NWMLS: No Hope for a Buyers’ Market in January

January market stats were published by the NWMLS yesterday. Before we get into our monthly stats, let’s have a look at their press release.

Spring market “not waiting for tulips” but limited inventory frustrates homebuyers

Home sales this super bowl season outpaced a year ago as sidelined buyers emerged to compete for limited inventory, according to brokers who commented on January activity.

New figures from Northwest Multiple Listing Service show year-over-year increases in pending sales, closed sales, and prices, while inventory fell by double digits.

[Northwest MLS director Frank] Wilson, branch managing broker at John L. Scott in Poulsbo, said the spring market is not waiting for the tulips this year – “spring has already sprung. We are seeing an increase in traffic at our open houses with more buyers out looking at our limited inventory.”

Wow. did they seriously just reference tulips? As a positive? Just wow.

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):

January 2014 Number MOM YOY Buyers Sellers
Active Listings 2,681 -2.8% -14.4%
Closed Sales 1,340 -32.4% +2.4%
SAAS (?) 1.03 -6.4% -5.2%
Pending Sales 2,140 +28.2% +6.5%
Months of Supply 2.00 +43.8% -16.4%
Median Price* $441,500 +0.3% +7.7%

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

This month it’s the same basic story we’ve been seeing over most of the last year: decent sales volume, rising prices, and a lack of inventory. One thing that is interesting, which I’ll get into more later, is how the year-over-year home price growth has been trending down since late 2012.

Here’s your closed sales yearly comparison chart:

King County SFH Closed Sales

Closed sales fell 32 percent from December to January, which is more than the average 24 percent decline for this time of year, but not way out of the typical range.

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

King County SFH Inventory

Inventory hit another all-time low point in January.

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

Both supply and demand are still moving in sellers’ favor, although the demand side did drop substantially.

Here’s the median home price YOY change graph:

King County SFH YOY Price Change

This one is particularly interesting to me. Seattle-area home prices peaked during the housing bubble in mid-2007, but the year-over-year change had been falling ever since late 2005. Currently home prices are still rising, but the year-over-year change has been falling since late 2012. Could we be in for another dip in home prices later this year?

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

Home prices have still been basically flat since May.

January 2015: $441,500
October 2006: $440,000

Here are this month’s articles from the Seattle Times and P-I:

Seattle Times: Tight house supply pushes prices up in King County
Seattle P-I: Supply of houses for sale in Seattle remains tight

Check back on Monday for the full reporting roundup.

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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.

16 comments:

  1. 1
    Dave0 says:

    Seattle-area home prices peaked during the housing bubble in mid-2007, but the year-over-year change had been falling ever since late 2005. Currently home prices are still rising, but the year-over-year change has been falling since late 2012. Could we be in for another dip in home prices later this year?

    I don’t think so. The peak in July 2007 was preceded by over a year of consistent YoY declining sales and rising inventory showing a decline in demand while supply rose. That’s not the case now. The high number of people underwater on their loans has kept inventory near record lows while sales activity remains healthily above the recession levels.

    People are grabbing up houses as fast as they can; it’s just not the frenzy of 2012 when everybody realized it was a once-in-a-lifetime deal to buy at those prices. The huge YoY gains in median price in 2012 and 2013 was the market buying up good deals that were priced low due to the recession. Now that prices are back to pre-recession levels the frenzy has tapered off leading to a normal market of modest YoY gains.

    As long as inventory stays low I think prices will continue to rise. They will have to before people get above-water on their loans and are able list their homes for sale.

  2. 2
    The Tim says:

    RE: Dave0 @ – You’re probably right. That reminds me, I really need to make the time to put together my “what’s similar, what’s different” post comparing the 2004-2007 bubble with the current frenzied market. I’ll see if I can get that together in the next week or two.

  3. 3

    RE: Dave0 @

    The Home Owners Leaving Seattle I Talk to

    Want to become landlords and keep their Seattle money pit…..when they finally return back. Maintaining a rental is not cheap….ask me, I’m a new landlord. I did it with my daughter’s “ear-marked” college funds and bought the foreclosed home for a paltry $26K cash….still the property taxes are a $1000/yr and insurance is $800/yr….the furnace broke and it cost me $1000 to fix it.

    Imagine the ones borrowing money to be a landlord and the rent stops for a few months.

  4. 4
    whatsmyname says:

    ” Home prices have still been basically flat since May.”
    That’s one way to look at it. Equally true to say that house prices for the month have been higher than they’ve ever been before for 5 consecutive months.

  5. 5
    Mike says:

    RE: softwarengineer @ – $26K? Guessing that’s not in Seattle. I spent more than that on repairs in the last 3 months…

    As an aside, I’m starting to see a new trend in Seattle. Houses that needed A LOT of work and were purchased a less than 2 years ago coming back on the market after current owners threw in the towel.

    There’s a lovely fixer a few blocks from me that was purchased by FTHB’s for $600K last year, now back on the market at the bargain price of $670K with none of the major problems addressed since the last sale. They did put in some shiny new laminate floors however to justify that $70K mark up!

  6. 6
    Jay says:

    RE: softwarengineer @ – Lots of people are borrowing money to have the dream job of becoming a greedy landlord! You don’t know how they can do it, I don’t know how they can do it either!

