June Reporting Roundup: “The balloon is growing”

It’s time once again for the 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 kick things off, here’s an excerpt from the NWMLS press release:

“First time buyers are returning to the market, but cautiously and with more knowledge based on market values and trends,” said George Moorhead, designated broker and owner at Bentley Properties in Bothell.

“Educated buyers today are no longer just dipping their toes in the water. They are diving right in,” reported Mike Gain, CEO and president of Berkshire Hathaway HomeServices Northwest Real Estate. Gain, a past chairman of the Northwest MLS board, said in his 38 years in the industry he’s experienced “good years, bad years and everything in between,” but he’s never seen a market as complex as the current one. “It’s been challenging for everyone involved in a real estate transaction, whether buyer, seller or agent.”

Gain and many of his colleagues bemoan the lack of listings. “The only real problem we are experiencing today is the lack of inventory,” he said.

“Kitsap house sales are hotter than a firecracker,” observed MLS director Frank Wilson, the branch managing broker and Kitsap district manager at John L. Scott Inc. in Poulsbo. “Despite heat, vacations and holidays the market has not slowed. We continue to see good open house traffic, low market times and multiple offer situations,” he stated.

Multiple offers are common throughout the Central Puget Sound region.

“We see many multiple offers on properties,” reported Dick Beeson, principal managing broker at RE/MAX Professionals in Tacoma, who described sales activity as “phenomenal.” For first-time buyers, the competitive bidding can be daunting, which he suggested underscores the importance of relying on experienced brokers. Anxious buyers have a sense of urgency as prices rise, he noted. “They need a great real estate broker to help guide them through multiple offer situations,” added Beeson, a member of the Northwest MLS board of directors.

Rising prices are prompting some house-hunters to broaden their search beyond primary job centers.

“More and more buyers are starting to chase the market northward as prices increase in King County, especially around Seattle,” said Diedre Haines, principal managing broker-South Snohomish County at Coldwell Banker Bain in Lynwood. [sic]

Happy days are here again for used home salespeople. You can feel their excitement oozing through the press release with phrases like “hotter than a firecracker” and “diving right in.”

It’s great times for everyone… except the people out there actually trying to buy a home.

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

Seattle Times

Sanjay Bhatt: Median price for single-family homes hits $500,000 in King County

But real-estate experts say this market is different in a number of ways. Buyers now must leap over many more hurdles to qualify for a mortgage. Hiring at technology firms has expanded the region’s economic base. And a drought in listings that surfaced in 2013 has no end in sight.

“I wouldn’t say we’re in a bubble,” said Alan Pope, a real-estate appraiser in Redmond. “I would say the balloon is growing, and I can’t tell when it’s going to stop.”

Lennox Scott, CEO of John L. Scott Real Estate, said that over the long term, homes in the region appreciate 4 percent annually. Home prices lost so much ground during the past recession that the market today is just slightly above where it should be by that measure, he said.

Home salespeople declare current frenzy market not a bubble. Film at eleven.

KIRO 7

Deborah Horne: Median single-family home in King County reaches $500,000

waiting several years for the right moment.
Within a week, they sold it for $529,000, nearly four times what they paid for it 22 years ago.

“It’s amazing. I could not afford to come back here and buy into this house,” said Meyer, who is retiring to Bellingham.

He said they wondered if they should wait another year, but thought interest rates might climb up by then.

“We thought you know, let’s get out of here. Let’s get going while the going’s good,” Meyer said.

Smart move. Now is a pretty terrible time to buy, but it’s a great time to sell.

KING 5

Travis Pittman: Average price of King County home rises to $500,000 in June

The median price for a single-family home in King County was $500,000 in June, up more than 10 percent from the same month a year ago.

Not much content in the KING 5 story, but they lose points for using average in the headline, even though they correctly cite $500,000 as the median in the text.

