Would-be Homebuyers Have More Buying Power, But Also More Competition For Meager Inventory

Would-be Homebuyers Have More Buying Power, But Also More Competition For Meager Inventory

Extremely low interest rates mean would-be home buyers have more buying power, but sparse inventory and increasing home prices in many parts of Washington state are leaving many buyers unable to take advantage of these attractive rates, reported broker Frank Wilson upon reviewing the latest statistical report from Northwest Multiple Listing Service.

The August report from Northwest MLS, which covers 23 counties, shows pending sales surged nearly 25% from a year ago, rising from 10,602 mutually accepted offers to last month’s total of 13,224. Within the four-county Puget Sound region encompassing King, Kitsap, Pierce and Snohomish counties, brokers reported 9,179 pending sales. A review of MLS records dating to January 2002 shows that volume was surpassed only once, in May 2017 when brokers notched 9,188 pending sales.

“In order for buyers to be successful in purchasing a home in today’s climate, they have to do some pretty illogical things,” remarked Wilson, the Kitsap regional manager and branch managing broker at John L. Scott Real Estate in Poulsbo. As examples, he listed waiving inspections, paying more than the house is worth, or agreeing to pay the difference in cash between the lower appraised value and the sales price.

“These are counterintuitive to what we used to see with a negotiation process,” he lamented.

“The lowest number of homes for sale in more than 20 years combined with the lowest mortgage rates on record are resulting in the perfect storm of frustration for buyers – but they are still out in force,” stated Windermere Chief Economist Matthew Gardner. “The few homes that are on the market are being snapped up quickly, and this excess of demand is causing record-high prices for single family homes in the Puget Sound area.” He also noted rising demand for lower density housing in outer suburbs.
Brokers added 11,943 new listings to inventory during August, down from July, when they listed 12,514 homes and condominiums, but up from the 10,488 properties they listed during the same month a year ago. Commenting on the dwindling supply, J. Lennox Scott, chairman and CEO of John L. Scott Real Estate, said “For the greatest selection and availability, the next two months of September and October will be the best months until next March.”

At the end of August, the Northwest MLS database included 9,591 total active listings, down almost 43% from a year ago when the selection totaled 16,697 listings. With pending sales (13,224) outpacing new listings (11,943), the months of inventory continues to shrink. Area-wide there is less than one month of inventory (0.97). Nine counties had under a month’s supply. Four-to-six months is a common indicator of a balanced market, according to industry experts.

“The housing inventory deficit continues in Kitsap County with 558 new listings coming on the market during August and 664 going under contract, leading to an ever-declining number of available homes to purchase,” said Wilson. NWMLS statistics show there is 0.81 months of supply in that county. “There currently seems to be no path back to a ‘normal’ market of 1,400 to 1,600 homes available, which has historically been a balanced market in Kitsap County,” he added.

“Kitsap County continues to have a competitive market,” agreed Frank Leach, broker/owner at RE/MAX Platinum Services in Silverdale. He noted buyers from eastern Puget Sound and South Sound are among those who are competing for the depleted inventory.

“Many buyers are bidding up their offers. We are also seeing some of the highest historical numbers of contingent offers,” added Leach, a member of the Northwest MLS board of directors. He also noted builders are scrambling to get projects approved. “Builders were looking for some relief from the COVID shutdown and a quick startup only to be faced with runaway prices on building materials and supplies which has caused delays in delivering new homes on time.”

With an insufficient supply, prices are appreciating at double-digit rates in most counties in the NWMLS report. Systemwide, for last month’s closed sales, prices increased nearly 14% compared with a year ago. Member-brokers reported 9,847 closed sales, up more than 4.8% from a year ago. That volume was the highest since June 2018 when there were 10,072 completed transactions.

In the four-county Puget Sound region year-over-year (YOY) prices jumped 17%, from $500,000 to
$585,000.

