Is Seattle’s real estate market cooling down?

After a chaotic summer that saw extremely low housing inventory, bidding wars and record-breaking jumps in median sale prices, Seattle’s tight real estate market could be showing signs of cooling off for the fall season.

A new market report form the Northwest Multiple Listing Service (NWMLS) found that competition for homes in Seattle eased slightly in July, with brokers adding more listings and less homes going under contract. The agency saw slightly fewer pending sales in July than in June and May.

Some of that slowdown might be seasonal, while other experts took into account that the state lifted all COVID-19 restrictions on June 30, and more people could be traveling after spending so much time at home.

“Although the local market is intense, buyers can find some relief because there aren’t as many offers to compete with compared to earlier this year,” said J. Lennox Scott, chairman and CEO of John L. Scott Real Estate in a news release Thursday. “August historically is the last month of the year with elevated levels of new listings before they slowly taper down in the fall and decline more substantially over the winter.”

However, inventory still remains historically low and prices are still climbing, meaning any breathing room for homebuyers might be short lived. Across all 26 Washington counties surveyed by the NWMLS, there is only 0.73 months of inventory. And only 12 counties report having more than one month of supply.

“Despite the extreme shortage of inventory and robust sales activity, there seems to be a bit of a leveling off from the market frenzy,” said Gary O’Leyar, broker owner at Berkshire Hathaway HomeServices Signature Properties. “In my opinion this is due to a typical mid-summer season market combined with some buyer fatigue.”

Prices also continued to climb. In June, median sale prices for homes in the region soared 30% compared to the previous year, marking a new record high. In King County, the median home sale price hit $775,000 in May, up 23% from the same time last year.

However, that growth is not just in the Seattle metro area. Many brokers said that suburban counties along the Interstate 5 corridor have seen sharp price increases, mirroring the fact that homes in the heart of Seattle are appreciating at a slower rate than homes located away from downtown.

“Prices in Lewis County are up 54.2% from the July 2019 level, Snohomish County is up 40.6%, and Island County is up 44.3%,” said James Young, director of the Washington Center for Real Estate Research at the University of Washington. “The search for value in the suburbs with sharp price increases suggest households are making their housing preferences known. They want to own rather than rent.”

One area of the market continues to rebound from the pandemic: condominium sales. New listings outpaced pending sales in July, and prices rose more modestly at 12.6%. In King County, where the majority of condos are sold, the median priced condo sold for $460,000.

Brokers are advising residents to make the most of the seasonal lull in the market while also warning potential sellers about overpricing.

“My advice to buyers would be to take advantage of this time before Labor Day and the fall market,” said O’Leyar. “[For sellers,] don’t get overly hyped with anecdotal information about the real estate market. Overpricing a listing in this market is still a big mistake.”

~Callie Craighead, Seattle P-I

Relief for Buyers Coming???

Home prices continue to increase as national inventory levels remain low heading into August. But relief for buyers could be coming in the next 12 months.

Home prices increased 2.3% from May to June, and 17.2% year-over-year, according to the latest CoreLogic report on home prices. However, CoreLogic officials said price gains could slow to as low as a 3.2%-gain by this time next year, as ongoing affordability challenges deter potential buyers — as well as an uptick in new for sale listings.

“Home prices have been rising in the mid single-digits for some years now, and the recent surge to double digit price jumps reflect the convergence of exceptional demand persistent low supply,” said Frank Marshall, CoreLogic CEO and president. “Affordability will become a more acute issue for the foreseeable future.”

The 17.2% growth is the largest annual growth reported since 1979, as supply and demand pressures endure and construction costs continue to rise, said Frank Nothaft, CoreLogic’s chief economist. Low- and middle-income Americans, he said, are being impacted the most.

At the residential level, the COVID-19 pandemic sparked an increase in buyer desire for lower density neighborhoods and more living space, Nothaft said. This, he said, led to detached homes having the highest annual growth (+19.1%) in June since 1976.

“Communities with single-family detached houses fill the need [for more space],” Nothaft said.

May home prices also jumped 16.6% annually in the latest S&P CoreLogic Case-Shiller National Home Price Index report. Home prices in May stood at all-time highs in 18 of the 20 S&P cities surveyed, and five cities – Charlotte, Cleveland, Dallas, Denver, and Seattle – recorded their all-time highest 12-month gains. 

Phoenix’s 25.9% increase led all cities for the 24th consecutive month in accelerating home prices, with San Diego (+24.7%) and Seattle (+23.4%) close behind. Prices were strongest in the West (+19.9%) and Southwest (+19.8%), but every region logged double-digit gains from April to May.

