Competition among home buyers “still fierce;” rising interest rates adding to fury

Well-priced homes continue to draw multiple offers and sell at a brisk pace around Western Washington as buyers react to increases in interest rates and asking prices. Northwest Multiple Listing Service reported double-digit gains in several key indicators it tracks for the 21 counties in its service area. Compared to a year ago, the number of new listings climbed 16 percent, pending sales increased about 10 percent, closed sales jumped nearly 22 percent, and prices rose more than 13 percent. Despite gains in listing activity, inventory remains tight.

Commenting on the latest report, brokers said the fast pace is frustrating some buyers -- and surprising sellers with unrealistic expectations. One broker cautioned against an overheated market. “We do not want a market that escalates too fast and topples again,” commented Frank Wilson, Kitsap district manager at John L. Scott Real Estate and branch managing broker for its Poulsbo/Kingston office.

“Overly aggressive sellers find themselves disappointed when no or low offers are presented,” remarked Northwest MLS director Kathy Estey, the managing broker at John L. Scott in downtown Bellevue.

With inventory apparently improving, some would-be buyers are staying on the sidelines. The increased inventory is “cooling some buyers,” reported George Moorhead, managing broker at Bentley Properties in Mill Creek and a member of the MLS board of directors. “We also have buyers who are stepping back as they are frustrated with current inventory and multiple offers going well above asking price,” he added.

Inventory showed signs of improving with the addition of 11,445 new listings during May, the highest number since April 2010. May’s total outgained the year-ago figure of 9,861 new listings for a 16 percent gain.

“It has been refreshing to see more listings coming on the market, but with overall inventory remaining low the competition among buyers is still fierce for homes that are priced properly,” commented Estey.

At month end, there were 21,943 total active listings in the Northwest MLS database, a drop of 4,248 from the same time a year ago for a decline of more than 16 percent.

Buyers looking for condominiums will find slim pickings. Condos currently account for only about 10 percent of the available inventory. The area-wide selection, which numbers 2,253 listings, is down more than 26 percent from a year ago.

Closed sales continue to track well ahead of a year ago. During May, member’s tallied 7,349 completed transactions, outpacing the year ago total of 6,027 by nearly 22 percent.  Prices jumped 13.4 percent from twelve months ago, rising from an area-wide median selling price of $242,500 to last month’s price of $275,000. The median price for homes and condos that sold in both King County and San Juan County was $375,000 ($100,000 higher than the area-wide figure). In King County, that represented a gain of 15.4 percent, while for San Juan County prices edged up only about 1.8 percent compared to a year ago.

“We're seeing the trajectory of home prices beginning to soften and the number of days on the market decline,” observed Mike Grady, president and COO of Coldwell Banker Bain, adding, “The trends suggest inventory levels are slightly more sustainable, but we're still clearly in a seller's market. For the foreseeable future, buyers will continue to pay more the longer they wait to purchase a home.”

Frank Wilson, who is also a board member for Northwest MLS, said recent market activity is affecting home values. In Kitsap County, where his office is located, brokers added 575 new listings to inventory during May, improving on the year-ago total of 515. During the same period, MLS members reported 567 pending sales to soar past the year ago figure of 414 sales for an increase of nearly 40 percent. Median selling prices in Kitsap County rose 5.3 percent, from the year-ago figure of $228,000 to $240,000.

“Slow and steady is the key here,” Wilson cautioned, while also raising concern about low appraisals, which he described as the “inchworm effect” of the market. “As prices begin to appreciate we will continue to see challenges with low appraisals,” he predicted.

Moorhead said increased activity is very noticeable, with mixed outcomes. “We are seeing multiple offers at 5-to-12 percent over list price in highly sought-after areas,” he reported, but also noted “there are other homes on the market that are not selling with no real reason why.”

Some brokers also commented on rising interest rates. Wilson said the biggest effect of the upswing in the real estate market has been the erosion of a buyer’s buying power. In May alone, interest rates jumped almost 0.75 percent, he noted, which reduces a buyer’s ability to purchase a $350,000 home by almost $31,000. Coupled with an increase in price, he said it “creates a compounding affect, which will frustrate buyers in today’s market.”  Estey said interest rate increases are “adding fury to the already frenzied buyers who must finance their purchase.” A one-half percentage point increase in interest rates reduces buying power by 5 percent, she explained, adding, “so as prices increase about a percentage a month, the feeling of urgency mounts too.”

