Housing Affordability Inches Down, Despite Record-Low Mortgage Rates

Despite hovering around their all-time low for several months now, it looks like mortgage rates have done about all they can for housing affordability.

According to a new report, skyrocketing home prices have now outstripped their power, and overall homebuying affordability is now moving downward.

Data from mortgage insurer First American shows that record-low mortgage rates boosted American homebuying power for much of 2020. At one point, buyers could afford a whopping $15,000 more house thanks to declining interest rates.

But now, with home prices up 8% over last year and 1.5% between just July and August, those days have officially come to an end.

Despite hovering around their all-time low for several months now, it looks like mortgage rates have done about all they can for housing affordability.

According to a new report, skyrocketing home prices have now outstripped their power, and overall homebuying affordability is now moving downward.

Data from mortgage insurer First American shows that record-low mortgage rates boosted American homebuying power for much of 2020. At one point, buyers could afford a whopping $15,000 more house thanks to declining interest rates.

But now, with home prices up 8% over last year and 1.5% between just July and August, those days have officially come to an end.

“Mortgage rates began declining in January 2020 and even dropped below 3% for the first time ever in August.,” says Mark Fleming, chief economist at First American. “But, as mortgage rates have fallen and the housing market has recovered amid strong demand and historically low supply, nominal house price appreciation has rapidly accelerated. In August, the dynamics powering affordability may have reached a tipping point.”

According to the report, affordability dropped by about $775 in August, despite mortgage rates hitting a new monthly low of 2.92%

Though the dip is small, Fleming says it indicates that rising home prices have begun to “erode the affordability gains of recent years.”

Buyers located in the Census Bureau’s Mountain region have it the worst. There, prices have risen by 9.2% in the last year. That area includes Arizona, Colorado, Idaho, Montana, Nevada, New Mexico, Utah, and Wyoming.

At the metro level, home prices have risen the most in San Diego, Seattle, Cleveland, San Francisco, Los Angeles, Washington D.C., Boston, Phoenix, Miami and Tampa, Fla. In San Diego, prices rose nearly 30% between August 2019 and August 2020.

Only three markets have seen price growth decelerate: New York, Chicago, and Portland.

~ Aly Yale, Forbes

Home Sales Continue To Rise Despite Low Inventory

Existing home sales continued their surge in September, marking the fourth consecutive month of a strong upward trajectory, according to the National Association of Realtors.

Each of the four major regions witnessed month-over-month and year-over-year growth, with the Northeast seeing the highest climb in both categories.

Total existing home sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 9.4% from August to a seasonally-adjusted annual rate of 6.54 million in September. Overall sales rose year-over-year, up 20.9% from a year ago (5.41 million in September 2019).

In a low-interest rate environment, many buyers who are juggling remote work and learning are searching for larger homes with extra rooms and a dedicated place for an office.

“Home sales traditionally taper off toward the end of the year, but in September they surged beyond what we normally see during this season,” said Lawrence Yun, NAR’s chief economist. “I would attribute this jump to record-low interest rates and an abundance of buyers in the marketplace, including buyers of vacation homes given the greater flexibility to work from home.”


The median existing home price for all housing types in September was $311,800, up 14.8% from September 2019 ($271,500), as prices rose in every region. September’s national price increase marks 103 straight months of year-over-year gains.

Total housing inventory at the end of September totaled 1.47 million units, down 1.3% from August and down 19.2% from one year ago (1.82 million). Unsold inventory sits at a 2.7-month supply at the current sales pace, down from three months in August and down from the four-month figure recorded in September 2019.

The week of Oct. 17 marked the fourth week in a row of homes selling nearly two weeks faster than the prior year.

“During a time when the housing market usually slows down, we are once again reminded that 2020 is anything but typical,” said realtor.com chief economist Danielle Hale. “Going into the last half of October, the median U.S. home for sale is still priced near the year’s peak and is selling almost two weeks faster than last year. At the same time, the pace of change has steadied and for some indicators, even slowed. This could be a welcome relief for buyers who have navigated not only a pandemic, but also a fiercely competitive 2020 homebuying season characterized by double-digit price growth and record low inventory.”

Bidding wars have erupted in many markets where would-be buyers fought over a dwindling supply of homes.

Ruben Gonzalez, chief economist for Keller Williams real estate franchise, predicts mortgage rates will continue to drive demand and are going to remain near record lows the rest of the year, and likely well into 2021.

