant, we are still well below a balanced market of 4-to-5 months of inventory.”

King County’s number of active listings surged nearly 48 percent from a year ago, rising from 3,465 active listings to 5,116. “It has been a long time coming, but we finally have some solidly good news for buyers in the Puget Sound area,” commented OB Jacobi, president of Windermere Real Estate. He noted the number of single family homes (excluding condos) for sale in King, Pierce and Snohomish counties in July was up 10.4 percent compared to June and up 20.5 percent year-over-year. “The increase in listings is clearly having a calming effect on prices while also giving buyers in the region somewhat of a reprieve from the frantic market of months past,” added Jacobi.

In his comments about sellers experiencing a reality check, broker Keith Bruce suggested Seattle is experiencing a self-corrective shift in the market. “Many sellers are reaching for their dictionaries to understand the words ‘price reduction’ and ‘increased market time.'”

“Sellers need to put away their dictionaries, take a collective deep breath and enjoy the ride. Listing brokers need to be as honest as possible with sellers and not promise multiple offers or huge price escalations,” suggested Bruce, adding “We are still a seller’s market. Much more inventory is needed to meet the overall demand for quality homes in Seattle.”

“Seller gridlock has loosened close to the job centers,” stated J. Lennox Scott, chairman and CEO of John L. Scott Real Estate. “While we are experiencing record sales activity for the higher end and luxury markets in year 2018, a record number of new listings is coming on the market in these price ranges. This has resulted in more opportunities for home buyers and lower premium pricing from the spring market.”

George Moorhead, designated broker at Bentley Properties, is noticing an increase in the number of price reductions for actively listed homes as inventory increases, “even in the hotspots in Seattle and the Eastside. We are seeing a continued shift from move-up and luxury home buyers to more first-time buyers, which is consistent with the flattening trends we are seeing in today’s market.”

MLS director John Deely said the change in the market “is more accentuated this year by the historically low inventory that we have been experiencing over the past several years. What now seems like a meteoric increase in inventory is in part caused by the many potential sellers who have been on the sidelines that are now coming to the market,” added Deely, the principal managing broker at Coldwell Banker Bain’s Lake Union office.

MLS statistics show pending sales declined from 11,800 a year ago to last month’s total of 10,965 for a drop of about 7.1 percent. New listings eclipsed pending sales by a margin of 1,233 units, easing some of the pressure on inventory.

“Even with an improving buyers’ market, our agents are telling us that buyers seem to have taken a bit of a break: instead of 20 buyers looking at new homes on day one, there were only 10 is the comment we’re hearing,” noted Grady. “While we may be lifting the pedal from the metal, we remain very much in the left lane, exceeding the posted speed limit by a significant amount,” he remarked.

Scott agreed, saying “For homes priced below a million dollars, the sales intensity for new listings has come off the extreme frenzy in the spring to just frenzy.”

Prices for single family homes only (excluding condos) rose about 8.4 percent, with a dozen counties reporting double-digit gains. Condo prices increased about 10.2 percent. In King County where more than half the condo sales occurred, price jumped about 12 percent from a year ago.

“It’s not such a crazy, go-go market, but it’s still a great time to be a seller,” stated Northwest MLS director Mike Larson, president of Allen Realtors in Lakewood. “The days of  pushing the envelope on the list price an extra 5 percent are gone. Ultimately, I think that’s healthy for the market,” Larson commented.

~NW Multiple Listing Service

 

Seattle housing market is under pressure as Chinese buying ‘dries up’

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Seattle has been arguably one of the hottest housing markets in America, with home prices rising annually by double digits fueled by scorching demand. There is, however, one outside force that is starting to throw cold water on all that heat: new weakness from once-intense Chinese buyers.

The Pacific Northwest city has been one of the greatest beneficiaries of the recent wave of Chinese buyers of U.S. real estate. Both Chinese investors and families hoping to send their kids to American universities have fueled demand for housing in Seattle, which has long enjoyed a strong Asian culture.

