Home buyers are finding some relief but it is temporary
Competition for homes eased slightly in July across much of Washington state, but brokers from Northwest Multiple Listing Service expect the respite to be short-lived, with inventory still tight and prices still climbing.
"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," observed J. Lennox Scott, chairman and CEO of John L. Scott Real Estate. He noted the number of listings brokers added last month outgained the number of homes going under contract by a small margin in most areas in the report.
Northwest MLS brokers added 12,916 new listings to the database during July. They reported 11,567 pending sales (mutually accepted offers) areawide, which covers 26 counties. At month end, there were 7,948 total listings offered for sale, down 22.5% from the year-ago total of 10,259. That was the highest level since October when inventory totaled 8,623 properties, including single family homes and condominiums.
"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," Scott said, reminding buyers they will find a better selection now than in the coming months.
John Deely, a member of the Northwest MLS board of directors, commented, "There is some 'normalization' in our market as it relates to the historical summer slowdown." Deely suggested the slowdown is occurring earlier this year, noting "We've also seen the warm weather in our region begin earlier." He attributes some of the slowdown in real estate activity to the lifting of pandemic restrictions on June 30 when the state reopened under its "Washington Ready" plan. "People are eager to enjoy the nice weather and take vacations," observed Deely, the executive vice president of operations for Coldwell Banker Bain.
Another industry veteran also detected some pullback of activity.
"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."
NWMLS statistics show there were fewer pending sales last month (11,567), than during both June (12,328) and May (11,969). July's volume was down about 8.8% from the year-ago total of 12,682 pending sales.
"While dangerous to compare 2020 lockdown figures to this year, it is interesting to see that new listings volume is starting to rise above 2019 levels," observed James Young, director of the Washington Center for Real Estate Research at the University of Washington. In July, MLS figures show member-brokers have added 1,723 more new listings of single family homes and condos than during July 2019 (12,916 versus 11,193). Year to date, brokers have added 1,438 more new listings this year compared to 2019.
Notably, 14 of the 26 counties in the Northwest MLS report showed year-over-year (YOY) gains in new listings, with half of them reporting double-digit increases: Clallam, Clark, Cowlitz, Ferry, Grays Harbor, Kitsap, and Thurston. Three of the four counties in the Puget Sound region had YOY improvement, led by Kitsap County with a jump of 29.3%. The volume of new listings in King County dropped about 5.4% from a year ago. System-wide there was a 3.2% gain in new listings versus twelve months ago.
Prices continue to climb by double digits in all but a few counties. Across all areas, prices for closed sales of single family homes and condominiums (combined) jumped 21.4% during July compared to a year ago, rising from $484,995 to $589,000. Last month's median price overall was unchanged from June.
"My advice to buyers would be to take advantage of this time before Labor Day and the fall market," stated O'Leyar. His advice to sellers would be: "Don't get overly hyped with anecdotal information about the real estate market. Overpricing a listing in this market is still a big mistake."
Young checked statistics from two years ago, noting prices in suburban counties and along much of the I-5 corridor have increased sharply. "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%. Skagit and Whatcom counties underperformed relative to these areas with median price increases of 36.4% and 38.4% respectively." NWMLS figures show four other counties have had price jumps of at least 40% -- Ferry, Grant, Grays Harbor, and Okanogan. Jefferson County had the smallest increase since 2019, with the median price increasing just over 24%, followed by Clark County, at 24.6% and King County at 26.2%.
"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," Young concluded. "Unfortunately," he added,"the lack of new construction for owner occupiers over the past few years in the suburbs means first-time buyers and marginalized communities are finding it more difficult than ever to get a foot on the housing ownership ladder."
"With a lack of new construction coming on the market in suburban areas after years of under building, increasing demand still has few places to go," suggested Young. "With interest rates staying at historically low levels and less than a one-month supply throughout the region, the perfect storm for rising house prices will continue, but perhaps not as ferociously as before."
Dean Rebhuhn, owner at Village Homes and Properties said would-be purchasers continue to be frustrated by the sparse supply of homes, although he noted low interest rates are providing increased purchasing power. "The demand for homeownership and low interest rates are fueling a very busy real estate market with buyers continuing to seek opportunities that provide more space both inside and out."
"Clearly the lack of inventory of homes for sale remains the primary reasons for price increases and multiple offer situations, giving nightmares to would-be buyers," remarked Dick Beeson, managing broker at RE/MAX Northwest Brokers.
Housing affordability "has left the building," according to Beeson, citing building supply chain slowdowns and a scarcity of skilled workers for homebuilding as culprits.
Beeson, whose office is in Pierce County, estimates about 75% of all sold properties during the past six months in that county as well as in Kitsap and Thurston counties sold in a week or less. "It can't get much faster. All three counties have barely two weeks of inventory," he commented.
Northwest MLS figures show there is 0.73 months of inventory system-wide, with only 12 of the 26 counties in the report having more than one month of supply.
"As more and more millennials enter the market, the crush of demand will grow even stronger. Can somebody please move?" asked Beeson, in hopes of uncovering more listings.
Coldwell Banker Bain CEO Mike Grady referred to recent housing activity in the region as "our 14th consecutive month of this hyper real estate market." He agreed with Deely's explanations for slowing activity, saying recent feedback from brokers confirms buyers and sellers are ready for vacations and traveling after spending so much time at home.
Commenting on the slight change in month's supply of inventory, Grady said the overall market hasn't deviated much. He noted the time it would take to sell all homes in inventory (month's supply) only increased about three days since June and still remains well under three weeks in most markets. "That's a long, long way from a 'balanced' market of four-to-six months of inventory."
Grady expects "more of the same" for the rest of the summer and beyond. "We don't appear to have the forces in play to change. Low inventory, high buyer demand, low interest rates, and thousands of job openings are continuing unabated. I remain bullish on the real estate market now and well into 2022."
Deely said one plus for buyers is some of the condo numbers. The MLS figures show the volume of new listings (1,702) outgained pending sales (1,549), although total active listings remained below year-ago levels (down 35% areawide).
Condo prices rose more modestly, at 12.6%, than the rate for single family homes (22%). In King County, which accounted for nearly six of every 10 condo sales during July, the year-over-year increase was just under 7%. The median priced condo in King County sold for $460,000, while overall the median sale price was $428,000.