“Accelerating price increases are potentially going to start to reverse some of the benefits we are seeing from low mortgage rates, and this could start to slow demand from entry-level buyers as their purchasing power diminishes,” he said.

The average commitment rate for a 30-year conventional, fixed-rate mortgage decreased to 2.89% in September, down from 2.94% in August, according to Freddie Mac.

Sales in vacation destination counties have seen a strong acceleration since July, with a 34% year-over-year gain in September.

“The uncertainty about when the pandemic will end coupled with the ability to work from home appears to have boosted sales in summer resort regions, including Lake Tahoe, mid-Atlantic beaches (Rehoboth Beach, Myrtle Beach), and the Jersey shore areas,” said Yun.

Properties typically remained on the market for 21 days in September – an all-time low – seasonally down from 22 days in August and down from 32 days in September 2019. Seventy-one percent of homes sold in September 2020 were on the market for less than a month.

“Higher earners have been more likely to retain their incomes, allowing the housing market to continue booming despite extremely high unemployment levels,” said Gonzalez. “As long as unemployment remains elevated, there is a possibility that we see layoffs spill into the higher-paying sectors that are currently propping up the housing market.”

First-time buyers were responsible for 31% of sales in September, down from the 33% in both August 2020 and September 2019.

Individual investors or second-home buyers, who account for many cash sales, purchased 12% of homes in September, a small decline from the 14% figure recorded in both August 2020 and September 2019. All-cash sales accounted for 18% of transactions in September, unchanged from August but up from 17% in September 2019.

“It’s a tale of two economies,” said Tendayi Kapfidze, chief economist for LendingTree, an online lending marketplace. “Higher income groups are doing far better than lower income groups. Home sales were at a 14-year high, but the details are informative. Homes under $100,000 were down 16.3%, from $100,000 to $250,000 up 4.3% but homes over $1 million were up 106.5%. This change in the mix of homes is a driver of the jump in prices.”

~ Brenda Richardson, Forbes

August pending home sales soar to a record high, fueled by rock-bottom mortgage rates


Pending home sales rose 8.8% in August compared with July, reaching a record high pace, according to the National Association of Realtors survey, which dates to January 2001.

Sales were 24.2% higher than August 2019.

These sales track signed contracts on existing homes, not closings, so they are an indicator of closed sales in the next one to two months.

“Tremendously low mortgage rates – below 3% – have again helped pending home sales climb in August,” said Lawrence Yun, NAR’s chief economist. “Additionally, the Fed intends to hold short-term fed funds rates near 0% for the foreseeable future, which should, in the absence of inflationary pressure, keep mortgage rates low, and that will undoubtedly aid homebuyers continuing to enter the marketplace.”

Yun also noted that not all pending sales contracts turn into closed sales, due to both sampling measures and mortgage and appraisal issues; therefore we may not see record closed sales in the coming months.

Mortgage rates started the month falling to a new low. They jumped sharply mid-month, but only briefly. Low mortgage rates have given buyers more purchasing power and added fuel to fast-rising home prices.

Homebuyers have been pouring into the market, thanks to a coronavirus pandemic-induced stay-at-home culture. They want more space, both indoors and outside for both work and school from home.

Home price gains have been accelerating for the past three months, with some large local markets seeing double-digit annual increases. Nationally, the median price of a home sold in August (by closed sale) was 11% higher compared with August 2019, according to the NAR.

“Home prices are heating up fast,” said Yun. “The low mortgage rates are allowing buyers to secure cheaper mortgages, but many may find it harder to make the required down payment.”

Prices are mostly being fueled by an incredibly low supply of homes for sale. The inventory of homes for sale at the end of August was down 18.6% annually, putting the market at a 3.0-month supply.

“The increase in contract signings is shrinking the limited number of homes for sale to some of the lowest levels in recent history,” said George Ratiu, senior economist at realtor.com. “This is causing a massive imbalance to the market’s supply and demand, which is rewarding sellers with home price increases that more than double the pace of wages. Looking forward, with no signs of these dynamics shifting anytime soon, more price increases are likely on the way and affordability will likely continue to be a challenge for many buyers.”