Commenting on the challenges buyers are encountering, Estey said, “The joy of buying a home in today’s market is in the long-term result of settling in, but the competitive process is sometimes not so joyful! Hiring the right broker who can add some fun elements and insights while wisely guiding buyers through the decision process can make a huge difference,” she suggests.

Federal officials are downplaying rising interest rates. In a recent interview, Frank Nothaft, Freddie Mac’s chief economist, commented on the latest rise that marked three consecutive weeks of increases. “While this may slow some of the refinance momentum, rates are nonetheless low and home-buyer affordability high, which should further aid home sales and construction in coming weeks,” he remarked, adding, “The rates are also lower today than they were a year ago at this time.”

 

Statistical Summary by Counties: Market Activity Summary – May 2013 Single Fam. Homes + Condos			LISTINGS				PENDING SALES		CLOSED SALES				MONTHS SUPPLY
New Listings		Total Active			# Pending Sales			# Closings			Avg. Price			Median Price
King	4,352			4,832		4,041		3,122		$457,903		$375,000			1.20
Snohomish	1,564			1,777		1,487		1,131		$309,112		$285,000			1.20
Pierce	1,576			3,025		1,648		1,116		$234,875		$210,000			1.84
Kitsap	575			1,426		567		345		$286,870		$240,000			2.51
Mason	206			759		94		71		$178,045		$149,900			8.07
Skagit	245			785		226		149		$238,902		$220,020			3.47
Grays Harbor	165			807		114		68		$143,411		$139,000			7.08
Lewis	187			700		90		74		$150,977		$134,500			7.78
Cowlitz	164			455		134		83		$174,330		$169,000			3.40
Grant	145			547		92		76		$169,412		$157,840			5.95
Thurston	506			1,121		482		332		$241,093		$225,500			2.33
San Juan	67			415		25		19		$519,047		$375,000			16.60
Island	279			834		199		117		$281,624		$240,000			4.19
Kittitas	150			447		66		60		$285,393		$217,995			6.77
Jefferson	123			466		53		40		$308,200		$298,750			8.79
Okanogan	114			447		48		28		$193,686		$147,950			9.31
Whatcom	552			1,448		398		279		$290,196		$250,000			3.64
Clark	83			149		69		54		$255,812		$229,000			2.16
Pacific	91			436		36		27		$136,736		$121,000			12.11
Ferry	11			76		4		5		$139,600		$151,000			19.00
Clallam	104			415		68		62		$191,923		$181,000			6.10
Others	186			576		104		91		$217,902		$179,900			5.54
MLS TOTAL	11,445			21,943		10,045		7,349		$343,639		$275,000			2.18

Source: NWMLS KIRKLAND, Wash. (June 5, 2013)  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.

 

Become a Master Recycler Composter

Become a Master Recycler Composter to learn new skills and help your community.

Join fellow fans of waste reduction and become a "green ambassador" for the three "R's." Thurston County trains Master Recycler Composter (MRC) volunteers with the purpose of inspiring others to reduce waste, recycle, or compost at home and work. 

Over a five week period, MRC volunteers learn how to reduce waste and increase public awareness of opportunities to prevent waste, recycle, and compost in Thurston County.  

Participants receive background and hands-on training from county and state educators. Class topics include: 

• waste prevention. 
• recycling processes and markets.
• home composting. 
• worm composting. 
• greener buying choices. 
• how to work with the public.
• plus so much more.

2013 Class Training Dates:

Tuesday evenings, 6 pm- 8:30 pm: refreshments provided
September 3- October 29  

Location: 9605 Tilley Rd S, Olympia WA 98512  

Saturday morning field experiences:
September 21, 9 am- 1 pm (Dirt Works Garden, Olympia)
October 5, 9 am- 12 pm (Waste & Recovery Center/LeMay Recycling Plant, Lacey)

Course graduates agree to give a minimum of 25 hours of yearly service as they put their new skills to use. They work with: 

• local organizations. 
• community members. 
• neighborhoods.
• schools. 
• workplaces. 
• or at special events.

Volunteers encourage waste prevention, recycling and composting.

MRCs can design their own projects or work on existing ones. On-going continuing education opportunities will be provided.

