Western Washington Real Estate Market Update

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The following analysis of the Western Washington real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact me.

ECONOMIC OVERVIEW

The Washington State economy added 96,900 new jobs over the past 12 months, representing an annual growth rate of 2.9%—still solidly above the national rate of 1.5%. Most of the employment gains were in the private sector, which rose by 3.4%. The public sector saw a more modest increase of 1.6%.

The strongest growth was in the Education & Health Services and Retail sectors, which added 17,300 and 16,700 jobs, respectively. The Construction sector added 10,900 new positions over the past 12 months.

Even with solid increases in jobs, the state unemployment rate held steady at 4.7%—a figure that has not moved since September of last year.

I expect the Washington State economy to continue adding jobs in 2018, but not at the same rate as last year given that we are nearing full employment. That said, we will still outperform the nation as a whole when it comes to job creation.

HOME SALES ACTIVITY

There were 14,961 home sales during the first quarter of 2018. This is a drop of 5.4% over the same period in 2017.

Clallam County saw sales rise the fastest relative to the first quarter of 2017, with an increase of 16.5%. In most of the other markets, the lack of available homes for sale slowed the number of closings during this period.

Listing inventory in the quarter was down by 17.6% when compared to the first quarter of 2017, but pending home sales rose by 2.6% over the same period, suggesting that closings in the second quarter should be fairly robust.

The takeaway from this data is that the lack of supply continues to put a damper on sales. I also believe that the rise in interest rates in the final quarter of 2017 likely pulled sales forward, leading to a drop in sales in the first quarter of 2018.

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HOME PRICES

With ongoing limited inventory, it’s not surprising that the growth in home prices continues to trend well above the long-term average. Year-over-year, average prices rose 14.4% to $468,312.
Economic vitality in the region is leading to robust housing demand that far exceeds supply. Given the relative lack of new construction homes— something that is unlikely to change any time soon—there will continue to be pressure on the resale market. As a result, home prices will continue to rise at above-average rates in the coming year.

When compared to the same period a year ago, price growth was strongest in Grays Harbor County at 27.5%. Ten additional counties experienced double-digit price growth.
Mortgage rates continued to rise during first quarter, and are expected to increase modestly in the coming months. By the end of the year, interest rates will likely land around 4.9%, which should take some of the steam out of price growth. This is actually a good thing and should help address the challenges we face with housing affordability—especially in markets near the major job centers.

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G3DAYS ON MARKET

The average number of days it took to sell a home dropped by seven days when compared to the same quarter of 2017.

King County continues to be the tightest market in Western Washington, with homes taking an average of 24 days to sell. Every county in the region saw the length of time it took to sell a home either drop or remain essentially static relative to the same period a year ago.
In looking at the entire region, it took an average of 61 days to sell a home in the first quarter of this year. This is down from 68 days in the first quarter of 2017 but up by eleven days when compared to the fourth quarter of 2017.

Anyone expecting to see a rapid rise in the number of homes for sale in 2018 will likely be disappointed. New construction permit activity—a leading indicator—remains well below historic levels and this will continue to put increasing pressure on the resale home market.

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CONCLUSIONS

This speedometer reflects the state of the region’s housing market using housing inventory, price gains, home sales, interest rates, and larger economic factors. For the first quarter of 2018, I have left the needle at the same point as fourth quarter of last year. Price growth remains strong even as sales activity slowed. All things being equal, 2018 is setting itself up to be another very good year for sellers but, unfortunately, not for buyers who will still see stiff competition for the limited number of available homes for sale.

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~Dr. Matthew Gardner, Windermere Real Estate

The Seattle Area Housing Market: Big Demand, Little Supply

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Home buyers in the Seattle area are up against the toughest purchasing prospects in the country.

The Seattle Times cited the monthly Case-Shiller home price index, which showed a 12.3-percent year-over-year increase for single family home prices in the metro area in March. It’s the fastest growth in more than three years and easily outdistances increases in Portland (9.2 percent), Dallas (8.6 percent), Denver (8.4 percent) and Boston (7.7 percent).

Seattle also more than doubles the national average for price gains, which are at 5.8 percent.

Seattle-based real estate company Redfin released its Demand Index on Tuesday, and it shows what buyers are certainly learning the hard way as prime selling season approaches — there just aren’t enough houses available for interested parties.

Seattle is the most inventory-constrained metro, as measured by months of supply, but it also has the third smallest amount of inventory, following Oakland and San Francisco, Redfin said. Seattle posted the largest year-over-year decrease in inventory, down 35 percent from last April. In the same period, the number of Redfin customers making offers climbed by 36.9 percent, an indication that the market is more competitive for buyers this year than it was last year.

“There’s no indication that this market is going to see a drastic increase in supply or a drop in demand, so waiting isn’t an option for a serious buyer,” said Redfin Seattle agent Kyle Moss in the company’s blog post. “People intent on purchasing this season should be discerning and focus on the one or two criteria that are most important to them, like commute time and/or schools. From there, carve out a list of homes that meet your qualifications and work alongside an agent who has experience winning offers in competitive situations to build and execute a competitive strategy that fits your budget.”

That inventory crunch, in a city attracting thousands of new well-paid tech workers to companies such as Amazon, Facebook, Google, Expedia and others, is leading to the highest rate of bidding wars among the cities that Redfin tracks in other hot markers. In Seattle in April, 88.7 percent of homes received multiple offers, outpacing Los Angeles (79.3 percent), Oakland (78.6 percent), San Diego (77.5 percent) and Washington, D.C. (73.9 percent) among others.

The Times said extra offers often drive prices higher, and the typical single-family house in the city last month sold for a record $722,000.

~Kurt Schlosser, Geekwire

February Local Market Update