Homebuilders are ramping up production, but not nearly fast enough. Sales of newly built homes in August, which are also measured by signed contracts, came in a remarkable 43% higher than August 2019, according to the U.S. Census. The homebuilders are benefiting from the lack of existing homes for sale, and their soaring sales are evidence that existing home sales would be higher if there were more on the market.

Regionally, pending home sales rose 4.3% month to month in the Northeast and were 26.0% higher annually. In the Midwest, sales rose 8.6% for the month and were up 25.0% from August 2019.

Pending home sales in the South increased 8.6% monthly and 23.6% annually. In the West sales rose 13.1% monthly and 23.6% annually.

~Diana Olnick, CNBC

Real Estate In The Pandemic Era: The Winds Of Change Are In The Air

To say that this is the strangest year most of us have ever experienced is an understatement. Let’s talk about the changes that are happening in the real estate industry as a result of the pandemic.

First, the good news. The combination of historically low interest rates and people leaving big cities in droves has fueled the single-family housing market around the United States. These low rates are helping people who previously could not afford to buy a home to do so now. To get that ultra-low rate, lucky buyers who still have a job will be required, in some cases, to put at least 20% down and must have a credit score over 700 with proof of their ability to pay. Those unable to meet these requirements will largely remain in the rental pool.

But does a robust homebuying flurry hurt the residential rental market? Not really, except for rentals in large cities from which people are fleeing. Amid lockdown, people learned that they can actually work from home or anywhere that has an internet connection. Productivity levels overall have increased, and parents can be home with the kids. An office space is the newest must-have for a family home.

Even after the pandemic, will workers want to go back to the office? Likely not. Months of sheltering in place have soured many on big-city living. The effect we can predict is that rents in large cities, which have historically been extremely high, will go down as inventory increases. For those who are staying in the big cities, co-living, which had become popular, may see waning interest. Co-living offers the cheaper alternative of a commune-like experience as opposed to renting an apartment and shorter-term or month-to-month leases. As rents drop and traditional apartments become more accessible, these new alternatives may lose popularity.

The commercial office space rental industry has also changed. Because of the work-at-home requirement, companies (which are often locked into long-term leases on large amounts of office space) are finding that their employees do not want to come back to the office setting. Those who do want to work in an office may be accommodated in smaller venues with meeting rooms for the occasional gathering of larger groups and space for smaller meetings as needed. Companies are needing to renegotiate leases and downsize on space while their employees continue to work from home is changing the face of the commercial office space market.

Once a viable, sought-after asset, building owners are scrambling to do conversions of office space to live-and-work or residential-only space. In addition, the days of call centers may be numbered now that we know people can actually be at home for both sales and customer service jobs. If these changes prove to be reliable and growth-oriented, the days of large rooms full of sales and customer service staff may be gone. The potential is that the cost of brick-and-mortar space for companies will decrease, thus adding a potential profit to the bottom line.

But this is not good news for the investors in those buildings, who will have to quickly adapt or die with a paucity of commercial tenants wanting office space. Smaller businesses — like accounting offices, legal groups and medical dental space, gyms and spas — will not be changed much in terms of their ongoing need for commercial office space.

Many small shops and retail outlets are suffering greatly from the lockdown. Rolling restarts and subsequent shutdowns are moving restaurants closer to insolvency. The fear is that when the PPP funds run out, it will be curtains for many of them. I have been through small towns around Idaho and see empty storefront after empty storefront. Sadly, these businesses are not coming back. Many small-town businesses were already operating month to month with little in reserve for slowdowns and simply could not weather the storm. It is not just the business owners who have lost; it is also the owners of those rental properties that are now sitting vacant. Those investors still must make mortgage, insurance and tax payments, and there is no money coming in from rents to support those cost outlays. They, too, will suffer if they cannot re-rent the spaces and make the mortgage and tax payments as required.

For the restaurants, bars, small retail businesses and large office-space holders, the near-term future is bleak — that is the bad news. Banks have not forgiven payments but in some cases have delayed them. That means that for many borrowers, large payments will be due before long. Because reopening is still not a sure thing, many will not be able to catch those payments up. Foreclosures loom unless there is a way found to give short-term support to investors with mass vacancies.

For those investors who have free cash available to invest, there will be some good buying opportunities and grateful owners who are only too willing to sell. This pandemic too shall pass, and for those who played and lost, there is hope that they can come back another day for the big win.

