Hefty Home Sales in Western Washington Fueled by "Basic Economics"

Thursday, April 21, 2005

News from Northwest Multiple Listing Service

KIRKLAND, Wash. (April 6, 2005) – Multiple offers, crowded open houses and some “wild and wooly agreements” are contributing to hefty home sales in Western Washington even as real estate brokerages continue to grapple with inventory shortages.

Brokers in the 15-county market area served by Northwest Multiple Listing Service reported 10,841 pending sales during March for a 12.2 percent increase over the same period a year ago. The volume of pending sales (offers made and accepted, but not yet closed) for the first quarter of 2005 is up 14.8 percent compared to the first three months of 2004.

Reports of competitive bidding are widespread. “We’re experiencing many multiple offer situations across the market from Everett to Puyallup and in all price ranges,” said NWMLS director Mike Grady, the president and designated broker of Coldwell Banker Bain. “It’s a matter of more demand than supply,” he explains, noting much of the imbalance is due to not enough land being available for development, “especially in King County, in part due to GMA [Growth Management Act] restrictions.”

King County’s pending sales rose only 5.25 percent during March, lagging eight counties with double-digit gains. Four counties experienced drops in last month’s volume of pending sales: Kitsap (-9.1 percent), Kittitas (-11.7 percent), San Juan (-40.7 percent) and Skagit (-11.2 percent).

The inventory in King County is at 70 percent of year-ago levels. That 30 percent drop for the month compared to twelve months ago was the largest among the 15 counties in the NWMLS system and a factor in rising prices. The median asking price for current listings of single family homes and condominiums in King County is $385,000, which is $55,500 (16.8 percent) higher than a year ago.

All counties served by Northwest Multiple Listing Service reported having fewer listings last month than a year ago. Area-wide, inventory is down about 18.9 percent, with six other counties also reporting drops of more than 20 percent (Grays Harbor, Island, Jefferson, Skagit, Snohomish and Thurston).

For the month, brokers added 11,808 new listings to inventory, bringing the total number of single family homes and condominiums being offered for sale at month-end to 20,308. A year ago, MLS members represented 25,047 sellers and replenished inventory with the addition of 12,320 new listings.

“The brisk market is beating up both agents and buyers,” remarked Dick Beeson, manager of Windermere Real Estate/Paragon Co., in Tacoma and a member of the NWMLS board of directors. Slim inventory is prompting some “wild and wooly agreements,” he reports. Some buyers have included blank escalator clauses, which he suggests is ill-advised. Beeson also notes the seller’s market is spawning some “cocky sellers,” with unrealistic price expectations.

Attractive interest rates continue to fuel the frenzy, notes MLS director Ken Bacon, the broker at Windermere’s Redmond office. Anxious buyers who fear rates will rise, potential sellers who are in a holding pattern (instead taking advantage of low rates for refinancings and remodeling) and investors are keeping inventory at low levels.

Bacon expects inventory to improve “as we go deeper into the spring selling season.” Sellers with kids prefer to move during summer months, rather than relocate during the school year, he notes. He also expects a recovering economy, rising consumer confidence and strong relationships with Asian markets will contribute to ongoing demand and price appreciation “even if rising interest rates create a leveling off to a strong market instead of a frenzied market.”

Brokers reported high volumes of closed sales for the month, reflecting robust pending sales activity of the past few months. NWMLS members completed 8,776 transactions last month for a 23.9 percent jump in closings over the same period a year ago.

Prices are up about 12.7 percent from a year ago, with the median price area-wide reported to be $256,783. In the four-county Puget Sound region, King County topped the list with a median sales price of $324,950 for homes and condos that sold there last month. That’s up about 16 percent from twelve months ago. (For single family homes that closed last month in King County, the median selling price was $362,000; for condos, the sales price was $205,990.)

On a percentage basis, Mason County claimed the biggest change, with prices there climbing 20.9 percent compared to a year ago, rising from $138,500 to $167,500.

Local brokers tend to dismiss speculation about a “housing bubble.” Asked about periodic reports that home prices are on the verge of tumbling, Grady stated, “There is no bubble.” A great job market, the inability to obtain an adequate number of building permits because of growth and development restrictions and “our own children growing into their first homes” continues to propel the strong market. He expects prices will escalate in response to basic economics.

Even rising interest rates (which crept above 6 percent briefly last month before dropping back to around 5.8 percent for a 30-year fixed rate) shouldn’t curtail demand, according to Grady. “While we believe interest rates might climb above 6 percent this year – perhaps as much as 6.5 percent by September or October – most purchasers are not using 30-year mortgages but instead are choosing adjustable rate options, such as 5/1 ARMS or other shorter term financing programs.

Selling time seems to support his optimism. The average time on market for sales that closed last month was 58 days, down from the year-ago average of 71 days. Areas north of downtown Seattle, including Ballard, Greenlake, Richmond Beach and Shoreline, reported having the quickest sales, averaging 32 days or fewer. Grady also lists Capitol Hill, Queen Anne, West Bellevue, South Bellevue and Mercer Island as other “hot” neighborhoods within King County.

So far, rising fuel costs aren’t influencing where would-be purchasers prefer to live, although when asked about possible shifts, one broker remarked, “Not yet – but perhaps we’ll see car sales affected soon.”

Northwest Multiple Listing Service, based in Kirkland, covers 15 counties, mostly in Western Washington, plus Grant County in the central part of the state. Its membership encompasses nearly 1,300 brokerages with around 18,000 sales associates.