Commenting on prices, James Young, director at the Washington Center for Real Estate Research, noted prices all along the I-5 corridor and the Puget Sound increased by double digits. “As people continue to seek housing outside the urban centers and within a two-hour drive of Seattle, the expected seasonal increases in prices in areas such as Island and San Juan counties have been extraordinary,” he remarked. NWMLS reports show San Juan County experienced the most notable spike at 43.6%. Island County prices increased nearly 22% from twelve months ago. Also noteworthy was Jefferson County where YOY prices jumped 27.9%.

“Home prices continue to increase, suggesting that now is a good time to buy,” stated Dean Rebhuhn, broker-owner at Village Homes and Properties in Woodinville. He described low inventory as
“problematic,” adding “Based on current low inventory and low interest rates, I expect the real estate market will continue to be robust into 2021.”

“We continue to see a flurry of activity in a market that has not allowed the pandemic to have a continued effect,” observed Mike Grady, president and COO at Coldwell Banker Bain. “Case in point: in January, the median sales price for the entire NWMLS was $422,750 and it is now $490,000 – a 15.9% surge in eight months. At the same time, we have nearly half as many months of inventory now than April – just four months ago (0.97 vs. 1.75). “The competition for buyers continues to be relentless, but luckily, much lower interest rates offer some relief.”

Scott said one area of note is luxury sales. “We’re seeing strong luxury activity in all areas locally. August brought strong and at times record luxury sales numbers in many areas.”

John Deely, principal managing broker at Coldwell Banker Bain, agreed, saying his analysis indicated the luxury market of residential properties priced at $2 million or more reached all-time highs in several areas during August. “The number of both pending sales and closed sales over $2 million hit new records in August. The number of new listings coming to market in the $2 million-plus range also set records.”
Deely also reported seeing “many more low appraisals with the rapid price increases and bid up prices due to the low inventory.”
Another metric cited by one of the Northwest MLS representatives was the “sale fail rate,” which tracks the percentage of failed transactions as a part of total written transactions. “What’s interesting is that it hasn’t changed through this entire year,” according to Grady in referencing Coldwell Banker Bain’s experience. “This seems to indicate that brokers are able to quickly move and successfully close a high number of sales. COVID conditions have had little or no effect on buyers and sellers closing transactions.”

This news release was issued by the NWMLS on September 4, 2020 and featured in our September Edition of Badgley News.

Northwest Multiple Listing Service is a not-for-profit, member-owned organization that facilitates cooperation among its member real estate firms. With more than 2,300 member firm offices and 30,000 brokers across Washington state, NWMLS (www.nwmls.com) is the largest full-service MLS in the Northwest. While based in Kirkland, Washington, its service area spans 23 counties and it operates 20 local service centers.

Three Topics

Three Topics

Three topics are the subject of this month’s newsletter:

  1. A snapshot of our current Eastside real estate market.
  2. A chart showing the continuously changing availability of homes to purchase on the Eastside.
  3. A quick review of our Windermere “Dress to Impress” program available to our sellers.

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The local market is HOT with no signs of slowing down. Buyers are snapping up new listings as soon as they hit the market and total available inventory has dropped to a 10-year low. Multiple offers are common and homes are being snapped up as soon as they hit the market. If you’re looking to buy this season, it’s important to put your best offer forward. Take a look at our latest Local Market Update blog post for a full update on the Eastside, Seattle, King County & Snohomish County.

Two Year Chart of the Eastside Market
– Single Family Residential Only

The two-year chart shown below has become one of our favorite charts for putting context into how real estate is (or has been) performing over time – in this case a two-year period of time.

This particular chart is a compilation of all single family residential for the Eastside which includes all of Bellevue, Mercer Island, Issaquah, Issaquah/Sammamish Plateau, Carnation, North Bend, Redmond, Kirkland, parts of Bothell and all of Woodinville encompassed by King County.