Continuing to look regionally, home prices in the western United States are still accelerating. Twin Falls, Idaho, where Evel Knievel famously attempted to jump a canyon in 1974 in a steam-powered rocket, experienced the highest year-over-year increase in the country, at 40.2%. Bend, Oregon, with beautiful scenery, a bevy of craft breweries and microscopic home inventory, saw the second-highest home price increase in the country year-over-year, at 35.4%. States with the highest annual home price growth in June were Idaho (34.2%), Arizona (26.1%), and Montana (24.3%).

“Home buyers are continuing to seek out more affordable locations with lower population density and attractive outdoor activities,” Nothaft said.

The markets expected to see the largest increases in home prices in the next 12 months, per CoreLogic, are San Diego, California (+11.5% expected increase); Miami-Miami Beach, Florida (+4.6% expected increase); and Las Vegas, Chicago, and Los Angeles (+4.3% expected increase for all three).

The markets at risk for the biggest home price declines over the next 12 months are Springfield and Worcester, Massachusetts; Chico and Oxnard-Thousand Oaks-Ventura, California; and Norwich-New London, Connecticut, Corelogic’s study found.

The overall pending home sales index fell 1.9% to 112.8 in June, according to the National Association of Realtors, which tracks the metric. (An index of 100 is equal to the average level of contract activity during 2001, the first year examined. The volume of existing-home sales in 2001 was within the range of 5 to 5.5 million.)

Regionally, pending home sales in the Northeast increased 0.5% to 98.5 on the index in June, an 8.7% rise from a year ago. In the Midwest, the index grew 0.6% to 108.3 last month, down 2.4% from June 2020. Pending home sales in the South fell 3.0% to an index of 132.4 in June, down 4.7% from June 2020. The index in the West decreased 3.8% in June to 98.1, down 2.6% from a year prior. May’s 8% increase was the highest jump for that month since 2005, according to NAR.

~Tim Glaze, Housing Wire

Housing boom will end when interest rates rise

The current housing boom will flatten in 2022—or possibly early 2023—when mortgage interest rates rise. There is no bubble to burst, though prices may retreat from panic-buying highs.

The boom produced some frantic buying, bids in excess of asking prices, and plenty of worry among would-be homeowners. But this has not been a bubble. A bubble is not simply rising prices, but demand not justified by fundamental economic factors. The key to the buying boom has been low mortgage rates plus a shift in desired housing type.

Mortgage rates hit what was then an all-time low of four percent in 2011, and then remained in that neighborhood until the pandemic, when they hit three percent. The decline in mortgage rates in 2020 dropped the monthly payment on a house by 12 percent, enabling many people to buy houses now rather than later.

In addition to the low mortgage rates, some people saw a future of remote work and wanted more space, which often means moving out of an apartment into a single family house. Others found urban living less fun, so they headed into the suburbs where houses are more common than apartments.

The increased demand for houses drove prices up, quite predictably. Yet the supply could not adjust as fast as demand. Home builders ramped up production in the second half of 2020, but after a few months they ran into supply constraints. Ready-to-build lots were all bought up, labor for construction was hard to find and social distancing made workers less productive. Now rising materials prices and goods on back-order squeeze profit margins. That’s how we find ourselves in the current housing boom.

But this boom is not a bubble, because the rise in prices is easily explained by the fundamentals of cheap mortgages and supply limitations. Recent housing starts are below historical averages, though that is justified by lower population growth. But with the shift from multifamily to single family housing, recent construction levels make sense. There need be no sudden drop in new construction to maintain a reasonable equilibrium.

When will the boom end? The two keys are satisfying the new demand and mortgage rates. Low mortgage rates allowed young families to buy houses earlier than they otherwise would have. It did not change the economics of buying for people who were never going to be homeowners. Instead, low mortgage rates enabled people to achieve their dreams earlier than they otherwise would have. In this sense, the strong housing market of 2020 and 2021 has been borrowing from the future. However, the shift in preferences from urban living to suburban living by people who previously could have bought houses is permanent new demand. At least, so long as they don’t become disillusioned about home ownership.

Mortgage rates are likely to rise when financial markets anticipate more inflation and action by the Federal Reserve to stem inflation. Although the Fed’s traditional tools impact short-term rates, with only small effect on mortgage rates, the new actions by the Fed impact mortgages directly. The Fed has been buying mortgages wholesale, depressing mortgage interest rates. The Fed has also been buying many treasury securities, which are often competitors to mortgages for institutional investors.

