NWMLS: Inventory Inches Up as Home Prices Near Peak

NWMLS: Inventory Inches Up as Home Prices Near Peak

July market stats were published by the NWMLS today. Here’s a snippet from their press release: Western Washington housing market in “recovery mode” but some brokers say it’s still not at full potential.

More sellers listed their homes for sale during July compared to a year ago, but brokers with Northwest Multiple Listing Service say inventory remains “well below” what is considered to be a balanced market. Last month’s pending sales rose slightly from a year ago while prices system-wide increased nearly 6.3 percent.

“Some agents and firms are beginning to feel the summer doldrums, while others are experiencing a definite increase in activity,” observed Diedre Haines, regional managing broker-Snohomish County for Coldwell Banker Bain. Haines, a director with Northwest MLS, described price increases as “healthy, not exorbitant,” adding, “Thankfully we are not seeing signs of a bubble and instead are seeing realistic appreciation.” Nevertheless, she suggested sellers who overprice their properties can face disappointing consequences.

How do you know when the real estate market might be facing a bubble? Wait for agents to say “there are no signs of a bubble.” I’d say that over two years of home price appreciation in excess of five percent is definitely cause for some concern on that front. I’ll be exploring this in more detail later this month as we dive into the fundamentals once again.

For now, it’s on with our usual monthly stats.

CAUTION

NWMLS monthly reports include an undisclosed and varying number of
sales from previous months in their pending and closed sales statistics.

Here’s your King County SFH summary, with the arrows to show whether the year-over-year direction of each indicator is favorable or unfavorable news for buyers and sellers (green = favorable, red = unfavorable):

July 2014 Number MOM YOY Buyers Sellers
Active Listings 4,862 +9.2% +6.1%
Closed Sales 2,666 +7.7% +0.7%
SAAS (?) 1.35 -4.5% +3.9%
Pending Sales 2,901 -8.6% -3.6%
Months of Supply 1.82 +1.4% +5.4%
Median Price* $468,000 +3.2% +7.8%

Feel free to download the updated Seattle Bubble Spreadsheet (Excel 2003 format), but keep in mind the caution above.

Inventory continues to inch up, and looks to be on track to beat 2012 in August. Closed sales just barely beat last year’s levels while pending sales dipped year-over-year. Meanwhile, prices hit their highest July level since the peak in 2007.

Median Price June to July 2013: +1.5%
Median Price June to July 2014: +3.2%

Here’s your closed sales yearly comparison chart:

King County SFH Closed Sales

Sales moved up from June, but not by quite as much as they did last year (+7.7 percent vs. +9.3 percent). However, the increase was still enough to keep sales just barely above last year’s levels.

Here’s the graph of inventory with each year overlaid on the same chart.

King County SFH Inventory

Inventory continues its slow climb, and looks like it may surpass the 2012 level as early as this month.

Here’s the supply/demand YOY graph. “Demand” in this chart is represented by closed sales, which have had a consistent definition throughout the decade (unlike pending sales from NWMLS).

King County Supply vs Demand % Change YOY

Not much change from last month, but things did just slightly turn back in buyers’ favor.

Here’s the median home price YOY change graph:

King County SFH YOY Price Change

The year-over-year growth in median price bumped up a bit this month to its highest level since February. We’re currently sitting at 26 straight months of year-over-year home price gains in excess of five percent.

And lastly, here is the chart comparing King County SFH prices each month for every year back to 1994 (not adjusted for inflation).

King County SFH Prices

July 2014: $468,000
May 2007: $469,000

Here are the articles from the Seattle Times and P-I:

Seattle Times: King County home prices up 7.8 percent for the year
Seattle P-I: Home supply, prices rose in July

Check back tomorrow for the full reporting roundup.

  

About The Tim

Tim Ellis is the founder of Seattle Bubble. His background in engineering and computer / internet technology, a fondness of data-based analysis of problems, and an addiction to spreadsheets all influence his perspective on the Seattle-area real estate market.

23 comments:

  1. 1
    The Desponder says:

    Prescient words from The Tim:
    ‘How do you know when the real estate market might be facing a bubble? Wait for agents to say “there are no signs of a bubble.” I’d say that over two years of home price appreciation in excess of five percent is definitely cause for some concern on that front.’