The available inventory (dark blue line) depicts the number of residential listings that are “Active” at the single point in time that the data was collected. The dark red line represents the number of “Pending” contracts that occurred in the 30 days prior to that data point. In a balanced market the red line will always be below the blue line and the greater the separation, the greater the inventory available. Inventory peaked in October 2018, gradually diminished through the coming winter months, then peaked again in July-August of 2019 before diminishing to a new low in January-February 2020.

Then came Covid-19 and the mandated lock-down in March 2020. Inventory levels had generally been comfortable for much of about a year and a half, but by October 2019 the level started dropping again. This time to a new low. By March 2020 as we entered the Covid pandemic, our inventory levels across the Eastside market were about as low as they have ever been.

When the red line rises above the blue line, our inventory level has dropped into the fractional numbers. The .8 months of inventory noted in the previous section of this newsletter is perfectly shown by the July-August 2020 portion of this chart.

Windermere Ready
– Invest to Impress

We brought this concierge program to you in April but wanted to circle back to it. We have been using this program with several of our recent listing clients and it is very effective and easy to implement. Windermere will cover up to $50,000 of anything that will help get your home ready for the market. There are no fees and no interest, and the advance will simply be paid at closing.

ONE-ON-ONE CONSULTATION
We’ll walk through your home together and identify potential updates and repairs. With your timeline and needs in mind, we will help you decide on the improvements that will get the biggest return.

PERSONALIZED PLAN
Once we identify our top home improvement priorities, we will connect you with my preferred local service providers, assist with a work schedule and arrange access to your home.

HIGH IMPACT UPDATES
No matter how small they seem, even the simplest changes can make a big difference.

These are the most valuable:

• Landscaping
• Interior and Exterior Painting
• Floor Repair/Refinishing
• Carpet Cleaning/Replacement
• Decluttering
• Window Washing
• Professional Deep Cleaning
• Fixture Repair or Replacement
• Cosmetic Updates
• Punch List Repairs
Plus dozens of other high-impact home improvements and services.

STAGING
When your home’s ready for its close-up, we’ll have it professionally staged, which can dramatically transform your home and boost your bottom line. In fact, forbes.com reports that staged homes statistically sell 87% faster than non-staged homes and for 17% more!

Back by Demand!

Back by Demand!

Last month’s newsletter ended with some optimism given how real estate was working then. However, none of us would have guessed just how well the market would be working by now, even with the Covid-19 protocol in place.

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Covid-19 or not, our 2020 spring market was not to be denied! In King County, the available inventory in May 2019 was 4,511 units, for May 2020 that inventory only was down to 2,513 homes, a drop of 44%. But while inventory was down by nearly half by May 2020, the number of pending contracts was only down from 3,338 in May 2019 to 2,776 a year later – in the middle of the Coronavirus. This was only 18% less than the year prior

What is even more startling is that there are more buyers (represented by pending contracts) than there are homes for sale! The chart for Snohomish County is also included and the contrast between “Active” listings (1,015) and pending contracts for May 2020 (1,392) is even more startling. Our reaction to all of this was simply… “Wow!” How did this happen?

When the Covid-19 pandemic forced the State to essentially shut-down to prevent the continued spread of the virus, the real estate industry was pretty much forced to shut down as well. In just a few weeks, however, our Washington Association of Realtors worked out a viable protocol for real estate to continue.

This protocol was very restrictive, but once we learned how to navigate, we were able to begin doing real estate again. Both Jim and I remained cool to the idea of jeopardizing both buyers and sellers to potential infection though, so we pulled back and advised our clients accordingly – all were in agreement with our caution.

Available Homes vs Pending Contracts

What a ride it is turning out to be

Despite all that’s happened, life does go on, and soon we were watching real estate take off, and with the slight lifting of the restrictions going forward, we also re-engaged with our clients.

Pent-up demand may be what is now driving the market, but of one thing we are sure – buyers are not holding back. They are out in force, willing to compete for the available listings, and multiple offers are back in vogue. As you can see by the numbers, we need sellers. And what a great time to sell! Prices are again moving upward due to the lack of supply to meet the demand.