Mortgage rates are likely to rise a full percentage point by mid-2022, though this forecast exceeds the average prediction of my fellow economists. They doubt long-term interest rates will rise by a percentage point even out to December 2022. If they are right and I am wrong, then the housing market will remain strong longer.

Business leaders in the housing supply chain should enjoy their strong sales this year but not anticipate further growth in the coming years. Major capital projects must pencil out with sales back at 2019 levels.

Prospective home buyers should probably chill. It’s been a tough buying season. Although prices are unlikely to fall nationwide, there will probably be easier buying opportunities in 2023.

by Bill Conerly, Forbes

Market offers home for homebuyers, but may be temporary

Homebuyers may find some good news in the latest report from Northwest Multiple Listing Service (NWMLS). The number of active listings at the end of June, 6,358, reached the highest level since November when buyers could choose from 6,505 properties. The volume of new listings added last month was the highest number in 17 months (13,111 last month versus 14,689 at the end of November 2019).

“Homebuyers will be happy to hear that between May and June the number of listings in King, Pierce, and Snohomish counties rose, giving them more homes to choose from and possibly easing the pressure just a little,” remarked Matthew Gardner, chief economist at Windermere Real Estate.

For the tri-county area, total active listings of single family homes and condominiums increased 14.5% from May. System-wide, the report covering all 26 counties served by Northwest MLS shows month-to-month inventory improved 14.9%.

“Buyers need some relief, so I hope this trend continues,” said Gardner.

Broker Dean Rebhuhn, owner at Village Homes and Properties, agreed the slight increase in new listings is good news for buyers, but tempered his optimism. “Low inventory and high demand coupled with low interest rates continue to drive up the market.” He also noted Kittitas County “is no exception to brisk sales. Many homes in that county are selling within one or two weeks.”

NWMLS director Frank Leach, broker/owner at RE/MAX Platinum Services in Silverdale, described Kitsap County as another “heated market” but said brokers there are growing inventory very slowly, resulting in more selection for buyers. Brokers added 621 new listings to that county’s inventory, improving on May’s volume by more than 13%. That number also marked the first time since May 2019 that the number of new listings in Kitsap County topped 600.

Other industry analysts suggested the uptick in inventory might be short-lived, citing vigorous activity as Washington state lifts several strict coronavirus restrictions.

“We continue on a trajectory that will keep the Puget Sound region at the top of national lists for one of the hottest housing markets,” stated John Deely, executive vice president of operations for Coldwell Banker Bain. “Inventory on hand remains at two-to-three weeks in the larger counties,” he noted.

The latest report from Northwest MLS shows a year-over-year (YOY) drop in active listings of more than 34%, with only about two weeks (0.58 months) of supply available areawide. Last month marked the first time since July 2020 that the year-over-year decline fell below 40%.

Only 10 of the 26 counties in the MLS report have more than one month of supply. Of these, only one (Ferry) has more than two months of supply. Snohomish County’s inventory declined more than 44% from a year ago, leaving it with only about 10 days of inventory (0.35 months of supply), the lowest of all the counties served by Northwest MLS.

“While pending sales saw a significant drop over this time last year, we believe that rather than that being an indication of a flattening of the market, this is a result of our extreme heat events, a typical summer slowdown as schools let out and people starting vacations, and, this year, the reopening of the country and discontinuation of COVID-19 restrictions,” explained Deely.

Pending sales rose about 3.5% compared with a year ago (from 11,916 to 12,328) but fell slightly from May when mutually accepted offers outgained the number of listings added during the month.

“The local real estate market is virtually sold out in the more affordable and mid-price ranges, even into the luxury market in some areas,” reported J. Lennox Scott, chairman and CEO of John L. Scott Real Estate. “This places extra focus on each new resale listing as it comes onto the market.”

An analysis of last month’s statistics by price range illustrates Scott’s point. Fewer than 23% of June’s listings had asking prices under $400,000. About a third of the inventory was listed at $800,000 or above.

James Young, the director of the Washington Center for Real Estate Research at the University of Washington, said the decline in active listings volume suggests homes are selling and closing very quickly once listed. He noted that while listing levels for June were higher than two years ago, pending and closed sales are much higher. “This indicates that well priced properties are closing very quickly.”

Lennox Scott concurred. “Many homes are going under contract within days due to the intense buyer demand.” He anticipates two more months of “elevated new resale listings” before the selection starts decreasing. “We expect the extremely high intensity for each listing will continue in most price ranges locally into the spring of 2022 due to historically low interest rates creating a large backlog of buyers looking to purchase a home.”

