Multiple offers are “the new normal” for housing market around Puget Sound

NWMLS, Kirkland, WA, May 6, 2013 – Northwest Multiple Listing Service members notched their highest volume of new listings since June 2011, but the additions did little to ease inventory shortages. Brokers also reported the highest volume of pending sales since May 2007, along with anecdotes of bidding wars.

“Multiple offers have become the new normal,” remarked MLS director Diedre Haines, the Snohomish County regional managing broker at Coldwell Banker Bain. “We have literally gone off the charts in absorption,” she stated, adding the dip in pending sales in that county “is all due to lack of inventory.”

Haines also reported low appraisals remain a problem as appraisers struggle to keep up with the fast paced activity and increasing values.

Northwest MLS figures support Haines’ observations. Brokers added 1,349 new listings to Snohomish County inventory during April, but that activity was outpaced by sales, with members reporting 1,500 pending sales in that county, slightly fewer than a year ago. Prices on sales that closed during the month surged more than 16 percent.

For the MLS market system-wide, new listings, pending sales, closed sales and prices rose compared to twelve months ago, but inventory across the 21 counties dwindled.

Members added 10,351 new listings during April, improving on the year-ago figure of 9,166 for a gain of 12.9 percent. At month end, with the additions, the selection of single family homes and condominiums totaled 19,826 listings, down about 21.6 percent from the year-ago figure of 25,291.

Area-wide pending sales of single family homes and condominiums (combined) rose 9.2 percent, from 8,790 mutually accepted offers to 9,600 transactions. That total is the highest since May 2007, when members tallied 9,743 pending sales.

Closed sales for April jumped nearly 20 percent, rising from 5,177 transactions a year ago to  6,209 completed sales. Year-over-year prices on those sales climbed 12.5 percent. A year ago, the median price for single family homes and condos (combined) that sold was $240,000. Last month, it rose to $269,950.

Through four months, closed sales are outperforming year-ago totals for same period by nearly 3,000 transactions. Haines believes the increase is an indicator “that lending restraints are beginning to ease and there are fewer and fewer short sale transactions being processed.”

Several factors are contributing to a “recipe for a frenzied May real estate market,” suggests John Deely, another member of the Northwest MLS board of directors. “The market pace has not subsided from previous months with low inventory and low interest rates being the primary drivers,” he stated. Also fueling the frenzy is the already fast pace market, news reports touting price increases of 9-plus percent both locally and nationally, positive job growth and record highs for the stock market, noted Deely, the principal managing broker at Coldwell Banker Bain in Seattle.

Prices will continue to rise as current market conditions are sustained, predicts J. Lennox Scott, chairman and CEO of John L. Scott Real Estate. Among the conditions he mentioned are historically low interest rates, pent up buyer demand, and a shortage of available inventory.

Scott said rising prices are prompting questions from sellers on whether now is a good time to sell. In response to such questions, he advises sellers to assess their own situation, considering their plans to purchase another home, including where and what price range.

Prices for last month’s sales of single family homes (excluding condos) rose 12 percent. Area-wide the median sales price for April was $280,000, a $30,000 increase from a year ago. Among the 21 counties in the MLS report, King County had highest median price for single family homes. Last month’s 2,096 closed sales had a median price of $400,000. That’s about 11.1 percent more than the year-ago median selling price of $360,000.

Multiple offers are more commonplace, including in Kitsap County, brokers noted, even though year-over-year prices fell slightly (2.75 percent). A full price offer with an escalation clause is not uncommon on a newly listed home that is priced right, according to Frank Wilson, Kitsap district manager and branch managing broker for John L. Scott in Poulsbo.

“Buyers have to be ready to buy and have an approval in hand from their lender,” suggested Wilson, who also serves as a board member for Northwest MLS. Open houses are drawing crowds, he stated, adding, “Just as sellers had to work harder to get their homes sold a few years ago, today’s buyers have to work harder to succeed in this competitive market.”

Whether the market becomes more balanced may depend on listings. Northwest MLS figures show every county in its service area had year-over-year gains in new listings during April. “Let’s hope this is the start of a positive trend for inventory,” commented Mike Grady, the president and COO of Coldwell Banker Bain, but then added, “Considering the overall market landscape, it’s likely there won’t be enough sellers to fill buyer demand, at least for the short term.”

Gary O’Leyar, designated broker/owner of Prudential Signature Properties in Seattle, said buyers should consider altering their searching strategy, given the limited inventory. For the past six months in many neighborhoods, the supply has averaged around 1.5 months or less, often prompting bidding wars, he noted. “Despite multiple offers on any given listing, the result is only one sale,” O’Leyar remarked.

O’Leyar suggested buyers look at properties that have been on the market for an extended period of time, that meet their basic requirements, but that may need some work. “Oftentimes, getting a better priced property may mean looking outside the immediate metro market and into the nearby suburban markets. The best buys are not always the properties that are newly listed,” he emphasized.

Along with widening their search area, some buyers are adding a step to the process before engaging in competitive bidding. “We are seeing more and more buyers completing pre-inspections on homes they’re interested in,” reported MLS director Haines.

To accommodate demand, builders around the state appear to be ramping up their activity. Figures from one industry group show a surge in permit activity for January, its most current reporting period. The number of permits more than doubled from a year ago, from 969 to 2,213, according to a report from the Building Industry Association of Washington.

A comparison of permits shows a significant shift in the types of housing BIAW members plan to build. This year, the January permits were almost equally divided between single family homes (about 51.6 percent), and multi-family (about 48.4 percent). That compares to the year-ago proportion, when permits for single family homes accounted for about 77 percent of the activity.

While most of Washington is experiencing brisk activity, many areas of the country show only “modest movement,” according to the National Association of Realtors®.

In a news release accompanying NAR’s Pending Home Sales Index (an indicator based on contract signings), Lawrence Yun, NAR chief economist, said the market appears to be leveling off. “Contract activity has been in a narrow range in recent months, not from a pause in demand but because of limited supply. Little movement is expected in near-term sales closings, but they should edge up modestly as the year progresses,” he said. “Job additions and rising household wealth will continue to support housing demand.”

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 – April 2013

4-County Puget Sound Region Pending Sales (SFH + Condo combined)
(Totals include King, Snohomish, Pierce & Kitsap counties)