    Another way to know is when panic over future events is used to push people into the market, such as this piece from bloomberg.
    http://www.bloomberg.com/news/2014-08-06/house-punting-the-cost-of-waiting-to-buy-in-hot-markets.html?cmpid=yhoo

    Surely interest rates will eventually rise, and, yes, that will impact affordability in the near term. However, that impact can be more than made up by potential declines in housing prices. Prices might not decline in the future in and of their own, but panic-based rationales for home purchases (i.e. over the future potentiality of interest rate changes/you’ll be priced out forever) suggests to me that we are near some sort of bubble territory which would then make housing price declines/stagnation more likely.

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  2. 2

    Tim wrote: “Sales moved up from June, but not by quite as much as they did last year (+7.7 percent vs. +9.3 percent). However, the increase was still enough to keep sales just barely above last year’s levels.”

    Wow, the highest sales volume since June, 2006, and that’s all you can say?

    The median is still $13,000 off the peak, but the mean is still over $30,000 less than the peak. What’s odd is the median pendings are not telegraphing these increases. They peaked at only $439,000 recently.

    As to the bubble comment, I wouldn’t put the number at 5%, but those double digit increases earlier were concerning.

    Numbers from NWMLS sources, but not guaranteed.

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  3. 3
    BacktoBasic says:

    Low interest baby. American buy house base on monthly payment. As long as you have a job and can afford your mortgage. The thing is, if the rate back to normal 6~7%) and job change force you to move, then less people will afford peak price anymore. If another recession hits, there will be another crash. The US economy is still in slow recover (the so called mid cycle). Many profits we generated are from sells are to overseas.Wait Chinese economy hit recession and stock market tanks again. Good time to sell at the peak.

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  4. 4
    The Kraken says:

    RE: The Desponder @ 1

    That bloomberg article hurt me when I read it. Though, it shouldn’t be surprising. More often than not I seem to remember feeling like their writing is drivel after reading one their articles. I wish FT subscriptions were a lot cheaper.

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  5. 5
    Erik says:

    Wow, Tim is calling a peak, which means housing prices will have to decrease to make a peak. Put this on your calendar. Tim, I dare you to show a projected home price curve. I remember when you showed inventory skyrocketing into the stratosphere. Boy was that ever wrong. Inventory has followed almost the same path this year as it did last year. I don’t foresee prices declining for about 2 years. You heard it first here folks. Prices will continue to increase in the area until August 2016. The rate of increase will be less for sure, but prices will be up year over year for 2 more years. If I am right again, I want to be allotted 6 comments per post instead of the 5 standard comments per post. You don’t need to admit defeat, but just go into your code and crank me up to 6 comments per post please. I have a lot to say.

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  6. 6
    whatsmyname says:

    The median price and number of sales were both bigger than I expected, but then I read the attached newspaper summaries: Seattle proper has now exceeded its old 2007 median price peak (and by a lot) – With $543,500. But without liar loans, or option arms, or growing percentages of home ownership, or even people saying, “house prices always go up”, (except sarcastically). Ouch.

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  7. 7

    In February 2012, the median home price was around 310,000. In July of 2014, the median home price was 468,000. So in 29 months, the median home price has appreciated about 50%, and actual selling prices in the more sought after areas like Greenlake or Queen Anne or Sammamish or Kirkland are at or above the peak prices of 2007.
    it seemed obvious to some of us in ’07 that home prices were unsustainable, that a pin was going to burst that bloated balloon. Still, lots of people were saying that Seattle was different, that we have Microsoft, Amazon, Boeing, Amgen, etc.
    Now Microsoft is laying off, and Amgen’s leaving Seattle. There aren’t any indications that the local economy is going to crash anytime soon. But if over the long haul real estate generally tracks the inflation rate, inflation’s about 3% a year, and home prices have gone up 50% in a little over two years? What do you think’s going to happen?

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  8. 8
    whatsmyname says:

    RE: Ira Sacharoff @ 7
    So long as we’re cherry picking our dates, median price in May 2007 was $469,000.
    Tracking at 3% increases annually, we would be over $577,000 today: County, not City.
    Perhaps we have some room to go.

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  9. 9
    Erik says:

    RE: Ira Sacharoff @ 7
    Microsoft is mostly laying off people in Europe. I read something like 18.5k jobs were over sees adn 1.5k were in the seattle area. I imagine that jobs will increase at Microsoft. I don’t know a lot about these software outfits, but they don’t seem to be leaving. Boeing will leave, I do know that.

    Here is how I would estimate where housing prices should be if you assume a 3% increase:
    Assume the insanity began in 2003.
    2014-2003=11 years
    Price of houses in seattle in 2003 on this month was $300k.