Deely said affordability, especially for first-time homebuyers, continues to be a concern. “Given indications from tech companies like Amazon and Microsoft to lease large office spaces and hire thousands of employees in our region, drawing people from higher-priced markets like Silicon Valley with lots of money to spend, we don’t see much change in this scenario for buyers in the short term.”

Brokers reported 10,923 completed transactions during June, a 31.4% increase from twelve months ago, and up 16.5% from May’s total of 9,374. Prices on last month’s sales, which includes single family homes and condominiums, rose nearly 27% from a year ago, from $465,000 to $589,000.

The single family segment accounted for about 86% of the sales. The median sales price on those 9,417 transactions was $611,000, which was 27% higher than the year-ago figure of $480,950.

Condo sales jumped a whopping 59% from a year ago, with prices increasing more than 20%. For last month’s 1,506 closed sales, the median price was $440,000; a year ago it was $365,000.

Looking at month-to-month, rather than YOY changes, Gardner noted King and Pierce counties experienced only modest price increases, while prices in Snohomish County rose by “a solid 3.1%. I believe this points to an uptick in buyers who can continue working from home and have made the choice to move from King to Snohomish County where housing is more affordable. The same can be inferred for Kitsap County.”

A comparison of Northwest MLS figures shows the median price on last month’s completed transactions in King County was $779,919, while in Snohomish County it was about $105,000 less ($675,000). In Kitsap County, where the median price was $505,000, the difference is nearly $275,000. Pierce County homes that sold last month had a median price of $507,375.

Commenting on the NWMLS report, Dick Beeson, managing broker at RE/MAX Northwest, Tacoma-Gig Harbor, said it reflects a “slight turn of the wheel. Sellers are still in control, but their expectations need a slight readjustment. Instead of 20 offers, there may only be five or fewer. Maybe even only one.”

When that happens, some sellers balk at selling, thinking they are being undersold, according to Beeson. “Sellers must remember, you can’t underprice a home in this market. You can still overprice a property. The market will find you out and drive the price to the appropriate market value.”

Given the strong, competitive market across all price ranges, Beeson offered a recipe for buyer success. “Scour the new inventory coming on the market daily; write the best offer you can using all the offer strategies you’re equipped to employ, and then decide if the extra cost to win the sale is an acceptable value to you. Close the sale quickly, and don’t whimper!”

Rebhuhn also offered hope for buyers who are prepared to act. “Generally speaking, July and August provide more opportunities for buyers as there is less competition because of vacations and fewer relocation buyers in mid-summer.”

Builders are also caught in the frenzy. “Builders are racing to bring new communities online and hoping to hit the sweet spot as prices on building materials for new construction begin to fall,” reported Frank Leach. He said new apartment buildings and condos are being approved and built all across Kitsap County to accommodate newly arriving residents. Notably, Leach said an aircraft carrier due to arrive shortly could potentially add 3,500 people to that county’s rental market.

Although pending sales in Kitsap County dipped slightly from a year ago, they were up nearly 12% from May. “The market in Kitsap County is expected to remain very competitive with exposure of only eight days on the market, on average, across all price ranges,” Leach noted.

NWMLS Press Release, July 7, 2021

Home prices keep rising

The Federal Housing Finance Agency (FHFA) found that house prices across the nation rose 16% from April 2020 to April 2021.

From March to April, house prices rose1.8%, surpassing the previous month’s 1.6% increase.

Three regions — the Pacific coast, the western states and New England — saw more pronounced year over year increases. The FHFA index tracks seasonally-adjusted, purchase data from Fannie Mae and Freddie Mac.

In the mountain division, which includes Colorado, New Mexico, Idaho, Wyoming, Utah, Nevada, Arizona and Wyoming, house prices rose 21% year over year. In the pacific division, encompassing Washington, Oregon and California, prices rose 18%. In Maine, Vermont, New Hampshire, Massachusetts, Connecticut and Rhode Island, house prices also rose 18%.

“House prices recorded another monthly and annual record in April,” said Dr. Lynn Fisher, FHFA’s deputy director of the division of research and statistics. “This unprecedented price growth persists due to strong demand, bolstered by still-low mortgage rates, and too few homes for sale.”

Mortgage rates rose above 3% for the first time in 10 weeks last week. Mortgage applications are still on the rise, however.

House prices have risen during the past year as a result of elevated lumber prices, a lack of available homes and increased demand for homes.

Lockdowns early in the pandemic led many to work from home and divide their living space into home offices. Those who were able to bought homes with more space, better suited to the pandemic remote work trend.

