At the beginning of the year, Coldwell Banker Bain CEO Bill Riss predicted that 2002 would see sales tail off as layoffs took their toll. Instead, "I continue to marvel at the strength and depth of the marketplace," he says.
It's a market that just for his firm alone saw four $1 million sales last week. "And three were over $3 million," Riss notes, observing that the dot-gone debacle was supposed to have taken care of that market. It didn't.
The proof of all this good news is in two numbers: the tally of home sales and the mortgage-interest rate.
They're intimately tied, say Scott and Riss.
King, Pierce and Kitsap counties all have posted more sales in the first five months of this year than they did in the same time period last year. Only in Snohomish County have sales dropped, the result, Riss says, of shaky consumer confidence brought on by Boeing layoffs.
However, 2001 saw record sales there, so a decrease doesn't qualify as unvarnished bad news, Scott qualifies.
Another way to measure the market is to look at the number of properties for sale. In those four counties, they're down anywhere from 4 to 7 percent of the first five months of this year compared to the same time period last.
That's an indication that the market isn't flooded with desperate sellers, and the balance between sales and inventory remains healthy.
Low rates continue
"We're now entering our 18th straight month of historically low interest rates," says Scott, "and that's what's built this market."
Nationally, mortgage-interest rates haven't been above 8 percent since September 2000, nor above 7-1/3 since January 2001, according to HSH, a mortgage information provider. That's for 30-year conventional loans.
Most recently, HSH pegged Seattle's average 30-year rate at just under 6-3/4 percent.
Here's what that means for buyers.
Say they can afford a mortgage payment of about $1,400. At 8 percent, that will buy them a $200,000 house (with 10 percent down, for 30 years). Drop the interest rate to 6¾, and they can buy their way into a $225,000 house.
But let's say they find what they like for $200,000. Then their monthly payment drops to $1,232 — saving them about $2,000 a year.
Windermere recently developed a sophisticated index to track local housing-sales activity. It takes into consideration such factors as regional job growth, unemployment, speculative housing demand, plus the supply and cost of homes.
Its conclusion: Despite a recession that's bringing far fewer newcomers to our area, despite a significant drop in new jobs available, the housing market is just slightly off its late 1999 high. And again, the reason is interest rates.
More factors
Yet that isn't the whole story.
Also contributing are the numerous first-time buyer programs whose financial incentives help turn renters into owners. (For more information contact the Community Home Ownership Center at 800-317-2918 or at www.choc-wa.org.)
Another factor is lenders' willingness to be flexible in their lending standards. One of the newest examples is Washington Mutual's Community Advantage home-loan program.
Designed for low- and moderate-income borrowers, it has features normally associated with first-time buyer programs.
"It helps people get into homes that a year or two ago they couldn't get into," notes Beth Castro, a Washington Mutual vice president.
Besides accepting repeat buyers, the program requires just a three-percent down payment, which can come from a gift, a grant, pooled funds — even a loan.
"It's very flexible where those other funds come from, and that's something we didn't do before," Castro says.
FICO credit scores aren't required for those purchasing single-family homes, nor is an extensive credit history. Also under this program buyers can purchase up to four-unit properties (thus giving them rental income to help meet the mortgage). Plus, they can take on a much bigger mortgage payment than usual — up to 45 percent of their gross income.
All this "really helps us extend homeownership to a wider range of customers," Castro says.
With house prices continuing to rise, every little bit counts.
Housing prices fluctuate
According to the most recent statistics from the Northwest Multiple Listing Service, the median price of a single-family King County house is $277,500, up 7 percent from this time last year. The median condo price, however is down some 4 percent, to $169,700. Median means half the properties sell for more, half for less.
In Snohomish County, the percentages are switched, with median house price up 4 percent to $217,250 and the condo median price dropping 7 percent to $144,500.
In Pierce County, the median house price has climbed to $168,500, some 7 percent over this time last year. Condos are down 6 percent to $128,950.
Kitsap's median house price is up 3 percent to $162,675, while its condominium market has seen a 25 percent decline in median price, to $82,450. (However this is based on a small number of sales — just 15 this May and 20 in May 2001.)
Why have condo sales weakened? Some experts say that when a market softens, condominium sales are the first to show the effect. That may be because condos are often purchased by first-time buyers, the group most likely to be buffeted by a downturn in the economy. And while the overall market is still healthy, it's not the frantic market it was two years ago.
That can be seen in the lengthening sales times. Last year 37 days on average were needed to sell a single-family house in King County. Now 45 days is more like it. And it takes just under two months to find a condo buyer — or six days more than this time last year.
That's led to concern for folks like Immunex employee Michele Lieuallen. She put her three-bedroom Redmond house on the market in late April, has dropped the price $10,000 to $269,000 and is still awaiting a buyer.
Her house is a five-minute bike ride to Microsoft, has new insulated windows, a remodeled kitchen, hardwood floors and a mountain view. The drawbacks: a one-car garage and no master bath.
Lieuallen initially expected it would sell within two weeks. "I just felt that magic buzz," she recalls. "I'd walk around the neighborhood and feel, yes, this house is good; it's clean and well landscaped. A lot of people have walked through and liked it.
"But there's also enough surplus within the price range we're in so it's a little more competitive. People (buyers) aren't in that state of urgency. They're taking their time to come back and look a second or third time."
Lieuallen is correct about that.
"It's a very normal market; it's not overheated at all," observes Coldwell Banker Bain's Riss. "On the Eastside I haven't heard of that many multiple offers on houses. But in Seattle, it's happening as much as a third of the time, depending on the neighborhood and especially on housing under $500,000."
Sara Hoppin, a veteran Gerrard Beattie & Knapp agent, has also noticed in-city Seattle buyers taking their time.
"It isn't all, 'We'll jump in there and throw a bunch of cash because there are so many people behind you that you dare not negotiate,' " Hoppin says. "Buyers are more cautious."
High-end homes selling
If there's one segment that's surprisingly strong considering the softer economy, it's $1 million homes.
Riss says that last fall he watched more than one buyer walk away from a "rather large earnest-money deposit," rather than commit to a big-bucks purchase in an uncertain economy.
The turnaround in this market began ahead of schedule, notes Lennox Scott. "In the fall, we predicted we'd see good activity in the upper price ranges in the summer. Actually, we saw it begin two months ago."
According to the Northwest Multiple Listing Service, over the last six months 168 single-family King County homes have sold for $1 million or more, up from 142 during the same time period a year ago. That's an 18 percent increase.
So what will the remainder of the year bring?
Brian Fairchild, branch manager of Windermere's Mount Baker office, thinks that barring any unexpected events, it should continue to be good.
Not only are interest rates very low, but many people "have seen that their jobs are stable, and people are buying if they see their jobs are stable," Fairchild says. As a result, "things are holding up very nicely." |