Timmi Ryerson, Forbes

ZILLOW SEES ULTRA-COMPETITIVE SPRING SELLING SEASON

The latest housing market outlook from Zillow projects that the nearly two-year slowdown in the housing market may be coming to an end right as home shopping season kicks off.

U.S. home values grew 3.8% year-over-year to $245,193, less than one-hundredth of a percentage point slower than the previous month, according to the January Zillow Real Estate Market Report. Annual home value appreciation has slowed in each month since April 2018, but this is the smallest drop from one month to the next during that period.

Though the number of homes listed for sale increased from record lows a month earlier, inventory is down 8% annually — the biggest annual drop since March 2018, Zillow said. There were 1,500,262 homes on the market in January, up 4,295 from the previous month but down 130,310 year-over-year.

This persistently low inventory is a key reason why Zillow expects home value growth to speed up once again. The economy has remained strong, mortgage rates are low and buyers will be competing for a limited number of homes this home shopping season.

“As the economic storm clouds on the horizon in early 2019 cleared up, we saw buyers return in droves, taking advantage of ultra-low mortgage rates,” said Zillow economist Jeff Tucker. “Our first look at 2020 data suggests that we could see the most competitive home shopping season in years, as buyers are already competing over near-record-low numbers of homes for sale. That is likely to mean more multiple-offer situations, and that buyers will have a harder time finding the perfect fit for their families. The good news for buyers is that low mortgage rates are helping to make home ownership more affordable, and home builders are responding to the hot housing market by starting construction on more homes than at any time since 2007.”

Home values are growing faster than they were a month ago in about half of large markets (17 of the top 35). The hottest large markets are Phoenix (up 6.7%), Columbus (6.2%), Charlotte (5.4%) and Cincinnati (5%). Home values fell year-over-year in San Jose for the 12th consecutive month. But its Bay Area neighbor, San Francisco, saw home values grow 1% year-over-year, breaking a streak of declines that dated back to May 2019.

Inventory fell in all but three top-35 metros — San Antonio (+7.7%), Detroit (+6.4%) and Chicago (+0.3%). Inventory was hit the hardest in Seattle (-27.6%), Phoenix (-24.5%) and San Diego (-23.1%).

Rent growth remained stable. The typical rent is now $1,602, up 2.3% year over year and just $1 more than last month. Rents are growing faster than a year ago in 28 of the 35 largest U.S. metros, led by Phoenix (+7.9% annually) — also the fastest-growing for-sale market — Pittsburgh (+7%), Cincinnati (+5.7%) and Las Vegas (+5.7%).

Mortgage rates listed by third-party lenders on Zillow rose to a peak of 3.77% on January 31 after starting the month at 3.70%. Rates reached their monthly low on January 24 at 3.51%. Zillow’s real-time mortgage rates are based on thousands of custom mortgage quotes submitted daily to anonymous borrowers on the Zillow Mortgages site by third-party lenders and reflect recent changes in the market.

~Builder

Dip in Seattle home prices leads nationwide slowdown


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For months, Seattle-area home prices have been teetering between growth and decline.

They just dropped over the edge.

The cost of a single-family home in May dipped 1.2% from 12 months earlier, the first negative change in a major U.S. city in a number of years, according to the latest S&P CoreLogic Case-Shiller data.

“Whether negative YOY (year-over-year) rates of change spread to other cities remains to be seen,” said Philip Murphy, managing director at S&P Dow Jones Indices, in a statement. “For now, there is still substantial diversity in local trends.”

Nationwide, home prices have been slowing their gains for the past year — even in the Southwest, where the market is growing fastest. Las Vegas, which overtook Seattle as the nation’s hottest housing market last June, saw gains of 6.4%, still a slight decline over last year.

But an overall fall in Seattle-area prices masks the trend that north and south of Seattle, the market is only getting hotter. In Tacoma and Pierce County, median house prices rose 7.3% in June from 12 months earlier, according to data from the Northwest Multiple Listing Service. (The Case-Shiller index lags by one month and is a composite of prices in King, Pierce and Snohomish counties.) And prices in Kitsap and Skagit County both posted double-digit price increases.

Some of that variation is because prices for less expensive homes, which tend to be outside of Seattle, are still rising.

The Case-Shiller index divides homes into three even tiers: homes that cost more than $625,000, those that cost less than $400,000 and those in between. Of the three, in the Seattle metro area only homes in the least expensive tier posted price increases in May, a 2.74% jump since last year.