That has led to astonishing price increases in markets like Seattle, where the median home-sale price rose more than 26% year-over-year to a record $737,800 in May 2021. Tech employees there, faced with working remotely from cramped apartments, instead hunted for homes with more space.

“I’ve never seen anything like this housing market,” a Seattle-area Redfin agent said.

~by Georgia Kromrei, HousingWire

Buyers struggling in competitive market

First time homebuyers and seasoned homebuyers alike are finding themselves frustrated when they bid over asking price, without concessions, only to be declined over and over.

“Why are we getting outbid?”

It’s the question on a lot of would-be homebuyers’ lips right now, and there are a few different factors at play.

Although it may feel like another housing bubble, the issues plaguing the market today are far different. In 2008, the housing market crash was precipitated by questionable mortgage practices and home builders churning out more homes than the market could absorb.

Today, that equation is flipped: lenders are only issuing mortgages to highly qualified individuals, the existing housing stock isn’t enough for a growing population, Boomers are aging in place rather than selling, and home building continues to lag behind demand. The current market conditions aren’t going away anytime soon.

Although there are nuances at the local market level, it’s safe to say that the housing market in the U.S. right now is extremely competitive. Well-qualified buyers are struggling to understand why solid offers at full asking price are no longer enough. This January, 56% of buyers faced bidding wars on their offers, according to a Redfin survey.

In order to make offers more appealing to sellers, buyers are having to go above and beyond – whether this means making an all-cash offer, an offer well above asking price, or a no-contingency offer. And frequently, buyers are offering all three.

The problem is, of course, that many buyers are limited in what they can offer. First-time home buyers are often lucky if they can put down 20%, let alone an entire cash offer, and often have student loans and other obligations holding them back from bidding higher. Other buyers – rightly so – are wary of waiving inspection contingencies. And even if a buyer is offering over asking, in this market, it may simply not be enough.

In the Philadelphia suburbs, homes in poor condition are going for 15% over asking. If the house has several really desirable features, the bids are reaching the 25% over asking range. And if a house is fully move-in ready–it’s actually in decent condition, it’s clean, and everything is great–it can go for 35 to 50% over asking price.

Historically low mortgage rates have been adding fuel to the fire. Mortgage rates reached an all-time low of 2.8% over the past year and continue to remain low, which allows qualified buyers to purchase more house while maintaining lower monthly payments. Knowing that rates will eventually rise is encouraging buyers to stay in the game, rather than waiting for a cooling-off period. There are simply more people than ever competing for a limited number of homes.

Appraisals have also been a factor in buyers losing out on homes. Buyers can bid high, but the lender isn’t going to approve a loan for more than the appraisal amount. Cash offers are preferable only because sellers seem to be looking for the path of least resistance to closing.

FHA loans, while popular among first time home buyers, are at a distinct disadvantage in this market because sellers – whether it’s fair or not – are often under the impression that these buyers will need to jump through more hoops to close on the house, and will have less cash on hand to make up for gaps between the offer and the appraised value.

Those searching for a new home shouldn’t expect the market to dramatically change anytime soon. People are slowly transitioning back to the workplace from work from home, mortgage rates may be going up, and as the country continues to re-open, there may be a cooling off period. Even still, thanks to pent-up demand from the years before COVID, it will likely only go from an “extreme” sellers market to a “strong” sellers market. Demand will continue to outstrip supply for the next several years.

So what can buyers do?

Buyers may want to start off their home search looking 10-20% below their ideal price range. This will give them more room for leverage and to comfortably bid well over asking. If they need a home a year from now, start searching for that home now, because many buyers are waiting 5+ months until they get into a home.

When mortgage rates are so low, another thing buyers can do is talk to mortgage lenders about taking a slightly higher interest rate to get lender credits they can put towards closing costs. This tactic has been helping first time home buyers who don’t have a lot of cash on hand.

If a buyer needs to take out a mortgage to purchase a home, they should consider making a statement to the seller as to exactly how much cash they are willing to bring to closing, in case the appraisal comes back below what the lender will pay. That’s a major factor in why people are getting outbid, and it’s something that someone who needs a mortgage is going to have to consider doing.

It can be tempting to add in contingencies (such as your own home having to sell for the purchase to go through), but realistically it is important to keep the deal as uncomplicated as possible, because buyers simply don’t have the upper hand in this competitive market.

