March Reporting Roundup: Lack of Inventory Edition

Well, obviously I failed at making time to get this done on Friday, but that doesn’t mean we’re going to skip our monthly reporting roundup, where you can read my wry commentary about the news instead of subjecting yourself to boring rehashes of the NWMLS press release (or in addition to, if that’s what floats your boat).

To get this party started, here’s an excerpt from the NWMLS press release:

Lack of inventory is holding back sales

Northwest Multiple Listing Service brokers reported rising prices on fewer sales during March compared to a year ago, citing inventory shortages as the main reason.

“The only thing holding back sales is the lack of inventory,” said John Deely, a member of the Northwest MLS board of directors. He said one recent listing priced at a fair market value drew more than 40 offers. “The depth of buyer demand appears to have no bottom in the most popular price ranges,” added Deely, the principal managing broker at Coldwell Banker Bain in Seattle.

Here’s the thing. For the claim that “the only thing holding back sales is the lack of inventory” to hold any water in an environment where sales are on the decline from this same time last year, inventory would need to be flat or down from last year. In fact the opposite is true:

Supply & Demand: King County Single Family Homes

So there’s obviously something else that’s driving down sales beyond just a lack of inventory. I think it’s mostly due to interest rates. Many buyers who might have otherwise waited until this year to buy jumped in last year when rates were crazy low. Since rates are now on the rise, sales are starting to suffer.

Read on for my take on this month’s local news reports.

Seattle Times

Sanjay Bhatt: Home price rising more slowly, but for-sale signs remain scarce

A continuing tight inventory of homes for sale kept pressure on prices.

“Everyone’s waiting for the spring bounce in listings,” said Seattle economist Matthew Gardner. “We’re all hoping that’ll be the case. Without a doubt there are still more buyers than sellers.”

Still, annual price growth has been slowing: In January the median price in King County was 17 percent higher over the previous 12 months; in February, 11 percent higher.

The number of active listings every month has been higher than a year ago, but the number of pending deals — mutually accepted contracts to buy a home that haven’t closed yet — is lower than last year in all three counties, suggesting buyers are being more choosy.

As usual, a good article from Sanjay Bhatt, digging deeper than the shallow sales pitches in the NWMLS press release.

Seattle P-I

Aubrey Cohen: Home inventory, sales fell in March

So much for improving home inventory.

After starting to ease in recent months, the supply of houses for sale in King County retightened in March, the Northwest Multiple Listing Service reported Thursday. The county had just 1.8 months of houses for sale at the current sales pace in March, down from 2.6 months of inventory in February.

Hmm. Technically true, but misleading. Months of supply always drops over the first few months of the year. Overall, inventory is (very slowly) climbing and sales are falling compared to a year ago, which removes seasonal factors.

Everett Herald

Jim Davis: Low inventory depresses county home sales

Another month, another drop in home sales.

Pending sales for homes and condominiums in Snohomish County dropped in March from the same period a year ago, according to according to numbers released Thursday by the Northwest Multiple Listing Service.

Sales fell to 1,481 last month, down from 1,576 in March 2013. That’s a 6 percent drop.

Hey, look, the Herald is back in the monthly reporting game. Welcome, Jim Davis!

Tacoma News Tribune

Rolf Boone: Pierce County home sales face tough comparison with 2013

The Pierce County housing market sold more homes in March, but it still didn’t match last year’s March totals as sales dipped nearly 2 percent, according to Northwest Multiple Listing Service data released Thursday.

Looks like we just get the short blurb version of the News Tribune’s story online this month.

The Olympian

Rolf Boone: Year-over-year home sales fall, but prices climb

The Thurston County housing market delivered a mixed bag of results for March, with sales heading in one direction, while prices went the other way, according to Northwest Multiple Listing Service data released Thursday.

Although more homes sold in March than February, last month’s sales still fell 6.8 percent from the year-ago period, falling to 246 units from 264 units in March 2013, the combined single-family residence and condo data show.

Not much of a meaty story online in the Olympian, either.

(Sanjay Bhatt, Seattle Times, 04.03.2014)
(Aubrey Cohen, Seattle P-I, 04.03.2014)
(Jim Davis, Everett Herald, 04.03.2014)
(Rolf Boone, Tacoma News Tribune, 04.03.2014)
(Rolf Boone, The Olympian, 04.04.2014)

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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. Tim also hosts the weekly improv comedy sci-fi podcast Dispatches from the Multiverse.

15 comments:

  1. 1
    John Sitar says:

    The Tim, The charts you posted show inventory has increased. There is another chart on the landing page of your blog by Altos Research. That gives a completely different picture for Seattle. Is that one wrong? Could it be that both are correct and the Supply and Demand chart in this post is mostly because of cities outside Seattle and Eastside?

  2. 2

    I wouldn’t rely too much on the change in pending volume because last year people still could have been snapping up short sale listings just to be in contract on something! Unfortunately there’s no way for me to test that theory.

    You missed this one, where the tight inventory is seemingly the only reason for higher prices this year, even though inventory was lower last year!

    http://m.bizjournals.com/seattle/blog/2014/04/severe-inventory-shortage-sends-seattle-area.html?ana=e_sea_rdup&s=newsletter&ed=2014-04-04&r=full

  3. 3
    Erik says:

    Good post. This is useful information. I see this theme of rising inventory continuing. This is why I sold when I did. Things will only continue getting better for buyers and hence worse for sellers in king county.