Puget Sound Business Journal

Marc Stiles: More buyers compete for fewer houses: Experts say this could go on for years

Typically home-buying activity falls off during the summer months, but not this year in the metro Puget Sound region, where buyers are competing to buy fewer homes while paying significantly higher prices.

Real estate brokers say first-time buyers are fueling the market as tenants grow tired of paying ever-rising apartment rents. In addition, more people are moving to the region to fill a growing number of jobs. Across the state, non-farm employment rose by 7,700 positions from April to May, according to early estimates from the federal Bureau of Labor Statistics.

The Puget Sound Business Journal is relatively light on any commentary beyond the press release as well.

Tacoma News Tribune / The Olympian

Rolf Boone:

The South Sound housing market in June had just about everything an owner would ever want if they needed to sell.

But here’s the catch: Can anyone actually find a house to purchase?

That might be the question on the minds of many buyers, because even though the South Sound housing market continues to sizzle like the weather, inventory got a little tighter last month.

Homes for sale are scarce across the entire Puget Sound region.

(Sanjay Bhatt, Seattle Times, 07.07.2015)
(Deborah Horne, KIRO 7, 07.07.2015)
(Travis Pittman, KING 5, 07.07.2015)
(Marc Stiles, Puget Sound Business Journal, 07.07.2015)
(Rolf Boone, The Olympian, 07.06.2015)

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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.

24 comments:

  1. 1
    sleepless says:

    Will the recent stock market “blood bath” affect the housing markets? Will the FED remain patient in September or finally raises the rates?

  2. 2
    redmondjp says:

    By sleepless @ 1:

    Will the recent stock market “blood bath” affect the housing markets? Will the FED remain patient in September or finally raises the rates?

    This may be showing my age, but to paraphrase the ending of the Batman TV show episodes: “Tune in tomorrow – same bubble-time, same bubble-website!”

    Personally, I’m getting pretty nervous about the whole global bubble as of late. The stock market trading ‘glitch’ today was just a little too conveniently-timed as well.

  3. 3

    In defense of KING, the median is an average, as is the mean and mode. Average used by itself is ambiguous, although most commonly would be the mean average.

    https://www.purplemath.com/modules/meanmode.htm

    But if anyone was confused, they probably either panicked or were overjoyed because a $500,000 mean would be low. The reported mean was over $600,000.

  4. 4
    Bob says:

    The Seattle market may cool now that Chinese buyers are losing their shirts in the stock market.

  5. 5

    By Bob @ 4:

    The Seattle market may cool now that Chinese buyers are losing their shirts in the stock market.

    Or that might cause it to heat up. The money for the net sales of Chinese stock has to go somewhere. I suspect it’s helping other financial markets. Probably a stretch to think it has much impact on real estate here either direction.

  6. 6
    Future Seller says:

    When median equals the mean you have a normally distributed data set. They are not the same statistic. Median is the middle ranked number in a set. Mode is most frequent number in the set. Mean as all probably know is the sum of all in numbers in the set divided by N. Statistical terminology is quite specific and is often misused. As an aside, I am near term seller and I look forward to current home sales market conditions. Onward and upward from here it appears for home valuations. The fundamental supply issue is not going away any time soon. Work in SLU and rumor is that Amazon is going to be hiring for awhile.

  7. 7

    From article: “It’s great times for everyone… except the people out there actually trying to buy a home.”

    It’s also not fun for the agents trying to find buyers a home, particularly if the buyer is looking in a market with multiple offers. And for the alternative brokerage models focused on buyers, it’s a disaster! For those representing sellers who like a challenge, they might even be bored. And for both buyer’s and seller’s agents, they have to deal with the incompetent agents and lenders coming back in the market. That leads to nothing but frustration.

    What was the phrase here a couple of years ago: Something like the bottom isn’t as fun as we thought it would be? I think a lot of agents would say the same thing about the recovery. This market still isn’t healthy, so it’s just a different set of challenges.