However, there’s one compromise buyers should never make. Don’t eliminate the inspection! Buyers can write the condition of the home in the contract “as is, with right to terminate” so that they have the ability to walk away if any major problem is uncovered. This protects buyers from buying a home with a major, undisclosed issue such as structural/foundational issues or a rotting roof while still assuring the seller they won’t be squabbling over a loose tile.

Buyers should have an in-depth talk with their Realtors about what will help them stand out in their local market and follow their advice. If they say your offer is too soft, it probably is. If a Realtor says the buyers must drop some of their “must haves,” do it.

Buyers should manage expectations so that they’re prepared for the likely event that they need to bid on multiple homes. Don’t fall in love with the first home either; see a second home right after it. Expect to write multiple offers, and expect to get outbid multiple times. It’s all part of the journey to homeownership in today’s market, and it’ll be worth it once the home has been secured.

Mike Maher, Houzer

Interest rates fall; mortgage applications increase

After three straight weeks of declines, mortgage applications increased 4.2% for the week ending June 11, 2021, according to the latest report from the Mortgage Bankers Association.

Both purchase and refinance applications increased, with refinances notably up 5.5%, according to Joel Kan, the MBA’s vice president of economic and industry forecasting.

“The jump in refinances was the result of the 30-year fixed rate falling for the third straight week to 3.11%, which is the lowest since early May,” Kan said. “U.S. Treasury yields have slid because of the uncertainty in the financial markets regarding inflation, and how the Federal Reserve may act over the next few months.”

Purchase applications were also down 17% from a year ago, the start of the mortgage boom, Kan said.

“[This time last year] was when the mortgage market started seeing large post-shutdown increases in activity,” Kan said.

Loan quality lessons learned from 2020  (Presented by: ACES Quality Management)

Historically, when we see the market transition from a high refinance volume environment to one that’s more purchase-driven, defects in borrower qualification categories tend to increase as lenders attempt to capture every last bit of volume they can.

The refinance share of activity decreased to 61.7% of total mortgage applications from 60.4% the previous week. On an unadjusted basis, the market composite index increased 15% compared with the previous week. The seasonally adjusted purchase index increased 2% from one week earlier.

The FHA share of total mortgage applications increased to 9.6% from 9.5% the week prior, and the VA share of total mortgage applications increased to 11.5% from 11.2%.

Here is a more detailed breakdown of this week’s mortgage applications data:

  • The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) decreased to 3.11% from 3.15%
  • The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $548,250) decreased to 3.20% from 3.29%
  • The average contract interest rate for 30-year fixed-rate mortgages increased to 3.14% from 3.12%
  • The average contract interest rate for 15-year fixed-rate mortgages decreased to 2.49% from 2.52%
  • The average contract interest rate for 5/1 ARMs increased to 2.69% from 2.54%, with points increasing to 0.38 from 0.29 (including the origination fee) for 80% LTV loans

~Tim Glaze, Housing Wire

Strong, chaotic Seattle housing market had record-breaking price increases in May

Seattle’s intensely competitive housing market continued to see record-breaking growth in May, and the summer season is looking to be just as hot as low inventory in the region persists.

A new report from the Northwest Multiple Listing Service found median sale prices for homes in the region soared 30% compared to a year ago, a new record high. In King County, the median home sale price hit $775,000 in May, up 23% from the same time last year. In Snohomish County, median prices hit $655,000, increasing nearly 35% year over year.

“Everything is about breaking records this past year with record-breaking housing prices, record-breaking low inventory, and record-breaking consumer savings rates during the pandemic,” remarked Meredith Hansen, owner/designated broker at Keller Williams Greater Seattle. “All this equals a very strong, chaotic market that may not slow down for the next year.”

Despite hopes in April that homebuyers could be getting some relief with more homes added to the market and moderating prices, listings remain lower than expected in May. The report found that active listings from April to May declined for the first time in 20 years, down 4,824 listings — or 46% — compared to last year.

“Last month’s listings came in lower than we would normally see due to the month starting on a Saturday and ending with a holiday weekend,” noted J. Lennox Scott, chairman and CEO at John L. Scott Real Estate. “New resale listings typically go on the market on Wednesday, Thursday or Friday. In today’s instant-response market, new listings often go pending over the weekend or early the next week.”

And the day of the week a home is listed does have significance for buyers and sellers: last week, a market-report from Zillow found that homes in Seattle sell the fastest when listed on a Thursday, moving from for sale to pending sale in just six days.

Homes are also selling for well over asking price, reflecting possible bidding wars driven by competition. NWMLS found residential homes in the Puget Sound region — comprising of King, Snohomish, Kitsap and Pierce counties — sold for 108.6% over the asking price. And that high demand is expected to continue into the summer.

