Eastside Market 2020 Perspective

Eastside Market 2020 Perspective

In November we are generally getting close to the end of the real estate year in the Northwest and so it is a time to evaluate how the year has gone for our Eastside real estate market. As always, a great way to gain perspective on the market is to compare it to the previous year.

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However, the direct comparison of the two years is overshadowed by something that happened this year that has never happened before. Our nation – indeed the world – was hit by the Covid-19 pandemic, and life changed. By March 2020, the coronavirus had reached the point that our State was forced to “lock down.” Suddenly the practice of real estate became extremely difficult until a protocol was worked out that would allow real estate professionals to continue in a limited offering of services.

Housing Inventory

To see the dramatic change in our Eastside inventory as it was reshaped by the Covid-19 virus, please refer to the “Housing Inventory” chart (below).

Normally the month of March is when sellers begin putting their homes on the market and the pace of new listings continues to strengthen through mid-summer. The chart shows this growth of available inventory through the first half of 2019. Buyers responded with their increasing demand through mid-summer of 2019 as well. In the years gone by, these cycles have been typical.

While the remainder of 2019 proved to be normal for the most part, available housing began a steeper than normal drop by October. The year ended with about half the available inventory that it started with, which meant that 2020 began the year with an abnormally low amount of inventory.

But . . . did the buyer pressure drop off? Not a chance! Notice that the buyer activity (dark red line) for the January – March period for both 2019 and 2020 were virtually identical. With the same number of buyers but diminishing inventory, this was a “housing availability” crisis in the making even before Covid-19 happened.

THEN 2020 AND COVID-19

Aside from an abnormally low inventory at the beginning of 2020, the market had the appearance of being normal until we hit the Covid-19 pandemic in mid-March.

While the buyers re-engaged, the sellers lagged, and by mid-summer 2020 we reached a point where housing inventory on the Eastside dropped below a one-month supply (this is where the blue and red lines meet and cross over). At this point, we measure inventory in fractions of a month, or weeks – and these are very tight markets. Pent up demand on the part of the buyers was not matched by the normal increase of homes available for sale. Multiple offers again became the “norm.”

LIST PRICE/SALE PRICE

The last chart I will offer for this discussion is the List Price/Sale Price Comparison chart. Cause and effect – shortage of inventory versus strong buyer demand. While this chart depicts only two data points, the first Monday in November 2019 and the same Monday in November 2020, the information is consistent across the mid-half of both years.

In 2019, the final sale prices were lagging the list price across all regions reported, except for Shoreline which inched just slightly over the 100% mark. In 2020, the only area that did not show final sale price above list price was West Bellevue. All other areas were between 102% and 104% except for North Seattle (Ballard, Green Lake, Fremont, Wallingford, and others) which was over 109%.

SUMMARY

Based strictly on the trends shown and not on any outside influencing factors, the year ahead could possibly be another year strongly in favor of sellers as buyers compete for what could be a very meager inventory of homes available. On November 2, 2020 there were only 433 single-family homes available for sale on the Eastside. On November 4, 2019, that number was 1,054. This represents a 59% decrease in the available inventory, year over year. We will be entering 2021 with a desperately low amount of inventory.

A Letter Arrived…

A Letter Arrived…

Occasionally a notice comes to us from one of our affiliated partners in the real estate industry that offers news that is important enough that it needs to be shared. Just such a letter arrived in our email baskets on the last day of September 2020.

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The letter as reprinted below is from Jon Scherer, the Recording Manager at the King County Recorder’s Office. The letter was sent to all the title companies in the area and First American Title – the title company that we have been using for years – forwarded this letter to us. We share it below:

Good Morning Everyone,

As you know we are experiencing a level of workload for recording that has not been seen for almost 20 years. 4,000+ document days are now becoming commonplace when they were unheard of. Our backlog of physical documents submitted for recording is now more than a month’s worth of submissions. This increasing workload and the continuing difficulties due to the Covid-19 response have overwhelmed our capacity to complete our daily work in a timely fashion.

Going forward the Recorder’s Office will suspend its guarantee of same day service for submissions received prior to 3:30pm. Our operations will officially end at 5pm each day. Staff will be allowed to work overtime in a voluntary capacity after 5pm, but will no longer be required to do so. Any work not completed by the end of operations or by staff volunteering for overtime will be at the front of the queue the next day.

Also, we will no longer be taking requests for rejects for documents from the queue. We did this for a long time as an accommodation, but the requests are now far too frequent (more than twenty a day) and a distraction that we cannot afford to continue.

I realize these changes will create some uncertainty in your operations, but we simply don’t have the capacity to continue with business as usual. Once the workload changes or circumstances return to something closer to normal, we may choose to resume operations as they were. We are working on bringing more staff on board, but the onboarding and training process is such that we will not feel the relief from that effort for several months.

Thank you for your patience as we do our best to serve the public in these difficult times.

Jon Scherer
Recording Manager
King County Recorder’s Office
500 4th Ave, Rm 430
Seattle, WA 98104

WHAT DOES THIS MEAN?

This means that no matter what time a transaction is submitted during the day, there is a possibility that King County will not issue recording numbers until the next day or days after.

WHAT IS FIRST AMERICAN TITLE DOING TO HELP?

First American has “Gap” insurance and has implemented protocols which will allow them to ensure transactions upon being released to record in instances where the County is unable to issue recording numbers based on delays.

Title for all our listings is through First American Title, so for our listing customers, there is little or no impact by this change at the King County Recorder’s office. The industry does continue to change however and we want to keep you abreast of these changes as they come to us.

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!