High demand, low inventory sparking multiple offers, market momentum

KIRKLAND, Wash. (Dec. 5, 2012) – Real estate brokers expected some seasonal slowing during November, but last month’s falloff was less than what some industry veterans anticipated. Members of Northwest Multiple Listing Service reported 6,522 pending sales last month — the highest total for November in six years.

“The market is done with needed correction,” declared one broker.

New figures from the MLS show last month’s pending sales rose 6.9 percent compared to a year ago, and was the best November for mutually accepted offers since 2006 when members tallied 7,022 pending transactions. As expected, the volume dropped from October’s total of 8,312 pending sales.

Closed sales and selling prices both rose during November versus a year ago, while the selection continued to shrink.

“There continues to be extremely low inventory levels and high buyer demand which is causing multiple offers in many local areas,” reported OB Jacobi, president of Windermere Real Estate. He also noted a “definite uptick” in the number of cash buyers, “many of which are investors.”

Commenting on the expected dip in activity, Jacobi, a member of the Northwest MLS board of directors, said it “was less than we usually experience during this time of year.”  Based on the current combination of sparse inventory and high buyer demand, Jacobi said those who are considering selling are encouraged to “list their homes sooner rather than later” in order to take advantage of unique market conditions.

MLS members across the 21 counties in its service area added a paltry 5,315 new listings to inventory last month. That compares to 6,043 additions for the same month a year-ago. Notably, both the number of pending sales (6,522) and closed sales (5,333) outgained new listings, contributing to a market imbalance. Inventory, which typically shrinks during the holidays, totaled 21,042 active listings, plummeting more than 31 percent from twelve months ago when the selection included 30,650 listings.  Condo inventory is at half the year-ago levels.

Northwest MLS director George Moorhead said many buyers are complaining about the “limited quality inventory,” prompting “aggressive multiple offers on well priced homes.”  Moorhead, the branch manager at Bentley Properties in Bothell, cautioned there is still a huge shadow inventory of bank owned homes, but he expects they will be put on the market “at a trickle to mitigate any adverse impact on the market.”

System-wide prices on last month’s 5,333 closed sales of single family homes and condos jumped 14.9 percent from a year ago, the largest year-over-year increase since July 2006 when prices surged 15.5 percent. Twelve counties reported double-digit gains in the number of closed sales compared to the same month a year ago.

Area-wide, the median sales price on last month’s closed sales of single family homes and condominiums was $258,500.  Last month’s price gains on these closings were led by Jefferson County (up 26.2 percent), Grant County (up 23.5 percent) and King County (up 21.8 percent).

Single family homes sold last month for a median price of $269,000, while condos fetched $185,000. In King County, single family homes that closed during November commanded the highest price at

$385,000 (up 19.7 percent), edging out San Juan County’s median selling price of $375,000.

Frank Wilson, another MLS director and the branch managing broker at John L. Scott Real Estate, described the current market as “the best of most worlds: low interest rates, a supply of homes to choose from that are aggressively priced, and lenders who are beginning to engage in ‘make sense’ loans.”

Moorhead noted short sales are up significantly from two years ago “and now outpace bank owned (REO) listings,” prompting outreach to hesitant sellers. “We all have a call out to sellers who are on the fence to remind them this is the first ‘sellers market’ we have seen since 2007. This also means sellers who were

on the edge of being in a short sale situation may actually be on the positive side of the ledger,” he added.

Commenting on the recent uptick of investors and cash buyers, Jacobi said there is good reason for that. Following a prolonged decline, real estate investors are usually the first to re-enter the market. “This is because investors are generally less concerned with timing the bottom of a market perfectly and more focused on the longer term financial benefits,” he explained, adding, “ Many investors also believe their cash is better invested in real estate than money market accounts, where it might actually be losing money given the current rate of inflation.”

Wilson echoed Jacobi’s assessment. “With the population of renters expected to grow for the next 3-to-5 years, now is a good time to buy a rental and let someone else make the payments,” he stated, adding, “With so many people having lost their homes and now having marred credit, they will become renters for the next few years as they get their foreclosure, short sale or bankruptcy behind them.”

Northwest MLS director Darin Stenvers believes the market is done with needed correction, saying “the bottom has come and passed. We are seeing some new loan programs designed to help first time home buyers that have low debt, strong income and high credit scores,” he remarked.  Stenvers, the office managing broker at John L. Scott in Bellingham, said these programs should help consumers benefit from a loosening of lending guidelines, leading to more closed applications and fewer failures of existing transactions. “Now is a great time for buyers and investors,” he exclaimed.