The online application is available now. Preference will be given to applicants who live or work within Thurston County. Applications are due August 16 by 5 p.m.

 A $75 course fee will be collected at the first class to cover all training supplies and field trips.

For more information, go to www.ThurstonSolidWaste.org and click on "Volunteers" or contact Cori Carlton at carltoc@co.thurston.wa.us at or call 867-2162.

  

Mortgage Interest Deduction

Wonder how much WA homeowners get in tax deductions by reporting their mortgage interest on their tax return? Or what is the percentage of homeowners in WA that actually use the mortgage interest deduction? The answers and more are in the report "The Geographic Distribution of the Mortgage Interest Deduction,"commissioned by The Pew Charitable Trusts.

Percentage of each state’s tax filers who claim the mortgage interest deduction, 2010

Home prices rose in 41 states in the 1st quarter of 2013

• FHFA (Federal Housing Finance Agency) price data shows that home prices across the United States rose 6.7 percent from the first quarter of 2012 to the first quarter of 2013. In 41 states and the District of Columbia prices were higher than the fourth quarter of 2012, and from one year ago the District and all states except Connecticut and West Virginia showed higher prices. In Connecticut and West Virginia, prices were weaker by less than one percent.
• Price gains were largest in the West. Nevada, Arizona, California, and Idaho each saw gains exceeding 15 percent from one year ago. The map above shows the breakout of annual gains for each state.
• Nationally, prices rose 1.9 percent from the fourth quarter. Note that this is seasonally adjusted, but not annualized, meaning that if prices continue to gain at this pace, it would imply an 8 percent gain for home prices nationally in the course of a year.
• FHFA uses a weighted repeat sales index that compares the prices of properties that involve a conforming conventional mortgage purchased or securitized by Fannie Mae or Freddie Mac. Thus, the FHFA index is based on a broad geographical sample of home transactions, though it misses out on transactions involving cash, jumbo or FHA/VA loans. In spite of this limitation, its price trend is usually similar to that of other price measures.

Courtesy of Danielle Hale, Research Economist via REALTOR.org

May/June 2013 Market Pulse

Home sales have been hovering at the 4.9 million sales-pace mark since fall of last year and aren’t likely to move up much unless more inventory comes onto the market. As long as markets continue to see inventory shortages, home prices will continue to rise, not a healthy development if household income gains don’t keep up. All trend lines are from March 2012 to March 2013.

How to Ensure Healthy Price Gains

Prices are increasing quickly, though that may not always be the most healthy development for the economy. Also, banks may soon loosen overly strict requirements, but a choke point remains in new-home construction.

The housing recovery is surpassing most expectations. Rising demand and many years of sluggish new-home construction have forced home prices to rise at a near double-digit pace in many parts of the country. The latest surveys from the National Association of REALTORS®, which looked at foot traffic at open houses and inquiries from potential sellers to real estate agents, continued to point toward too many buyers chasing too few sellers. Home prices should continue to rise this year and likely next year as well.

Fast-rising home values are clearly good for home owners, but price increases that are far in excess of income growth are not good for buyers and not a healthy development for the economy. However, it’s important to keep in mind that demand is moving ahead in spite of the stringent lending standards still in place. Fully one-third of buyers are using cash.

Consider what demand would look like if underwriting restrictions were dialed back to a more reasonable level. That’s finally a possibility for two reasons: Banks are sitting on piles of cash, and the quality of recently underwritten mortgages has been high. These conditions could persuade banks to start easing overly strict requirements. The additional demand in a more “normal” lending environment potentially would mean even faster price growth. The only way to tame excessive price jumps is for more inventory to reach the market. Investors could help here by selling properties ahead of their intended schedule to take advantage of rising prices.

The choke point today is from the slow recovery in new-home construction. Housing starts in March finally crossed the 1 million mark for the first time in five years. But 1.5 million new housing units are needed annually to keep home-price gains at a healthy, long-term level of around 3 percent to 5 percent a year. That balance seems unlikely this year as we will continue to see demand outstrip supply, fueling exorbitant price increases in some places.

PER realtor.og MAY 2013 | BY LAWRENCE YUN

In the Know: Prepare Your Home for Inclement Weather

Be "In the Know" with these statistics about the yearly impact of natural disasters in the U.S., and guidelines for protecting your family and your property as best you can.