    Use the old fashioned simple interest formula…
    P(1+i)^n=$300k(1+.03)^11=$300k(1.03)^11=$300k*1.3842338707= $415k

    Our current median is $468k.
    $468k-$415k=$53k
    We are $53k higher than we should be assuming 3% increase.
    $53k/11years = 4.82

    The crazy bubble was 2003 to 2007, which was 4 years.

    Use the old fashioned simple interest formula…
    P(1+i)^n=$300k(1+.03)^4=$300k(1.03)^4=$300k*1.126= $337.8k

    The median in July 2007 was about $480k
    $480k-$337.8k=$142.2k
    We were $142.2k higher than we should be assuming 3% increase.
    $142.2k/4years = 35.55

    35.55 was the rate of change from 2003 to 2007. The rate of change from 2003 to 2014 was 4.82. That is over 7 times as steep as an increase than we are seeing today! Of course we bounced off the bottom. That’s what happens after sharp decreases in prices like we saw from 2008-2012. I do not think the bounce off the bottom should be taken as a huge upswing in prices and a crash will happen.

    Let me reiterate:
    2003-2007 rate of change is 35.55
    2003-2014 rate of change is 4.82

    We are not out of control.

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  10. 10
    Blurtman says:

    RE: Ira Sacharoff @ 7RE: whatsmyname @ 8 – I think you have to ask when the ninja, no doc and speculators’ home purchases inflated the median home price by creating false and unsustainable demand. By May 2007 that would certainly have been the case, and so the median home price in May 2007 is likely a specious indicator. Expectations of a stable or rising market likely provides encouragement to potential buyers. If home prices are the result of unsustainable demand, then buyers become bag holders, as we have recently seen with the case of underwater owners. Some believe that artificially low interest rates have inflated asset prices, and that this is unsustainable. But it is hard to make predictions, especially about the future.

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  11. 11

    By Ira Sacharoff @ 7:

    In February 2012, the median home price was around 310,000. In July of 2014, the median home price was 468,000. So in 29 months, the median home price has appreciated about 50%,

    The non-distressed median had been within $400,000, plus or minus about $20,000 since the end of 2010. For example, in February 2012 it was about $385,000. February 2014, about $450,000.

    The difference is because in February 2012 almost 39% of sales were distressed sales. In February 2014 only just over 18% were distressed.

    If you look at the non-distressed median, we are now over the peak, and that’s a fair comparison since very few homes were distressed in July, 2007.

    Numbers from NWMLS sources, but not compiled by or guaranteed by the NWMLS.

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  12. 12
    Eastsider says:

    Calling a peak or a bottom is a fool’s errand. That said, based on your affordability index, we are nowhere near the peak. Am I missing something?

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  13. 13
    BacktoBasic says:

    If you own a house, it donen’t really matter the daily or monthly price change. If your plan to buy or sell, it matters. In the long run, housing price follows the affordability which consists of income, interest rate. Do we anticipate wage increase? yes we do expect a min wage increase to $15. That will translate to increase inflation and cost to most of the home buyer. Rate increase, sure we do. Do we anticipate a big hiring boom in Seattle? We don’t. Microsoft is cutting work force, Amazon is not making profit, Amgen is leaving for California, Boeing is shift to southern states. I can’t say it is the peak, but the general feeling is that the bubble will pop up again in the foreseeable future.

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  14. 14
    The Tim says:

    By Erik @ 5:

    Wow, Tim is calling a peak, which means housing prices will have to decrease to make a peak. Put this on your calendar.

    You’re either really bad at reading comprehension or really obvious at intentionally trolling.

    I said “Home Prices Near Peak” in the headline, then explained exactly what I meant in the text: “Meanwhile, prices hit their highest July level since the peak in 2007.” Home prices are nearing the level they were at the peak of the market in July 2007. That is an objective fact about the present, not a prediction about the future.

    Tim, I dare you to show a projected home price curve. I remember when you showed inventory skyrocketing into the stratosphere. Boy was that ever wrong.

    We’ve been over this repeatedly, so this is the last time I’m going to feed the troll on this topic. Go back and read the post. I used the word “if” three times in as many paragraphs. The post was not a prediction, but merely a look at a hypothetical possibility.

    I was also very clear that I explicitly did not expect inventory to “skyrocket” at all: “Of course, even if that happens it will only manage to make 2013 inventory the second worst on record since 2000.”

    Likewise, I’m not predicting imminent price declines now. I’m just pointing out that we’re definitely getting into bubble territory again. “We may be in another price bubble” is not the same as saying “home prices are at their peak and will now decline.”