Looking ahead, several MLS directors expect the recovery to continue:

  •  George Moorhead: “We are seeing some well-deserved price stabilization, and consumer confidence has been on the rise since first quarter.”
  •  Frank Wilson:  “To have this kind of market momentum going into 2013 is very exciting. Provided we don’t fall off a ‘fiscal cliff’ we should have a good year in real estate.”
  •  Darin Stenvers: “Buyers should be considering their purchase as an investment. If they see a home that fits 75-80 percent of their criteria they should strongly consider that purchase and pull the trigger. Foot dragging or shooting out lowball offers is leaving many empty handed.” Noting “the perfect storm has been brewing,” Stenvers said existing homes sales are on pace with 2003-2004 ( pre-bubble) volume “but we are enjoying interest rates that are 1.25 to 2 percent lower.”

Northwest Multiple Listing Service, owned by its member real estate firms, is the largest full- service MLS in the Northwest. Its membership includes more than 21,000 real estate brokers. The organization, based in Kirkland, Wash., currently serves 21 counties in Washington state.

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Statistical summary and sources quoted follow.

Statistical Summary by Counties: Market Activity Summary – November 2012

Single Fam.Homes + Condos LISTINGS PENDING SALES CLOSED SALES
NewListings

Total

Active

# PendingSales # Closings Avg. Price MedianPrice
King 2,004 4,737 2,633 2,276 $435,304 $353,250
Snohomish 796 1,754 1,114 806 $280,343 $257,000
Pierce 877 3,239 1,136 841 $225,101 $195,000
Kitsap 268 1,412

305

240 $281,215 $245,000
Mason

86

675

47

57

$184,061 $159,000
Skagit 103 708

139

115 $259,337 $214,900
Grays Harbor

85

725

71

48

$121,898 $91,250
Lewis

71

639

62

57

$142,471 $145,000
Cowlitz

95

492

75

71

$152,082 $153,500
Grant

65

499

54

36

$180,383 $166,995
Thurston 253 1,183

255

197 $238,871 $220,000
San Juan

19

349

20

17

$421,897 $375,000
Island

87

676

94

95

$333,660 $264,000
Kittitas

47

405

49

44

$259,043 $216,500
Jefferson

41

403

41

34

$277,499 $284,000
Okanogan

25

361

24

23

$193,500 $160,000
Whatcom 208 1,205

221

192 $281,929 $238,950
Clark

42

216

45

59

$241,642 $210,000
Pacific

28

353

21

28

$110,904 $100,000
Ferry

13

82

3

1

$149,900 $149,900
Clallam

30

355

49

33

$205,506 $207,000
Others

72

574

64

63

$200,685 $170,000
MLS TOTAL 5,315 21,042 6,522 5,333 $327,652 $258,500

4-county Puget Sound Region Pending Sales (SFH + Condo combined)

(totals include King, Snohomish, Pierce & Kitsap counties)

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Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2000 3706 4778 5903 5116 5490 5079 4928 5432 4569 4675 4126 3166
2001 4334 5056 5722 5399 5631 5568 5434 5544 4040 4387 4155 3430
2002 4293 4735 5569 5436 6131 5212 5525 6215 5394 5777 4966 4153
2003 4746 5290 6889 6837 7148 7202 7673 7135 6698 6552 4904 4454
2004 4521 6284 8073 7910 7888 8186 7583 7464 6984 6761 6228 5195
2005 5426 6833 8801 8420 8610 8896 8207 8784 7561 7157 6188 4837
2006 5275 6032 8174 7651 8411 8094 7121 7692 6216 6403 5292 4346
2007 4869 6239 7192 6974 7311 6876 6371 5580 4153 4447 3896 2975
2008 3291 4167 4520 4624 4526 4765 4580 4584 4445 3346 2841 2432
2009 3250 3407 4262 5372 5498 5963 5551 5764 5825 5702 3829 3440
2010 4381 5211 6821 7368 4058 4239 4306 4520 4350 4376 3938 3474
2011 4272 4767 6049 5732 5963 5868 5657 5944 5299 5384 4814 4197
2012 4921 6069 7386 7015 7295 6733 6489 6341 5871 6453 5188