Eager home buyers were plentiful in December but their choices were meager

Published on: January 14, 2020

KIRKLAND, Washington (January 6, 2020) – “The buyers are out there and are showing up at open houses and making multiple offers on new listings,” was how one industry leader summarized December’s housing activity involving members of the Northwest Multiple Listing Service.

Frank Wilson, Kitsap regional manager and branch managing broker at John L. Scott Real Estate in Poulsbo, also said the severe shortage of inventory – “much lower than in years past” – will lead to continued buyer frustration and escalating home values. He noted one of his colleagues added a new listing the day after Christmas and it quickly drew 11 offers.

Newly-released figures from Northwest MLS show inventory at the end of December was down 31% from the same month a year ago, with only 8,469 active listings compared to the year-ago total of 12,275. The figures include single family homes and condominiums across the 23 counties in the MLS service area.

Last month marked the sixth straight month of declining inventory, noted James Young, director of the Washington Center for Real Estate Research. MLS figures show inventory peaked in June when the database had 16,680 active listings ? about twice as many as December.

Inventory for single family homes and condos (combined) was down by more than 30% in seven counties: Thurston (-54%), Pierce (-38.9%), King (-38.8%), Snohomish (-35.6%), Mason (-32%), Kitsap (-30.6%), and Skagit (-30.5%).  System-wide there is only about 1.2 months of supply.

The inventory of single family homes (excluding condos) is especially tight in several counties, notably Thurston (-54%), King (-41.4%), Pierce (-40%), Snohomish (-36.1%), and Kitsap (-34.3%).

Robb Wasser, branch manager at Windermere Real Estate/East and NWMLS director, noted the sharp drop in King County marked the first time since March 2018 that the supply of homes dropped below one month. “Looking all the way back to 2012 when home values first began recovering, King County has only logged six months with supply levels lower than where we currently stand,” he remarked.

“This market is unlike any market I’ve seen in the South Sound over the past 40 years. Too many buyers chasing too few properties,” remarked Dick Beeson, principal managing broker at RE/MAX Northwest in Gig Harbor.

December’s volume of active listings included 3,777 new listings added during the month, but during the same timeframe, 5,943 sellers accepted offers on their properties. That number of pending sales was up about 4.7% from twelve months ago.

Brokers said December is typically a slow month for home sales with holidays and historically cold, wet weather, but several MLS representatives commented on last month’s surge in activity:

• “December 2019 proved to be better in just about every single category than December of 2018 – this notwithstanding weather that was not as mild as 2018, and weather typically has an impact on sales.”-Mike Grady, president and COO of Coldwell Banker Bain.
• “Historically low interest rates and strong job growth continue to drive the Puget Sound housing market, which is already sizzling as we begin the new decade. In the more affordable and mid-price ranges, many areas are seeing frenzied sales activity with multiple offers on most properties.”-J. Lennox Scott, chairman and CEO of John L. Scott Real Estate.
• “Home sales continued to be strong through December, fueled by low interest rates and new job creation. Hot spot locations continue to experience multiple offers on properly priced inventory.”-Dean Rebhuhn, owner of Village Homes and Properties in Woodinville.
• “December was one of the most active in recent years with an unusual number of ready, willing, and able buyers in the Seattle market. These buyers were competing for little inventory as the year ended.”-John Deely, principal managing broker, Coldwell Banker Bain.
• “December was a bit of an anomaly in the King County real estate market. Although appreciation has slowed considerably from the 14% or so annual appreciation increases that we experienced during the market frenzy years, inventory continues to get tighter. We experienced very high demand for housing.” – Gary O’Leyar, designated broker/owner, Berkshire Hathaway HomeServices Signature Properties in Seattle.

Northwest MLS member-brokers recorded 7,093 completed transactions during December, a gain of more than 11% from the 6,374 closed sales of the same month a year ago. Prices on last month’s closed sales of single family homes and condos rose 8.75% from a year ago. For the MLS market overall the price was $435,000 versus the year-ago figure of $400,000.