Northerly Skagit County, where median home prices hover in the low tier at $380,000, saw an 11.8% increase in prices from June 2018, according to the Northwest Multiple Listing Service data. Realtor Duane Gish, who’s been selling homes in Skagit County for 19 years, said that five years ago the homes he sold were in the $300-400,000 range. Now, they’re closer to $500,000.

While the Northwest Multiple Listing Service data charts growth in some ritzy suburbs like Bellevue and Mercer Island, that’s not the case for the city itself. Prices in the middle tier of real estate are stagnant, the Case-Shiller data shows, while the top tier has been losing value since early this year.

Those top two tiers include almost all the single-family real estate in Seattle proper, where the median home price is $714,600, according to Zillow.

Kelly Meister, a broker at Compass in Seattle, said buyers “don’t have the sense of urgency they did last year,” when prices for top-tier real estate were growing in the double digits.

Right now, she said, “the Seattle market is like a microwave: Super hot in some spots and cold in others.” Houses that would have been “a major grab” last year in neighborhoods like the Central District and Columbia City aren’t getting as much attention in a slower market.

Meanwhile, in tony neighborhoods like Mount Baker, Magnolia and Laurelhurst, there’s still a great deal of demand for “homes that check all the boxes,” said Barbara Shikiar, a Windermere broker working primarily in Northeast Seattle.

“But homes that are more idiosyncratic, in this type of market,” she said, “those tend to linger.”

Nationwide, the Case-Shiller index showed gains of 3.4% over the past 12 months. Growth is slowing because “buyers are no longer willing to pay any price,” Zillow economist Matthew Speakman said in a statement.

Buyers, he said, “took a breather … The fact that buyers — and prices — slowed their roll right through the middle of home-buying season indicates just how few homes are on the market.” And, he said, high land and labor costs mean builders aren’t putting up inexpensive homes fast enough to woo first-time buyers.

Even though home prices in Seattle are dropping, they remain high. A typical home in Las Vegas, the nation’s hottest market, might sell for $274,000, according to Zillow’s Home Value Index, less than half the median Seattle value.

~Katherine Kashimova Long, Seattle Times

2019 Homebuyer Forecast ~ Update

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On Tuesday, Realtor.com issued a revised forecast projecting a more robust market than originally predicted through the remainder of the year.

As mortgage rates fall and more homes hit the market, realtor.com has updated its homebuying forecast for the end of 2019. While the original forecast predicted mortgage rates to reach 5.5 percent by the end of the year, the adjusted forecast indicates rates will likely peak at 4.5 percent. The number of home sales, meanwhile, will experience a much smaller drop than initially forecasted. Realtor.com expects them to drop by only 0.3 percent instead of 2 percent.

“The 2019 housing market is different than what we predicted in fall 2018, primarily due to an unexpected drop in mortgage rates in January 2019,” said realtor.com Chief Economist Danielle Hale in a prepared statement.

Courtesy of Realtor.com

Home prices are the only metric not predicted to experience a shift toward affordability. Realtor.com predicts prices will grow by 2.9 percent instead of the original 2.2 percent. But overall, the anticipated slowdown in sales is not likely to take place. With lower mortgage rates, more homes are expected to trade hands than originally predicted.

“We believe 2019 will be characterized by lower, but still increasing mortgage rates that will buoy home prices and sales by boosting buyers’ purchasing power beyond what we initially projected,” Hale said. “This will create a slightly hotter, but still cooling housing market relative to the initial forecast five months ago.”

Veronika  Bondarenko,  Inman

Is spring going to be a Goldilocks housing season for everybody?

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Have we arrived at one of those rare Goldilocks moments in real estate, where the market works well for sellers and buyers, strongly favoring neither?

Maybe. Based on the latest national consumer-sentiment survey by mortgage investor Fannie Mae, American consumers appear to think so. They’re more positive about the overall direction of the housing market than they’ve been in nearly a year. Growing numbers think it’s a good time to sell and a good time to buy. They expect their own personal financial situations will improve this year, and they believe that interest rates for home loans will continue to remain relatively affordable.