Greetings All

Greetings All

We are now several weeks into our “Stay Home, Stay Healthy Order” that Gov. Jay Inslee just extended to May 31, and we thought it appropriate – as well as timely – to share the highlights of the mandated protocol for showing homes, and some good news to go with it!

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To begin with, I feel it is most important to share that we are in agreement with the order, but we watch with despair and heartache as we hear of businesses that just cannot survive the shutdown. What a hard time of adjustment to an unprecedented pandemic. The main theme of our mandated protocol for real estate is that we limit in-person interactions to the greatest extent possible, and only engage in in-person real estate activities when required. This makes sense.

Some of the key points

• In-person activities must be by appointment only.  

• No more than two people, including the broker, may be inside the property at any one time.

• Those two persons must strictly follow social distancing guidelines established by the CDC by remaining at least six feet apart at all times.

The in-person real estate brokerage services that are now permissible during our “Stay Home…” order allow us to:

• Conduct listing presentations, take photos and create virtual tours for new listings.
• Facilitate the signing of contract documents.
• Preview and show listings by appointment only.
• Facilitate inspections, appraisals, buyer “walk-throughs,” and key delivery.
• Hire professional photographers.

We cannot hold Open Houses, but we can live stream or record a virtual open house. Additional steps we are doing for our upcoming listings to protect our sellers:

• Buyers must be pre-approved and provide the pre-approval prior to visiting one of our listings.
• One use, disposable booties are required to enter the home.
• A facemask must be worn during the showing.
• We will provide hand sanitizer at the entry.
• We will ask that buyers limit what they touch inside the home. 

Ready for Some Good News?

Real estate is still working! Once our Washington State Association of Realtors managed to work out a safe protocol with the Governor’s office and gain approval, our real estate market has been engaged and working.

We offer you a chart that reflects the growing health of the real estate market in our area under the approved guidelines of the “Stay Home” order.

The included chart is for the Eastside combined and shows the number of newly listed homes in the last 7 days, and the new pending contracts in that same period. The chart shows 10 data points from March 2, 2020 to May 4, 2020. Notice that the numbers on the chart peaked in mid-March just before the Coronavirus crisis began, tanked in early April when our “Stay Home” order went into effect and has now been growing nicely again since mid-April.

We are learning how to do real estate within the guidelines of the “Stay Home…” order, and have found that the market is receptive and stronger than expected.

Stay healthy!

Windermere Ready – Invest To Impress

Windermere Ready – Invest To Impress

Small upfront investments can yield a much bigger payoff when you sell your home. We’ll work together to best showcase your space and help buyer see themselves living in it.

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There’s no second chance for the perfect first impression.

We believe so strongly in the power of first impressions that we created the Windermere Market Ready program to provide you with concierge-level service that readies your home for sale. Together we will determine the repairs and upgrades that are most likely to appeal to today’s buyers who prefer stylish, turnkey spaces.

If needed, we can provide up to $50,000 to help mitigate any expenses incurred with no upfront cost to you. From decluttering and deep cleaning to scheduling major repairs or replacements, together we’ll set your home up for selling success.

The Details

ONE-ON-ONE CONSULTATION

We’ll walk through your home together and identify potential updates and repairs. With your timeline and needs in mind, we’ll help you decide on the improvements that will get you the biggest return.

PERSONALIZED PLAN

Once we identify our top home improvement priorities, we’ll connect you with our preferred local service providers, put together a work schedule, and arrange access to your home.

HIGH IMPACT UPDATES

No matter how small they seem, even the simplest changes can make a big difference. These are the most valuable:
• Landscaping
• Interior and Exterior painting
• Floor repair/refurnishing
• Carpet cleaning/replacement
• Decluttering
• Window washing
• Professional deep cleaning
• Fixture repair or replacement
• Cosmetic updates
• Punch list reports
Plus dozens of other high-impact home improvements and services.