  8. 8

    “It’s great times for everyone… except the people out there actually trying to buy a home.”
    The official line on the part of the real estate industry is that they’re always doing just swell.
    But, if the number of listings is at historic lows, and the number of listing agents is the same, they can’t all be doing well. As far as buyer’s agents, when a lot of properties for sale are seeing multiple offers, they can’t all be doing well either.

  9. 9

    RE: Ira Sacharoff @ 8 – I don’t think the overall number of transactions is all that bad. Real estate firms are doing fairly well. But for a buyer’s agent if you look at a house and then it goes pending, or it gets multiple offers, that can result in needing to exert a lot more effort to get to mutual acceptance on any property. And for the incompetent buyer’s agent they never will likely get to mutual acceptance. But for the competent agents it is more work than normal–and that is not something to be excited about.

    Several years ago I had a buyer’s agent prepare an offer that was so poorly drafted I had to re-draft the Purchase and Sale Agreement from scratch, and present it as an offer from the seller to sell to the buyer. My seller was that desperate! In this market a listing agent would never have to do that because another offer would come in, and that same buyer’s agent would likely never get an offer accepted.

  10. 10
    Macro Investor says:

    By redmondjp @ 2:

    Personally, I’m getting pretty nervous about the whole global bubble as of late. The stock market trading ‘glitch’ today was just a little too conveniently-timed as well.

    There’s plenty to be wary of these days, but the trading glitch isn’t one of them. It was the NYSE, not the stock market. The NYSE only has a tiny market share now, unlike decades ago when they were the whole enchilada.

    There are many electronic exchanges now. I doubt anybody wanting to trade was seriously inconvenienced. Arca has been around since 2000 or so. It automatically routes your trade to which ever exchange has the best price. Most brokers have software that does the same.

    This is why I love stock investing and have avoided real estate investing. If I want to take profit or cut losses, it is a mouse click away. Find your next “gem” as Ray likes to say and move on. For real estate you don’t have that luxury. It can take months to complete a transaction, and waiting for buyers in a falling market can kill you financially. No thanks.

  11. 11
    Shoeguy says:

    By Kary L. Krismer @ 5:

    By Bob @ 4:

    The Seattle market may cool now that Chinese buyers are losing their shirts in the stock market.

    Or that might cause it to heat up. The money for the net sales of Chinese stock has to go somewhere. I suspect it’s helping other financial markets. Probably a stretch to think it has much impact on real estate here either direction.

    When the Chinese economy finally implodes and those Chinese investors lose their shirts, they’re going to seek liquidity wherever they can get it, and they’ll find it in their parked US real estate assets. When they start to sell, it’ll be interesting to see what kind of an impact that has on prices over all, as price increases and decreases in the housing market tend to spread via the Multiplier Effect.

  12. 12
    redmondjp says:

    By Shoeguy @ 11:

    By Kary L. Krismer @ 5:

    By Bob @ 4:

    The Seattle market may cool now that Chinese buyers are losing their shirts in the stock market.

    Or that might cause it to heat up. The money for the net sales of Chinese stock has to go somewhere. I suspect it’s helping other financial markets. Probably a stretch to think it has much impact on real estate here either direction.

    When the Chinese economy finally implodes and those Chinese investors lose their shirts, they’re going to seek liquidity wherever they can get it, and they’ll find it in their parked US real estate assets. When they start to sell, it’ll be interesting to see what kind of an impact that has on prices over all, as price increases and decreases in the housing market tend to spread via the Multiplier Effect.

    What makes you think that these so-called investors will be selling? They have so much cash that they literally don’t even know what to do with it, so they are putting it into assets that they think are safe and outside their border, like west coast real estate. That massive trade surplus with us all has to go somewhere!

    My personal opinion is that a vast majority of these buyers will NOT sell if the market turns, even if they lose half of their investment. For them, it’s about asset preservation, not about maximizing returns. So keeping half of something is better than losing it all (like they might if they kept their cash in-country). And if they did sell, what would they put the funds into instead of housing?

  13. 13
    Rudolfo says:

    RE: redmondjp @ 12

    Bingo!

