Puget Sound region sees ‘extraordinary’ drop in housing inventory

Amid the ongoing pandemic, the Puget Sound housing market has become a peculiar one to say the least, thanks in large part to plummeting inventory.

Housing prices across King, Snohomish, and Pierce County have skyrocketed over the last month, with double-digit year-over-year increases in median home prices in all three areas. This comes amid an historically low inventory for prospective home buyers Windermere Chief Economist Matthew Gardner says.

“We have to go back to good old Economics 101,” Gardner said. “When you have net new demand and you limit supply, what happens to prices? They rise, and that’s very much the case.”

According to the Northwest Multiple Listing Service (NWMLS), all three major counties had under a month’s worth of inventory in September, a year-over-year decrease of 43%. Looking at historical data dating back to 1999, Gardner couldn’t find a single month with inventory supply that low.

“It is quite extraordinary,” he noted. “Yet at the same time, buyers are clearly out in force.”

Despite the economic recession brought on by the COVID crisis, demand has been buoyed by “remarkably, historically low mortgage rates,” and a surge in high-income buyers.

“In most areas, we are virtually sold out in the more affordable, mid-price and upper end segments of the market,” John L. Scott Real Estate CEO J. Lennox Scott told the NWMLS in a recent news release. “We’re also seeing a record-setting number of luxury properties going under contract across King, Pierce, and Kitsap counties.”

Elsewhere, the downstream effects of the recession have largely been felt by lower income renters, rather than homeowners.

“Middle and upper middle classes are doing just fine,” Gardner described. “The wealthy are doing really well, and lower income households are absolutely not. They are hurting more than anyone else.”

~Nick Bowman, KIRO

August pending home sales soar to a record high, fueled by rock-bottom mortgage rates

Pending home sales rose 8.8% in August compared with July, reaching a record high pace, according to the National Association of Realtors survey, which dates to January 2001.

Sales were 24.2% higher than August 2019.

These sales track signed contracts on existing homes, not closings, so they are an indicator of closed sales in the next one to two months.

“Tremendously low mortgage rates – below 3% – have again helped pending home sales climb in August,” said Lawrence Yun, NAR’s chief economist. “Additionally, the Fed intends to hold short-term fed funds rates near 0% for the foreseeable future, which should, in the absence of inflationary pressure, keep mortgage rates low, and that will undoubtedly aid homebuyers continuing to enter the marketplace.”

Yun also noted that not all pending sales contracts turn into closed sales, due to both sampling measures and mortgage and appraisal issues; therefore we may not see record closed sales in the coming months.

Mortgage rates started the month falling to a new low. They jumped sharply mid-month, but only briefly. Low mortgage rates have given buyers more purchasing power and added fuel to fast-rising home prices.

Homebuyers have been pouring into the market, thanks to a coronavirus pandemic-induced stay-at-home culture. They want more space, both indoors and outside for both work and school from home.

Home price gains have been accelerating for the past three months, with some large local markets seeing double-digit annual increases. Nationally, the median price of a home sold in August (by closed sale) was 11% higher compared with August 2019, according to the NAR.

“Home prices are heating up fast,” said Yun. “The low mortgage rates are allowing buyers to secure cheaper mortgages, but many may find it harder to make the required down payment.”

Prices are mostly being fueled by an incredibly low supply of homes for sale. The inventory of homes for sale at the end of August was down 18.6% annually, putting the market at a 3.0-month supply.

“The increase in contract signings is shrinking the limited number of homes for sale to some of the lowest levels in recent history,” said George Ratiu, senior economist at realtor.com. “This is causing a massive imbalance to the market’s supply and demand, which is rewarding sellers with home price increases that more than double the pace of wages. Looking forward, with no signs of these dynamics shifting anytime soon, more price increases are likely on the way and affordability will likely continue to be a challenge for many buyers.”

Homebuilders are ramping up production, but not nearly fast enough. Sales of newly built homes in August, which are also measured by signed contracts, came in a remarkable 43% higher than August 2019, according to the U.S. Census. The homebuilders are benefiting from the lack of existing homes for sale, and their soaring sales are evidence that existing home sales would be higher if there were more on the market. 

Regionally, pending home sales rose 4.3% month to month in the Northeast and were 26.0% higher annually. In the Midwest, sales rose 8.6% for the month and were up 25.0% from August 2019.

Pending home sales in the South increased 8.6% monthly and 23.6% annually. In the West sales rose 13.1% monthly and 23.6% annually.

~ Diana Olnick, CNBC