STAGING

When your home’s ready for its close-up, we’ll have it professionally staged, which can dramatically transform your home and boost your bottom line. In fact, staged homes statistically sell 87% faster than non-staged homes and for 17% more. Call us when you are ready.

Editor’s Note:

Two months ago, our Windermere/East, Inc. company rolled out two products to help our Windermere clients achieve a higher level of success in tight markets. We reported on the first of those products, the Windermere Bridge loan, in our March newsletter. We would now like to report on the second product, the “Invest to Impress” package that includes a number of important and effective tools for success, and the resources to make it all happen.

Both products were rolled out before Covid-19. We have dedicated this newsletter to the “Invest to Impress” product, even though the market is pretty much on a “hold” mode for a few more weeks. We want you to be aware and ready when we get back to business.

Stay Home, Stay Healthy

Stay Home, Stay Healthy

To Our Valued Real Estate Clients:

In this time of “Stay-at-Home” mandated by Governor Jay Inslee, Jim and I wanted to reach out to all of you to share some insights on how all of this will impact the real estate industry here locally.

In short, the real estate industry is not considered an “essential” industry, so we will all be working from home.  We will not be allowed to perform any activity that requires us to be in the home of another person(s) until the “stay-at-home” mandate has been lifted. For real estate practitioners, that’s pretty much everything we do.

Will the real estate industry collapse?  Will prices fall through the floor?

To be sure, we are in uncharted waters so none of us know or can guess how this will all play out, but…

On-Hold

For the duration of the “stay-at-home” mandate, we know that the real estate industry will be on-hold. 

Pent-Up-Demand

Once the mandate is lifted, we believe that the on-going demand will bring the market back in full strength.  We saw this happen as we emerged from the real estate recession, and – while greatly different in cause – we expect the market to re-emerge quickly and strongly.

Will Prices Fall?

During the mandate, there will be no reason for prices to fall.  There will be no showings allowed so no real effective way bring buyers into contract on a house they haven’t had the ability to see and feel.  Lowering the price will not enhance the possibility of a sale, hence there should be no reason to lower the price.

Homes on Active

What about those homes that are already listed and are currently “Active” on the market?  Not a problem, there will just be no showing activity.  In fact, this would be a good time to be on the market when you consider all the on-line viewing activity that can take place.

Time on Market

What about those homes that are already on the market?  Will they continue to accumulate days-on-market time?  Yes, they will continue to accrue time on the market.  Our NWMLS has looked into the possibility of turning off the accumulation of time on these listings, but the technical challenge is greater than the benefit, so at this time, those market days will continue to accumulate.

Will This Hurt?

We don’t believe that the accumulating market time will be something that buyers will use as a point of leverage over sellers.  Extended market time in a time when the market really didn’t function at all, cannot be something that ultimately provides buyer leverage.  Given the buyer competition that existed just before the mandate, and that which we fully expect to return after the mandate, this should be a non-factor in the market.

Are We Available?

Absolutely, even more so.  A number of you have been in contact with Jim and I regarding plans to list, sell, buy, or both and this will be a time that we put all of our plans on temporary hold – but we are still working.

Working From Home

In fact, this might be the best time ever to be in touch with us regarding your needs.  Jim and I are both finding more time to concentrate on planning, preparing, and following through on so many details that we sometimes struggle to find time for.  Please touch base with us, we will be delighted to hear from you.

Interest Rates

What’s happening with interest rates during this time? 

While we prefer to refer you to any number of great lenders in the area to inquire about interest rates, we were privileged to receive a very profound interest rate prediction from Steve Tedrow, our in-house lender here at Windermere.  This rate prediction was offered by the Chrisman Report amid the current interest rate volatility.

Keep Up-To-Date

Every Monday, Windermere Chief Economist Matthew Gardner provides an update regarding the impact of COVID-19 on the US economy and housing market.

Thanks all. Stay home, stay healthy.

Bill Badgley and Jim Badgley