The Seattle Area Home Inventory is at a Record Low. We are Fresh out of Homes.
The Seattle area home inventory set a new record low in 2016. That’s according to the year-end report from the Northwest Multiple Listing Service (NWMLS).
The NWMLS recorded 121,468 mutually accepted offers (pending sales) during 2016. Only 113,305 new listings were added to inventory. The depleted Seattle area home inventory often led to competitive bidding and multiple offers for homes in the most desirable areas.
During 2016, the average area-wide supply, as measured by months of inventory, averaged only 1.86 months. This was down from 2.4 months for 2015. King County had the lowest level, averaging only 1.1 months of supply. This means that if no new homes came on the market, it would take about one month for the King County housing cupboard to be empty. Not a single home would be for sale.
The Seattle Market: Up, Up, and Away
A balanced market would be one where the supply of homes would last between four and six months. Such a market would favor neither buyers nor sellers. The Seattle housing market has been a seller’s market since early 2015.
This became evident first in the most desirable areas, such as Capitol Hill on the Seattle side of Lake Washington and Bellevue’s 98004 Zip code on the Eastside. While some of these high-end neighborhoods have cooled down a bit, the prices in usually more affordable areas have exploded. Examples are Rainier Valley south of Seattle, most of Bothell, and Kirkland’s Kingsgate neighborhood. In Kingsgate, a 1970s-built split level home could be had for $425,000 in 2014. Now the same kind of home sells for up to $550,000. The sellers reaped the benefits of the low Seattle area home inventory.
In fact, and in hindsight, if you’ve bought a home in 2014 you likely have hit the jackpot.
What’s a Buyer to Do?
- Start looking early and watch very, very closely! (However, see point seven.)
- Stay informed! Have your agent set up an automated search on the NWMLS. For your peace of mind, search yourself online.
- Be flexible! Your search criteria need to be broad enough to return results.
- Be vigilant! Watch for price reductions (see What’s a Seller to Do?). Watch for pending listings that come back on the market.
- Be out there! Go see as many homes as you can with your agent or at open houses.
- Be patient and persistent! When you and your agent find the right home, don’t be afraid of making an offer! Remember, making an offer is not the same as buying a home. If necessary, use an escalation clause. If you “love” the home, invest in a pre-inspection.
- Get pre-approved! Don’t even start looking for homes without a lender having qualified you. A solid pre-approval from a local, well-regarded mortgage broker like this one or bank is mandatory. In a close multiple offer scenario, the reputation of your mortgage source may swing the decision in your favor.
What’s a Seller to Do?
- Be decisive! If you thought of selling, don’t wait. This is not the usual “now is a good time to sell” agent advice. The current market is screaming for new listings.
- Be realistic! Don’t overprice your home. When there are only a handful of homes for sale, it’s easy to spot the one that’s overpriced. Price strategically to attract as many buyers as possible and to encourage multiple offers with escalation clauses.
- Be prepared! Even in a seller’s market, the pretty homes in any price range sell first and for more money. Clean, declutter, and stage the home if you are not living in it.
- Be visible! Listing your home with a competent agent on the NWMLS is essential, but it’s only the beginning. Get an experienced agent who knows how to market your home online and in social media.
- Be careful! When you receive offers – and you will – closely evaluate them with your agent. The offer price is of primary importance, but a fast closing date, a waiver of inspection, and a solid pre-approval from a local lender are all close seconds. With cash offers, request not only evidence of funds but demand to know the source of the funds.
- Be ready! If you are living in the home, know when you are ready to move out. If necessary, rent the home from the buyer after closing. Remember, in this market, as the seller you are in the driver’s seat.
- Be vigilant! Once you have a mutual agreement with a buyer, stay on top of the process. Above all, have your agent keep close tabs on the progress of the buyer’s financing. That closing date is not a mere suggestion.
There is no immediate relief for the low Seattle area home inventory in sight. What may change the picture are slowly rising interest rates. Higher mortgage rates will reduce the number of first-time buyers, especially in the bottom price range. Price reductions are on the increase, but they are mostly the result of unrealistic seller expectations.
New construction may lessen the shortage. In 2016, about 11.3 percent of residential sales were newly built homes or condos. Much more new construction is needed in 2017 and beyond to meet the demand. Until this happens demand will outstrip supply and that usually means rising prices.
First published by Gerhard as his
January 2017 View from the Street Newsletter.