Housing and mortgage economists tend to agree. As Michael Fratantoni, chief economist of the Mortgage Bankers Association, told me: Six months ago, “I was guardedly optimistic. Now I’m just plain optimistic.” Mark Fleming, chief economist of First American Title Insurance, says: “So far in 2019, we’ve seen mortgage rates decline and wages rise — both trends work to boost home-buying power and fuel greater market potential for home sales, setting the stage for a stronger than expected” season.

Yet some economists warn that things are not necessarily as rosy as Fannie’s consumer survey would suggest. They point to troubling signs: Total home sales on a national basis continue to decline. That pattern historically has been a leading indicator that prices could actually fall during the year ahead, ending years of nonstop appreciation. Plus, houses are taking longer to sell — many owners are having to cut their asking prices. The days of widespread bidding wars are over.

So what’s really going on, and how do you relate it to your own situation, either as a potential buyer or seller? Some hard facts:

●Prices are still rising, but at a slower rate than in recent years past. The median home listing price hit $300,000 last month for the first time ever, a 7 percent jump over the previous year, according to Realtor.com. Fratantoni predicts price increases will moderate to an average of just 4 percent this year, 3 percent next year and 2.5 percent in 2021.

●A notable percentage of sellers’ asking prices are being reduced.

●Interest rates have been a great stimulus and are key to a strong spring. Lower rates are good for buyers, good for sellers. Last fall, average rates for a fixed-rate 30-year mortgage hovered near 5 percent, according to data from investor Freddie Mac. In the first week of April they averaged 4.08 percent. Homeowners and would-be buyers have responded enthusiastically to the lower rates, sending applications soaring by 18.6 percent during the week ending March 29 compared with the week earlier, according to the Mortgage Bankers Association.

●Inventories of available homes for sale continue to rise — meaning more choices for shoppers, according to National Association of Realtors researcher Michael Hyman. Listings nationwide were up by 3.2 percent year-over-year in February. That’s generally a good sign for buyers because it helps keep price pressures down. But homes for sale in the primary entry segment for first-time home buyers — houses priced under $200,000 — dropped by 9 percent year-over-year, according to Realtor.com, while they grew by 11 percent in the upper price brackets over $750,000.

All this is well and good, says Issi Romem, chief economist for realty marketing and data site Trulia, but the reality is that the housing market is in cyclical slowdown mode. Inventories of available homes may be increasing, but part of the reason is that houses are staying on the market unsold for longer times in many areas. The price cuts and longer days-on-market times reveal that significant numbers of “sellers are facing greater difficulties in selling.”

Romem and Trulia Senior Economist Cheryl Young issued a report last week that runs counter to the cheery outlook prevailing in the industry. “[It] is possible,” they say, that “by fall or next year prices might modestly decline.”

What that means is that the Goldilocks theory and perceptions of balance between sellers and buyers may not be quite right.

Advantage: buyers.

 

Kenneth R. Harney, The Washington Post

Home Buyers Still Competing for Sparse Inventory in Western Washington, Driving Up Prices – Especially for Sought-After Condominiums

“The Seattle area real estate market hasn’t skipped a beat with pent-up demand from buyers is stronger than ever,” remarked broker John Deely in reacting to the latest statistics from Northwest Multiple Listing Service. The report on January activity shows a slight year-over-year gain in pending sales, a double-digit increase in prices, and continued shortages of inventory.

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“Sellers that have put their properties on the market early this year have less competition and are seeing multiple offers. Open houses are experiencing heavy traffic with hundreds of potential buyers attending,” reported Deely.

Of 23 counties served by Northwest MLS, eight counties, including three in the Puget Sound region (King, Kitsap and Snohomish), reported fewer pending sales than a year ago. In King County, where acute inventory shortages exist in many neighborhoods, pending sales dropped 7.5 percent and closings dropped 18.5 percent.

“The decline in sales last month can’t be blamed on the holidays, weather or football. It’s simply due to the ongoing shortage of housing that continues to plague markets throughout Western Washington,” said OB Jacobi, the president of Windermere Real Estate. The number of total active listings at month end stood at 8,037 homes and condos, down nearly 17.6 percent from a year ago. Measured by months of supply, there was only about 1.5 months overall, well below the 4-to-6 month level many industry experts use as a gauge of a balanced market.

Condo inventory is especially tight in Snohomish County (0.8 months of supply) and King County (0.92 months). System-wide there is under a month’s supply (0.93 months). For the four-county Puget Sound region, there were only 427 active condo listings at month end, down almost 31 percent from a year ago.