“Frenzy-level buyer demand has not waned,” Scott said. “The local market is still virtually sold out in the more affordable and mid-price ranges, as well as into the luxury ranges in some areas.”

However, there are some bright spots as the region recovers from the pandemic: Seattle’s market for condominiums is finally stabilizing. The NWMLS report found condo inventory in May was down nearly 36% from a year ago while pending sales shot up 83.7%.

Windermere Chief Economist Matthew Gardner noted that many condo owners decided to sell amid the height of the COVID-19 pandemic and more out of the urban downtown core, leading to high inventory and lower demand. Some downtown properties even began offering price reductions to attract new buyers, giving them the upper hand.

“The good news is the Seattle condo market has settled back down with inventory dropping and sales rising. Because of the shift in this market there was a price reset, but this appears to be luring buyers who previously thought they could not afford to buy downtown, leading to more balance between supply and demand,” Gardner said.

~Callie Craighead, Seattle PI

5 trends fueling hot real estate market

The housing market is on fire.

What began as a pickup in demand early in the pandemic has evolved into an all-out buying spree. Sales of new and previously owned homes, while off their peaks, remain elevated. Construction has picked up somewhat, but contractors are struggling to shore up supply. With inventory sitting near record lows, price growth has accelerated to rival the 2000s housing bubble.

Reports published Tuesday confirmed the boom is alive and well. Prices soared through March at the fastest rate since 2005, according to S&P CoreLogic. Separately, Census Bureau data showed new single-family home sales slowing 5.9% through April. Still, the sales pace sits well above the pre-pandemic norm.

But it’s not just conventional gauges posting shocking superlatives — fundamental change is afoot in US housing. Alternative data, from lumber prices to the realtor-to-listing ratio, show a handful of structural shifts taking place throughout the market. Glenn Kelman, CEO of real-estate brokerage Redfin, unpacked several of them on a Twitter thread that racked up more than 14,000 likes in less than 48 hours. 

     Here are the five major changes reshaping the US housing sector.

1 – Buyers face a persistent shortage of available homes

At its core, the market boom is simply a result of too few homes. Economists are largely confident that, while trends are similar to the mid-2000s bubble, it’s a nationwide supply shortage driving prices higher, and not risky lending practices.

  • More realtors than listings

The number of available homes in the US totaled 1.16 million at the end of April, according to the National Association of Realtors. NAR ended last month with 1.48 million members.

The association’s membership has exceeded listings through much of the year as sales bite into home availability.

  • Historically low inventory

The national supply of available homes in the US plummeted to record lows at the start of the pandemic and have only just risen from those levels through 2021. The monthly inventory rose to 4.4 months in April, but the bounce has as much to do with a slowing pace of sales as it does with a pickup in construction.

  • Homes selling at a record pace

When homes are coming up for sale, they aren’t staying on the market all that long. The average home now sells in a record-low 17 days, Kelman wrote on Twitter.

2 – People are fleeing cities for cheaper locales

The story of the 2020-2021 housing market is also one of migration. Americans largely fled densely populated cities for suburbs and traded their apartments for homes while mortgage rates were low. And after years of intense crowding in metropolitan areas, people seeking more space during the work-from-home period rushed to less populated states.

  • Low-tax states seeing huge inflows

Attractive tax rates seemingly played a major role in the moving bonanza. Four people moved into low-tax states for every one that left, Kelman said. That ratio rose to 5:1 in Texas and 7:1 in Florida.

  • Moving families face a new status quo

Americans who moved during the pandemic took a few risks. In a Redfin survey of 2,000 homebuyers, 63% said they bid on a home they hadn’t seen in person yet.

Separately, those moving to low-tax states enjoyed far lower housing costs. In many instances, the money saved allowed one parent to stop working, and many buyers are retiring early, Kelman said in a Wednesday tweet.

  • Inventory and prices up in SF and NYC

Still, some of the country’s biggest cities aren’t down for the count. Inventory has swung higher in New York City and San Francisco by 28% and 77%, respectively, according to Kelman. Yet prices are increasing steadily in both markets, suggesting that, while many are moving out, enough are moving in to support already lofty prices.

3 – It’s getting more and more expensive to build homes

The simplest solution to slowing homes’ rapid price growth would be to increase supply. Yet the combination of a historic surge in demand with supply-chain bottlenecks as the economy reopened have hindered contractors.

  • Lumber prices exploded higher

Most recently, surging lumber costs cut into builders’ efforts. Prices soared to record highs earlier in May and closed 280% higher year-over-year on Tuesday.

