A myriad of buyers left with virtually nothing left to purchase is one way to sum up the market situation today. Although the market is most challenging for buyers, many sellers are also facing difficulties. Some refuse to list their house on the market out of fear that they won’t find another home to live in by the time their house has sold.
Although this is typically the time of year when inventory increases, the housing pool is shrinking.
According to the Northwest Multiple Listing Service, the Puget Sound area’s inventory depicts approximately 1.8 months of supply, which is extremely low when compared to a “balanced market” at a supply level of four to six months.
Taking a closer look at the close of March, King County had 1.1 months of inventory, Snohomish County had 1.2, and Pierce County had 1.4. These numbers are somewhat lower than March of last year where King County had 1.3 months of inventory, Snohomish County had 1.7, and Pierce County had 2.6. Collectively, across the 23 counties the Northwest MLS encompasses, inventory levels fell by more than 25% from 2015.
Pending sales have also seen a reduction from the previous year. Region wide, pending sales in March dropped approximately 4.5%. Focusing specifically on the four-county Puget Sound region (King County, Snohomish County, Pierce County, and Kitsap County) pending sales dropped approximately 6%. According to the Seattle PI, approximately 50% of Seattle listings go pending within 8 days of hitting the market.This year’s drop in pending sales can be attributed to low inventory levels rather than a decrease in market activity.
Although both inventory levels and pending sales have seen a reduction, home prices continue to increase. King County saw significant growth in single family median home prices increasing from $440,250 in 2015 to $531,250; a record-breaking increase of 20.7%. Pierce County and Snohomish County also saw gains in median home price. Currently, Snohomish County has a median home price of $385,000, a year over year increase of 13.2%. Pierce County trails behind with a median home price of $265,000; an increase of 8.2% from last year.
Despite significant gains in home prices and record low levels of inventory, many buyers are unwilling to overpay for homes.
MLS Director George Moorhead states “Home pricing is critiqued at a much higher level now with all the information available to buyers.” He adds, “The conversations we have with buyers today are totally different than in years past. We’re discussing pricing in greater detail, along with school ratings, neighborhood trends, and future values.”
Although buyers are becoming increasingly more market savvy, bidding wars and lack of inventory still push home prices. Sellers are consistently in multiple offer situations and are selling homes for thousands of dollars over asking price.
Not only are buyers in plenty of company, many would-be homebuyers have been priced out of the market altogether.
An article by the Seattle PI states, “At the bottom of the housing market in 2012, a typical homebuyer only needed to commit 32.2 percent of their income to buy the median priced starter home. That share of income has climbed to 37.7 percent, putting home ownership out of reach for many.”
The lack of affordability and inventory in King County continues to lead the buyer search to surrounding markets and submarkets, which are also experiencing significantly low inventory levels.
Bottom line if you’re looking to buy a home right now: plan accordingly.