Despite the sparse selection, brokers expect inventory to improve.

“I actually believe 2018 will bring us moderately more listings, which should help offset the growing demand that continues to result from the area’s strong economy,” remarked Jacobi.

“The month of March can’t come soon enough for home buyers,” said J. Lennox Scott, chairman and CEO of John L. Scott Real Estate. “In March, the number of new listings will bump up substantially from the low number of new listings typical for winter months. Better selection will start in March as we enter the spring housing season,” Scott predicts.

In the meantime, Scott reported “a multiple-offer everything, virtually sold out market” in all price ranges close to job centers and in the more affordable and mid-price ranges in surrounding counties. “Sellers are receiving premium pricing and home buyers are pouncing on each new listing,” he added.

Prices continue to rise in all but a few counties, even as the volume of closed sales fell about 9.3 percent. For January’s 5,325 closed sales, the median price was $363,500, a jump of about 11 percent from the year-ago figure of $327,500. Twelve counties reported double-digit spikes.

Within the four-county Puget Sound region, King County had the largest year-over-year gain. Prices for homes and condos combined shot up 20.3 percent in that county, rising from $475,000 to $571,250. Pierce County reported a jump of 15 percent, followed by Snohomish County at about 12.2 percent and Kitsap County at nearly 3.5 percent.

The depleted supply of condos meant premium prices. Area-wide the median price for last month’s completed transactions rose nearly 18.6 percent, from $269,900 to $320,000. Snohomish County’s condo prices surged nearly 25.5 percent, followed by King County at nearly 22.6 percent.

Some brokers expect the hefty price gains to ease.

“As interest rates rise, the rate of price increases will slow down,” predicts Northwest MLS director Dick Beeson, principal managing broker at RE/MAX Professionals in Gig Harbor. Despite this expectation, he believes sparse supply and the area’s appeal both nationally and internationally will mean ongoing competition and multiple offer situations.

 

The luxury market is also off to a quick start in 2018. “Close to job centers, the luxury market is gaining positive momentum due to the wealth effect of the stock market, the strength of the U.S. economy, and homebuyers from the Pacific Rim, especially China,” noted Lennox Scott.

Northwest MLS figures show sales of homes selling for $2 million or more are far outpacing year-ago activity. Last month, member-brokers reported selling 55 residences at this price threshold. That’s up 66 percent from the same month a year ago when brokers sold 33 such homes.


~Northwest Multiple Listing Service

Why It’s Now An Empty Nesters’ Housing Market

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There’s a mismatch in the housing market. Demand is rising, yet homebuilders don’t have the capacity to create the supply.  They haven’t banked as much land, they haven’t filed the permits and they’ve become increasingly short of labor—one possible byproduct of the Trump administration’s crackdown on illegal immigrants.

In fact, the nation is probably short about 700,000 homes on an annual basis. That explains why new home sales have been somewhat disappointing.

It also explains why sellers in many markets are now in prime position. According to Realtor.com, in December and January the supply of existing homes was 3.6 months, something that hadn’t happened since January 2005. In Seattle, for instance, the average time a house stays on the market is 36 days, compared with the national average of 90 days. In Dallas-Ft. Worth, it’s 42 days, according to Realtor.com.

Combine that with the prospect of higher-priced mortgages thanks to the Federal Reserve’s decision to begin lifting interest rates and it makes buyers a little more motivated. “We’ve seen home sales surge because buyers are beginning to realize there is this expectation that mortgage rates will rebound: you might as well get in now,” says Bernard Baumohl, chief global economist at The Economic Outlook Group. He says prices are rising at twice the rate of inflation and more than two times the rate of average hourly pay. That’s bad news on the affordability front for first-time buyers who are trying to get onto the first rung of the housing ladder.
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But it’s great news for empty nesters and other homeowners looking to downsize. Even better, there’s less of a supply constraint because developers have targeted the boomer market by building high service, luxury condominiums in major markets. And why not, says Peter Wells, a partner at Real Capital Solutions, which is developing a luxury condo tower in suburban Dallas: “When [boomers] sell their big place, they’re cash rich and it becomes all lifestyle driven.” Spring is a traditional time for buying and selling homes, and this season stands to be a busy one.

~Bill Saporito, Time