  4. 4
    mike says:

    Two of the $550K fixers near me are still sitting vacant months after closing. I’ll be interested to see if these turn out to be flips or whether the buyer is just renovating before moving in. These are interesting houses to watch, because they’re not in the typical FTHB ‘sweat equity’ range, nor are they particularly attractive to rebuild investors at that price point as the land value is somewhere in the $300-$400K range.

  5. 5
    mike says:

    RE: Erik @ 3 – It’s going to take a while for inventory to get back to where it was even 2 years ago, price wise anyway. When I bought, there was a pretty good selection of fixers in the $400K-$450 range that I was shopping in. Now? 0. Zip, zilch, nada – not even close. Add another $100-150K on to that and there’s some inventory, but it’s still very thin, or very old and decrepit.

  6. 6
    Scotsman says:

    Zillow says most/many homes are unaffordable. Unless you’re Chinese. Or unless they’re as affordable as ever. Confusing article.

    http://www.zerohedge.com/news/2014-04-05/zillow-study-shows-1-3-homes-are-unaffordable-vacation-home-sales-are-soaring

  7. 7
    whatsmyname says:

    Overall, inventory is (very slowly) climbing and sales are falling compared to a year ago, which removes seasonal factors..

    Technically true, but kind of misleading. Inventory is climbing from an extreme low outlier. It is still 30% below the next-lowest same month number, and more than 50% below the same month median. Falling sales are in the mid-range, and only about 10% below the median. Neither change is significant relative to either of these positions. That is the cyclical factor.

  8. 8
    Erik says:

    RE: mike @ 5
    I may get a job in auburn. If I do get it, I will buy in the $90k-$150k range In South Park like Ardell suggested I do. Seems like a solid plan. I will flip it and gtfo because I don’t like the area. Maybe fix it and rent it til they put that new bridge in.

  9. 9
    Mike S says:

    My wife and I relocated to Seattle last month. We were fully expecting the high prices in Seattle compared to Scottsdale AZ but something else has shocked us even more: the poor quality of the homes for sale. We are looking in some of the better neighborhoods and fully expect to pay well above the median price. We are looking in that most sought after range between $500 and $700k. We can honestly tell you that 9 of 10 homes for sale have serious issues. Not aesthetic things like, we don’t like the carpet or the style of cabinet. The issues are things like seriously deferred maintenance, terrible floor plans, no off street parking, etc. the sellers are clearly offering the homes that would be overlooked if there were competition. We were in on the illustrious 40 offer home in Ballard. Truly silly. The homes prices are too high for the quality of homes on the market. We really think that it would be a mistake to buy at this point. Doing our homework we have seen more than a dozen homes offered this spring that were bought during the bubble and now are being sold for more than 2007 prices due to the competition of buyers. Each of these homes had a lot of un permitted work done and were less than perfect. This is the perfect time to offload since everyone knows that an inspection clause is a death sentence for your bid. Something must change and this flock of buyers will again be the same as the lucky ones in 2007. Overpaid by any measure.

  10. 10
    mike says:

    RE: Erik @ 8 – Ardell also said my neighborhood is one of the bad parts of 98117, yet there’s been very little sold under $600K that isn’t seriously old and worn out. Even at $700K, there’s a lot of old and worn out houses going under contract in a week or less. You passed up on that 3/1.5 fixer I pointed out at $699K and someone else snagged it the next day! And that’s what’s happening in the undesirable ghetto areas.

  11. 11
    boater says:

    By and large inside Seattle and in the better neighborhoods you’re not paying for the house. You’re paying for the land. I. Arizona I suspect you’re paying for the house and the land is relatively cheap.
    If you want your Arizona house for an Arizona price you either need to buy in Arizona or live way out of Seattle. That’s just life.

  12. 12
    wreckingbull says:

    RE: boater @ 11 – Most don’t tear down the homes and rebuild, so most are indeed paying for the house. At some point, living with 6-foot ceilings must play into the equation, right? Apparently, we are not there yet.

  13. 13
    boater says:

    RE: wreckingbull @ 12
    You don’t have to tear a place down to be paying for the land. You’re paying for a short commute and proximity to all that downtown has to offer.

  14. 14
    ARDELL says:

    RE: mike @ 10

    I don’t believe Erik is contemplating buying a $700K “fixer”.

    I also don’t recall talking about a “bad” part of Ballard. There are clearly more and less desirable sections for different reasons working up from 98103 through 98107 into all of 98117. My close activity in that area will diminish a bit now that my client won in multiple offers yesterday on the 98103 Fremont side of all that. But over the last 4 to 6 weeks while we were looking there I don’t recall advising my clients about a targeted “bad” area. I am on vacation this week with my family in LA so maybe I’m a bit distracted and need a reminder of where that “bad” area is exactly. Can you quote me on that?

  15. 15
    wreckingbull says:

    RE: boater @ 13 – I used to live down the street from that house and I worked at 4th and Madison. Bike, bus, or car, that commute is no picnic. If that is now deemed a convenient commute, things are getting worse at a rate faster than I thought.

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