  7. 7
    Corndogs says:

    …… The high number of people underwater on their loans has kept inventory near record lows while sales activity remains healthily above the recession levels. ……. . They will have to before people get above-water on their loans and are able list their homes for sale.
    RE: Dave0 @

    What is the chain of cause and effect events that relate underwater home owners to low inventory? As underwater homeowners have decreased in number, it appears that inventory is still decreasing, which doesn’t seem to support your claim. Please explain.

  8. 8

    By Corndogs @ :

    What is the chain of cause and effect events that relate underwater home owners to low inventory? As underwater homeowners have decreased in number, it appears that inventory is still decreasing, which doesn’t seem to support your claim. Please explain.

    Sales volumes have been relatively high, and would undoubtedly be higher if there were more inventory. Those are what is driving down the inventory levels.

  9. 9
    Corndogs says:

    RE: Kary L. Krismer @ – Sales volume isn’t saying enough though. What if every buyer also sold 1 house? In that case inventory would stay the same or increase with sales volume because every purchase would be ensured an additional listing for some period of time in-between transactions, so in that case your conclusion is just as erroneous as the last guy. Therefore, your answer is also lacking. Now if you were to say that people are buying multiple houses without selling (investors) or there are more 1st time home buyers, then you would have a meaningful statement. Are you willing to take the next leap of logic? or do you want to try something else?

  10. 10
    Rudolfo says:

    There are likely multiple factors contributing to what we are seeing, which makes it hard to understand and describe.
    There are new residents (increasing buyers who do not sell)
    There are some households underwater (reducing buyers and sellers)
    There are happy-enough and scared households (both not selling, not buying)
    There may be some first-time buyers (increasing buyers who do not sell)
    I’m sure others smarter than I can add more.

  11. 11
    Erik says:

    RE: Corndogs @
    Haha! I have been thinking the same thing. Now that more people have equity, shouldn’t inventory increase?

    I will tell you why inventory is low. When tim was telling everyone that inventory was on the rise, I posted on here that I would say a prayer to keep inventory low. The reason inventory is low is because I said a prayer to keep inventory low. That is a more reasonable explanation than the reasons given on this site.

    You told me years ago not to try and do causation because you can’t. Now you are doing what you told me not to do. Stop it and just let it happen.

  12. 12
    Blurtman says:

    The rapture has begun and you can see who was left behind.

  13. 13

    By Corndogs @ :

    RE: Kary L. Krismer @ – Sales volume isn’t saying enough though. What if every buyer also sold 1 house?

    You can’t really expect one to one buy/sell transactions, although real estate agents love that! On the other side, many sellers don’t buy another house. Maybe they’re moving out of state, for example.

    Rather than sales volume though, I should have said buyer demand. That would have been the better term. There’s been a lot of talk here about shadow inventory, but there was also shadow demand. What I have called here “putting your life on hold” waiting for the market to turn around. When it was finally apparent the market was turning, buyers started coming out of the woodwork in large numbers. That’s what drove down the inventory in 2012. Many first time buyers could have bought in 2007, 2008, 2009, 2010 and 2011, but they were scared about the future of the market and didn’t. Add those people to the people who could first buy in 2012, 2013 and 2014 and you have a lot of demand in those years. And as mentioned above, many who bought in 2005, 2006 and 2007 still cannot sell, so they do not counter that demand (but they also don’t necessarily add to it as a move-up buyer either).

    It’s somewhat similar to how auto dealers know that poor car sales won’t last forever. People can delay a car purchase, but eventually cars wear out and demand improves.

  14. 14
    Deerhawke says:

    Kary, you are absolutely right about the whole idea of shadow demand.

    In early September 2011, I brought out 6 really beautiful view townhouses in Fremont. It didn’t help that there was a lot of ink in the paper about whether Republicans would let the government default or whether the Greek debt would bring down the Eurozone. Anyway they sat and sat. No offers or absurdly low ones. The first week of December we had another 8 units coming on the market on Capitol Hill. I was really worried that we had misjudged the market and were going to have to turn them all into rentals.

    But somehow, everyone went home for Thanksgiving that year and decided to buy. We were sold out on all 14 units (near, at, and in some cases above full price) by Christmas. We even had several back-up offers.

    It is like that moment at a wedding when the band has been playing for an hour and nobody has gotten out on the dance floor– and it seems like nobody ever will. And then one young couple gets out there and in a minute, so is everybody else.

    All of those people who had stayed on the sidelines since late 2007 jumped back in the market as buyers.

    The real question now is when sellers will do the same thing.

    I am in touch with several who feel that unless someone makes an absurdly high offer, they should wait until the market calms down and levels out.

    Anybody who has been paying attention will see that the market has been basically flat since May, but the monthly real estate column in the Seattle paper says that prices are up 8% in KC and 12.5% in Seattle. That is what sellers are paying attention to. Why should homeowners sell now when by summer their place could be worth 6-8% more?

    When buyers read that this year’s prices are only a bit ahead of last year’s prices, they will start fixing their places up and getting them ready to sell. There will be a couple of months of lag time and then we will see a lot of inventory hitting the market, probably all at the same time.

    Rather than bank owned stuff, that is the real shadow inventory we should be talking about.

  15. 15
    Rudolfo says:

    “On the other side, many sellers don’t buy another house. Maybe they’re moving out of state, for example.”

    Another approach to the analysis could be take these cases and quantify them. For instance, there are more buyers moving into the metro area than sellers moving out. This reduces inventory.

  16. 16
    Jonness says:

    In addition to other factors leading to lower inventory, many previously foreclosed home owners are now eligible to buy again.

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