  • Not enough building space

Even if lumber cost less, there’s scant room to build homes. The New Home Lot Supply Index — which tracks lots ready for building — fell 10% to a record low in the first quarter, according to housing analytics firm Zonda.

Even the firms that have empty lots are running behind in converting them to sellable homes. About 242,000 authorized homes hadn’t been started yet in April, the Census Bureau said last week. That’s the highest level since 1979. 

  • Builders waiting for the opportune moment

The various shortages and bottlenecks have led builders to hit the brakes and wait for profitability to rebound. Nearly one-in-five contractors surveyed by the National Association of Realtors in April said they’re delaying construction or sales.

About 47% said they added escalation clauses to contracts last month. The clauses allow contractors to lift homes’ selling prices to offset an increase in building costs.

4 – Pricey construction, unrelenting demand is driving stronger home inflation

With builders unable to meet demand with new supply, prices predictably shot through the roof. Experts see home-price inflation staying hot into 2023, and with selling prices already elevated, a long rally could further dent home affordability across the US.

  • Prices hit record highs

While the rate of sales has cooled slightly, price growth remains strong. The median selling price of new homes rose to a record-high $372, 400 in April, the Census Bureau said Tuesday.

The median price for previously owned homes rose to a record of its own last month. The average existing home cost $341,000 in April, the National Association of Realtors said on May 21.

  • Sell-over-ask at record highs

For those looking to sell, there’s never been a better time. Homes are selling on average for 1.7% above their asking price, Kelman wrote on Twitter. That’s the largest average overshoot on record.

5 – Americans increasingly prioritize value and space

Still, not all buyers are losing out as the market boom charges onward.

  • Two-thirds of buyers say they snagged great deals

A Redfin survey of 600 homebuyers found that about two-thirds of people who moved during the pandemic bought a unit that was the same size or larger than their previous home. The same share of buyers spent the same or less on housing, the firm added.

  • Most had more cash after they moved

Moving during the pandemic also tended not to break the bank. Of the Americans reporting they moved into larger homes, 78% said they have the same amount of disposable income or more after their move, Kelman said.

“Idaho home price could triple and still seem affordable to a Californian,” the Redfin CEO said in a tweet.

~Ben Winck, Insider 

Buyers snapping up homes in 5 days or less

Nationwide, almost half of homes sold above list price. These and several other record-breaking measures made April a historic month for housing.

Note: Pandemic lockdowns significantly slowed home buying and selling in April 2020, which means the year-over-year trends for home prices, pending sales, closed sales and new listings are somewhat exaggerated. 

April was another history-making month for housing, with homes selling for higher prices and in fewer days since at least 2012. The following measures all hit new records:

  • The national median home-sale price hit a record high of $370,528, up 22% from 2020.
  • The number of homes for sale fell to a record low.
  • The typical home sold in just 19 days, a record low.
  • 49% of homes sold above their list price, a record high.
  • The average sale-to-list ratio, a measure of how close homes are selling to their asking prices, hit a record high of 101.6%.

“To put the scarcity of housing into context, there is plenty of room for supply to increase and demand to taper off, and we would still find ourselves in a historically strong seller’s market,” said Redfin Chief Economist Daryl Fairweather. 

“While Americans brace themselves for a lot of changes as workplaces and schools reopen, the story of the housing market will largely remain the same. There simply aren’t enough homes for sale in America for everyone with the desire and the means to buy one right now. Until new construction takes off–over the course of years, not months–home prices will continue to increase. This housing boom is nowhere close to over.”

Indianapolis is home to the country’s fastest housing market. The typical home in the Indianapolis metro went under contract after just four days on the market in April, down from 10 days a year earlier.

“I’m helping buyers understand the current market by advising them that it’s no longer unusual for a home to sell for up to $50,000 above asking price,” said Indianapolis Redfin agent Andrea Ratcliff. “Builders have waiting lists of at least a year and people are hesitant to sell their homes because there are so few options available for them to buy. Plus, remote workers are moving into the Indianapolis area, fueling even more homebuyer demand. Those factors are exacerbating our local housing shortage and fueling the competitive cycle.”

Homes in Seattle also sold exceptionally fast in April, with half of all homes pending sale in just 5 days in each of those metros.

Three of the five most competitive markets of the month were in California. In Oakland, 81.5% of homes sold above list price, a higher share than any other metro. It’s followed by San Jose (78.2%), Tacoma, WA (73.7%), Austin (73.7%) and Sacramento (72.5%).

~Tim Ellis, Redfin