  14. 14
    Saffy The Pook says:

    Buying property overseas is not for the faint of heart, I doubt a significant fraction of the Chinese investor population is participating. Also, the Chinese stock market is still up hugely over the last year so I doubt the recent correction has soured market participants on continued participation once things stabilize. Finally, any Chinese investor with enough money to buy Seattle property is probably sophisticated enough to recognize the liquidity difference between money in the stock market and money in real estate. Trading liquid investment for illiquid is not typically done lightly.

  15. 15

    RE: Saffy The Pook @ 14 – With the kind of wealth we’re talking about they probably don’t care that much about liquid or not for the size of the expenditures we’re talking about.

  16. 16

    I don’t know why anyone would expect decent reporting of anything when “news” like this gets reported.

    http://www.komonews.com/news/local/Broken-elevator-makes-life-tough-for-elderly-Olympia-residents-312711921.html

  17. 17
    David B. says:

    RE: Future Seller @ 6 – “When median equals the mean you have a normally distributed data set.”

    Which is seldom the case when dealing with statistics about monetary amounts. Things like prices and incomes are almost never negative, yet on the high end the sky’s the limit. Medians tend to be the best measure of central tendency because means tend to be skewed upwards by a tiny number of high-end outliers.

  18. 18
    jon says:

    The Chinese stock market is built on borrowed money. It doesn’t matter if the investors would prefer to keep their nice American houses. When their family is jailed until they cover their margin call, they will sell their American houses no matter what.

    http://www.ft.com/intl/cms/s/0/40d768dc-25e1-11e5-bd83-71cb60e8f08c.html#axzz3fPhH7hHy

  19. 19
    Carl says:

    Interesting (and very complimentary) article on Seattle housing.

    http://www.wsj.com/articles/seattles-luxury-homes-get-a-tech-boom-boost-1436449162

  20. 20
    herrbrahms says:

    RE: Kary L. Krismer @ 5 – I’m with Kary on this one. Displaced Chinese capital has been flooding the Nikkei, with the result of strengthening the JPY, which is about the last thing that Japan needs, being a heavy exporter.

    Expect to see more displaced Chinese capital at an open house near you.

  21. 21
    ESS says:

    Lets hear it for the sellers – at least the longer term holders are making money, and many of them are pumping the profits back into real estate. I remember on this very site not so many years ago in the comments section, many were lambasted and ridiculed as fools for even thinking about buying real estate. Those of us who are long term home owners and rental property owners knew better, because we have seen all of this before. It is like everything else in life – there are risks and rewards for all activities, and real estate has to be evaluated with all other investments and activities in life. Sometimes investments make sense – sometimes they don’t. Perhaps rents will never go up – perhaps they will skyrocket.
    As to the Chinese – Seattle isn’t even a major market for Chinese real estate investment. NYC, Vancouver, BC and the California cities are bigger markets for Chinese money. And the amounts to those NYC condos and coops makes the amount of money spent on Seattle real estate look like small change.

  22. 22

    RE: ESS @ 21 – There are areas where people bought at the prior peak and would still make money after accounting for closing costs. Remember, not all the areas and types of houses have recovered fully, so that means some have recovered more than fully.

  23. 23
    Chandler says:

    RE: Bob @ 4 – By Bob @ 4:

    The Seattle market may cool now that Chinese buyers are losing their shirts in the stock market.

    Comparing to the “I can’t believe it is still growing” Chinese real estate bubble, the recent burst of stock market is merely tip of the iceberg. Plus, It is more likely that those who are buying houses in US are the owner of a listed company who just sold their shares while it is clearly trading above its worth. People who are really losing money in the Chinese stock market is most likely to be those mom and pop investors who don’t even know what P/E ratio means. And those people are NOT the cash buyers in the housing market because they simply don’t have the capital.

  24. 24
    Chandler says:

    RE: jon @ 18
    The Chinese super rich knows better. Chinese stock market is immature. It is a game rather than investment.

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