For the four-county Puget Sound region (encompassing King, Kitsap, Pierce and Snohomish counties), the median sales price for December’s closed sales was $495,000, up 10% from the year-ago figure of $449,950.

In King County, which had the highest volume of sales and the highest prices, the median sales price for last month’s closed sales was $615,000. That was an increase of about 3% from a year ago. Prices in King County peaked in May at $645,000.

Deely, a member of the NWMLS board of directors, reported “unusually brisk activity” in the luxury market as the year wound down, with several multimillion-dollar sales coming in all cash with less than two-week closings. Another noticeable trend he cited was foreign buyers and sellers anxious to complete buy-sell transactions before year end. “If this is any indication of the 2020 market, then we will be moving more towards the blistering market of 2017, swinging away from the more balanced market of 2019,” he proclaimed.

Some brokers expect the pressure on prices to ease during the first quarter of the year as inventory improves.

“We will see increased new inventory in the 1st quarter of 2020 resulting in a better selection of homes,” declared Rebhuhn, who added, “Buyers should be ready to supply sellers with prequalification letters including satisfaction of major underwriting elements.”

Scott said some relief should be on the way as the weather warms up and sellers choose to put their home on the market, but he also cautioned it’s possible the trend of fewer resale listings than usual will continue on the Eastside. He described the Eastside housing market as “particularly hot,” adding, “It shows no sign of slowing down anytime soon with recent job growth announcements and an extreme shortage of unsold inventory priced up to $1 million.”

Brokers in several counties outside of King County also commented on inventory shortages and the velocity of sales.

Frank Leach, broker/owner at RE/MAX Platinum Services in Silverdale, said Kitsap, Mason, Pierce and Jefferson counties continue to have constrained inventory, and “the market remains very competitive in all price categories.” NWMLS figures show December’s inventory in those four counties declined more than 35% from the selection of a year ago, while prices jumped 10.4%. Collectively, there is less than a month’s supply (0.94 months) in these South Sound counties.

Leach also noted rentals are very tight with new apartments rented as soon as they are finished. Builders are “chasing the market with most of their inventory being sold before they are finished,” added Leach, a member of the Northwest MLS board of directors.  

Wilson, whose office is also in Kitsap County, said more and more of their buyers do not work in Kitsap, adding areas connected to the ferry system are seeing more and more commuters purchase homes “because we are still more affordable than King County with a much higher quality of life.” He also said, “The unheard story out there is the one of many sellers who would like to sell their home but cannot find a home to buy in Kitsap.”

Young said December’s double-digit price increases in several counties reflect the long-term trend of increased interest along the I-5 corridor.

Looking ahead, brokers expect brisk activity.

Grady said, “With inventory below one month in King County, we can only surmise that 2020 will show a return to rising home prices as a result of the lack of inventory and continued robust job market. While buyers will continue to benefit from low interest rates, there are simply not enough homes for sale. These predictors indicate that the first quarter of 2020 will be active.”

Beeson, also a member of the NWMLS board of directors, underscored the fact that new construction falls further behind the need each year. “We continuously see multiple offer situations in the median or lower prices ranges. Price creep in Pierce County continues to be above 8% year-over-year for the past three years.”

“Clients often ask for our ‘crystal ball’ projection regarding the direction the real estate market is heading,” stated O’Leyar. He tells them “Follow the employment numbers,” citing State Employment Security Department reports showing the unemployment rate in King County for November 2019 was 2.3%, the lowest rate for any month measured since January 2016 and the highest employment rate since November 2017.

“The only sound reason for waiting to buy real estate in the Greater Seattle market now would be finding the suitable home versus anticipating the market to get any less challenging for buyers in the near future,” O’Leyar remarked.

Statistical Summary By Counties
Market Activity Summary and 4-County Puget Sound Region Pending Sales (PDF)