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  15. 15
    BacktoBasic says:

    All tie to interest now. We are eating future gain now. Fed and current administration don’t care about future gain. They are doing as much as possible to pull the economy out of the muddy recession. The bond purchased now will be sold at lost in the future. Who will bear the lost?

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  16. 16
    Blurtman says:

    RE: BacktoBasic @ 15 – If you hold to maturity there is no loss but for inflation related losses. And if yields rise, and you buy the newer higher yielding bonds, your periodic returns are higher. Kind of like dollar cost averaging if you are an investor in bonds. But someone must pay the higher yields, and so it is within the Fed’s interest for war to be encouraged, and the resulting flight to safety and lower Treasury yields the result.

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  17. 17
    BacktoBasic says:

    RE: Blurtman @ 16
    Hold 2% interest bond 10 years till maturity and pay your marginal tax at the end when inflation runs at 4~5% in real term. No thanks.

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  18. 18
    Blurtman says:

    RE: BacktoBasic @ 17 – It’s not for everyone, surely. But some folks apparently are keeping money in negative interest rate accounts. I have pointed out that by manipulating the risk free rate, the Fed is cheating investors in Treasuries by forcing those seeking safety to receive artificially low yields. And of course when the spring can no longer remain compressed….. But if you look at 10 year yields, in spite of an expectation of rising rates, they are dipping, due to fears of war, and a flight to safety. Go figure.

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  19. 19
    BacktoBasic says:

    Maybe the rate will stay lower forever. Just set rate lower and use new bond to pay the old bond. Like Madoff scheme, the last person hold the bond will pay for the loss. Let’s see.

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  20. 20
    Deerhawke says:

    I tended to be an optimist and have thought a lot of the talk about another bubble was hype.

    On the other hand, watching Seattle median prices jump nearly 10% or $44,500 ($499K to $543.5K) in one 31-day period makes me pause to reassess.

    If this is the sustainable new-normal, then buying and selling real estate in Seattle is like being a day trader.

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  21. 21
    Erik says:

    RE: The Tim @ 14
    Thanks for clearing that up. To me a peak means there will be a decline. You just mean that we are in an area that could be overvalued since we bounced off the bottom so quickly. I compared the rate of increase from 2003 to 2007 and 2003 to 2014 above. I showed that the rate of change is much much smaller now than it was during the bubble. What is happening now is a trait of recovery where we have a quick run up. This is part of the recovery process. Prices should begin to level off at some point, but I foresee no risk of bubble trouble. I was tired when I did that quick calculation above, but you see my logic, right? We are not at crazy price increases when you take out the bubble.

    Just had a good idea for a post… You could simply draw a straight line from prebubble to now and look at the slope. Then compare that slope to a time periods you would consider normal. That would show us how close we are to normal times without the bubble.

    The reason it seemed like a prediction was because you drew the line and said “if.” That isn’t the whole story Tim. After you drew a hypothetical line, you plotted actual inventory rises until the rises stopped following your line. When you draw a line and plot actual results next to it, that sure seems like a prediction to me. That’s what engineers like yourself are suuposed to do. You make a theoretical guess, plot actual values against it and see how close you were. That is what you did, and I call that a prediction. Just because your prediction or theoretical values didn’t match the results doesn’t change that it wasn’t a prediction. We all know you are smart. Smart people are wrong all the time.

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  22. 22
    Erik says:

    RE: Erik @ 21
    Okay, I will stop cranking you about the inventory hypothetical line. In mechanical engineering, a hypothetical line is a prediction. Maybe it is different in software. Johness agreed with you and he is a software guy. Corndogs agreed with me and he is a mechanical guy. Let’s just say it is a difference of what we have learned in school and just be peaceful. :)

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  23. 23
    whatsmyname says:

    By Blurtman @ 10:

    I think you have to ask when the ninja, no doc and speculators’ home purchases inflated the median home price by creating false and unsustainable demand. By May 2007 that would certainly have been the case, and so the median home price in May 2007 is likely a specious indicator.

    I agree; quite like the absolute trough month in a financial panic would be a specious indicator. The point of the post was what happens when you cherry-pick the numbers.

    Interestingly, those creators of false demand mentioned above are currently absent, or at least very minimal. You seem very concerned about artificially low rates affecting asset prices, and their sustainability. But what about the artificially high rates the Fed has more than frequently used to fight inflation and overheating during these past three decades? Have they held asset prices back? Are we just equalizing? Are poor victim treasury buyers maybe getting back a little of what they’ve been giving?

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