In just the last two years, that demand increased dramatically. In 2016, nearby Canadian city Vancouver slapped a 25 percent tax on international homebuyers in an effort to cool its own overheated housing market. Chinese investors, who had been strong in that market, simply moved south of the border to escape the tax.

“Chinese buyers are flooding into Seattle,” said Jonathan Woloshin of UBS in a 2016 interview.

But the Chinese yuan’s recent fall in value against the U.S. dollar has made housing more expensive for Chinese buyers. Now, Woloshin said, Seattle could see the opposite of the buying frenzy it had two years ago.

“I’m not telling you there is going to be a crash in prices, but do I think there is going to be a drop in the rate of increase? yes,” said Woloshin.

In the Seattle metropolitan area, home prices skyrocketed 45 percent between August 2016 and now, according to Woloshin. On a currency-adjusted basis, for Chinese buyers, they are up 54 percent.

“The Chinese have a very long time horizon, so if they are buying that home as a second or third home or they’re going to buy it for their child, that’s fair, but the huge run-up in prices, the depreciation in the yuan is going to have an impact,” he added.

Seattle housing is already cooling. The number of homes for sale in King County (where Seattle resides), shot up 47 percent in May compared with a year ago, according to the Northwest Multiple Listing Service. Pending home sales, which represent signed contracts, dropped nearly 9 percent.

Stephen Saunders is a managing broker with Coldwell Banker Seattle and works with Chinese investors in the Seattle market. “It’s drying up,” he said. “I just don’t see the same kind of volume. The downtown Seattle condo market has come to a grinding halt, and that’s where Chinese buyers were.”

Most of his clients are looking for properties in the $1 million to $3 million range, but he said the slowdown in buying is not all about the yuan.

“It’s not necessarily the decline in the currency, it is the increasing restrictions on getting money out. It’s just getting tighter and tighter,” he said, adding that the trade war between the U.S. and China is hitting the finances of some of his investor clients. As for Chinese families looking to buy homes for their children in the area, in just the past six to 10 months, “that’s dried up substantially,” he said.

Despite the increase in the supply of Seattle homes for sale, inventory is still incredibly low at barely two months’ worth, based on the level of sales. This is the same trend throughout the West, where overheated home prices have caused buyers to pull back.

“Although signs of an inventory turnaround are encouraging, whether they mean good news for buyers remains to be seen,” wrote Danielle Hale, chief economist at Realtor.com, in a release. “But high prices and fast-selling homes are causing some buyer hesitation which is reflected in fewer home sales.”

The Seattle housing market has benefited enormously from the region’s largest employer, Amazon. While there was concern earlier this year that a local “head tax” on employers would cause a hiring slowdown, that tax was quickly repealed after enormous pressure from Amazon.

The e-commerce giant, however, did report its first decline in its number of employees since 2009.

After strong hiring throughout the first half of 2017, job postings for open positions at Amazon headquarters dropped sharply last December, according to a report from The Seattle Times. Amazon is also planning to open a second headquarters, commonly called HQ2, although it has yet to announce the location. It currently employs more than 40,000 workers at its Seattle headquarters, according to quarterly filings.

Hiring shifts in Amazon’s home market would certainly affect local housing. The Seattle area, however, is also home to Microsoft and other tech companies.

“I think it will slow down,” said Skylar Olsen, director of economic research at Seattle-based Zillow. “Amazon is certainly a huge player, but they were a catalyst that started a lot of growth in tech. It wasn’t just Amazon that was booming local neighborhoods, it was other start-up players.”

On the other hand, Olsen said she actually thinks the devaluation of the yuan could spur homebuying in Seattle.

“If they’re investment buyers in the first place, then really you just move down in your price point, but you’re still really interested in the rate of return. If you expect the yuan to continue to drop, then you have every reason to buy an asset that’s not valued in yuan,” she added.

~Diana Olick, CNBC