KIRKLAND, Wash. (Aug. 5, 2010) – Housing activity during July held few surprises for members of
Northwest Multiple Listing Service, although some brokers wonder why more buyers aren’t taking advantage of historic low interest rates.
Both pending sales and median prices on closed sales showed slight improvement from the previous month, according to the latest report from NWMLS. “It’s a housing trifecta,” declared Meribeth Hutchings, a director for Northwest Multiple Listing Service when asked to comment on activity for the month of July. The combination of the lowest interest rates on record, plenty of inventory and low prices offer an unprecedented opportunity for buyers, Hutchings explained. The broker/owner of Windermere Real Estate/Lake Stevens Inc. said homes have never been this affordable in her 28 years in the business.
Brokers reported 5,571 pending sales across the 21 counties in the Northwest MLS service area. That’s up slightly from June when they reported 5,547 pending sales, but down about 23 percent from twelve months ago when there were 7,279 pending sales. The MLS report showed year-over-year increases in inventory, a double-digit decline in closed sales and a small drop in prices:
• At month end, there were 44,770 properties for sale system-wide, a gain of 5.8 percent from twelve months ago. The inventory includes 10,850 new listings added during July (9,308 single family homes and 1,542 condominiums).
• Brokers reported 4,491 closed sales of single family homes and condominiums (combined) during July. That’s down 18.7 percent from the same month a year ago when members tallied 5,527 closed sales.
• The median price for last month’s closed sales was $274,990, down 1.4 percent from the year-ago figure of $279,000. Prices rose in nine counties.
• Last month’s median price, compared to June, is up about 3.8 percent overall.
“The tax credit pulled some first-time buyers from the second half of the year into the first half,” surmised NWMLS director Pat Grimm, managing broker, Windermere RE/Capitol Hill, Inc. The National Association of REALTORS® echoed his comment. In a statement accompanying its report on nationwide pending sales for June, NAR said it expected near-term home sales to be noticeably lower in contrast to the spring surge when buyers rushed to take advantage of the home buyer tax credit.
Dick Beeson, NWMLS director and broker/owner at Windermere Commencement Associates in Tacoma, suggested the market has adjusted to a “non-stimulus environment.” The lack of a tax credit has caused some buyers to postpone their purchase, he said, but added, “Many others are continuing to take advantage of superlative interest rates and bargain prices.”
Hutchings said business was “typical” for July, “usually a slow month because of vacations.”
Nevertheless, she noted, despite the expiration of the tax credit, sales volumes for her office were comparable to a year ago.
Another MLS director, Frank Wilson, managing broker at John L. Scott, Inc. Poulsbo, said the current market is being driven by people who “have to.” These include buyers who “have to buy” and sellers who “have to sell,” with a good deal of buyers and sellers still sitting on the sidelines waiting.
He noted homes in Kitsap County priced in the $200,000 to $299,000 range are selling quite quickly, thanks in part to very favorable loan programs.
On another positive note, Grimm said the influx of first-time buyers taking advantage of the tax credit has pulled move-up buyers into the market. “We’re seeing increased sales in the higher-end market,” he remarked, adding there’s been a “reality check” on pricing at the higher end, marked by price drops and a corresponding uptick in activity. As an example, he said a home in Seattle’s Capitol Hill neighborhood sold for $1.045 million in just four days. “The seller had priced the home well and it sold within four percent of the asking price,” Grimm stated.
Commenting on the inventory and pace of sales, Bobbie Petrone Chipman, managing broker of Coldwell Banker Bain in Puyallup and a member of the NWMLS board of directors, emphasized that sellers “must focus on the condition, amenities and pricing of their properties in order to obtain a sale in this very strong buyer’s market.” She also suggested buyers who procrastinate while waiting for a better time to purchase may risk looking back in hindsight bemoaning the opportunity that passed them by.
Brokers also report some encouraging activity for newly built homes. “We see sales occurring in new construction where large builders have reset their prices to 2004 levels. Sales are brisk among first-time buyers in this market. These buyers know we are bouncing along the bottom in prices and have reach historic low interest rates,” Beeson reported.
The “Monthly Monitor” newsletter from Bothell-based New Home Trends, Inc. also said new home sales activity is trending up in the Puget Sound region. “The number of new construction home sales written in the last twelve months exceeds the previous year by 28.1 percent.
The Puget Sound area continues to show a demand for new housing,” the report concludes.
Industry officials believe interest rates, jobs and consumer confidence are critical to building momentum. “Consumer confidence is ebbing and that makes major purchases even more difficult to initiate or even contemplate,” observed Beeson. “If the job picture improves even slightly later this year, we will see an uncharacteristic uptick in sales in the final quarter,” he stated.
NAR, in its prepared statement, also addressed the employment picture. “There could be couple of additional months of slow home-sales activity before picking up later this year, providing the economy continues to add jobs.
We’ve turned the corner on home prices and they should remain fairly stable over the balance of the year, but we really need to see stronger job creation to have a meaningful recovery in
the housing markets,” according NAR.
MLS director Matt Deasy, managing broker of Windermere Real Estate/East, suggested some would-be buyers may not fully understand the advantages of today’s low interest rates.
Citing examples from Windermere’s affiliated mortgage company, Deasy said a buyer saves $374 a month on a $300,000 loan compared to three years ago. The principal and interest on a $300,000 mortgage at today’s rate of 4.375 percent would be $1,498. Three years ago, when the rate averaged 6.375 percent, the P&I payment would have been $1,872.
On a $400,000 loan, the savings would be almost $500 per month ($2,495 less $1,997 = $498). For the past 30 years, the average rate is approximately 9 percent, which puts the payment on a $300,000 loan at $2,414 – a difference of $916 per month.
“Buyers are motivated when they see these comparisons,” Deasy remarked. He also believes there’s a pent-up demand based on the number of pre-approvals for loans in the mortgage company’s pipeline. He expects many of these potential buyers “will pull the trigger” once rates or prices start edging up.
Bystanders are still waiting for a piece of the puzzle to fall in place, according to Wilson. For some, he said the missing piece might be jobs, the economy, confidence in the future or direction of the stock market.
J. Lennox Scott, chairman and CEO of John L. Scott Real Estate praised recent action to help households purchase homes in rural areas. “The Federal Government should be applauded for passing the legislation that will allow for recapitalization of the USDA's Single-Family Housing Guaranteed Loan Program,” he said. “Rural America has more than 50 million people nationwide, many of whom are in a strong position to buy a home, but lack the down payment funds required by conventional loan programs, he explained, adding, “The USDA loan program opens up opportunities to many of these buyers, bringing with it a proven track record of success and another step towards creating long-term housing sustainability."
Washington fared “4th best state” for building a nest egg and has the country’s most promising real estate market in the near term, according to an index created by U.S. News that considered each state’s housing market, unemployment rate, per capita income, and taxes. Citing data by Moody’s Analytics, the report indicated home prices in the state are expected to surge by “a whopping 6.6 percent per year” between 2010 and 2013.
Northwest Multiple Listing Service, owned by its member brokers, is the largest full-service MLS in the Northwest. Its membership includes more than 24,000 brokers and agents. The organization, based in Kirkland, currently serves 21 counties in Western and Central Washington.
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