PENDING HOMES SALES ON THE RISE IN THE SOUTH SOUND
Evidence of spring is all around us – from the bright blooms to the cheery faces of people getting outdoors on these beautiful sunny days. Along with the flowers and trees, the South Sound real estate market is perking up as well. Pending sales are at multi-year highs, active inventory is at a six-year low, and prices have stabilized over the past eight months.
Last quarter we reported seeing a more balanced mix of homebuyers in the market. This in turn has led to an overall increase in buyers. First-time buyers made up 50% of the market in 2010. Last year, that number fell to 37%. The absolute number of first time buyers did not drop, just the percentage of the total. This means a greater number of repeat buyers (both trade-up and trade-down buyers) are entering the market. Regular readers of our newsletter know that we have been watching demand build over the past few years as people delayed desired moves. That demand is now being slowly unleashed.
Through the first quarter pending home sales are up a robust 12.4%. Pending sales haven’t been this strong, without artificial stimulus, since 2007. In 2010, we saw a great deal of first quarter activity as people rushed to take advantage of the federal tax credits offered to first time buyers. Later that year, when sales had an unprecedented drop in the second and third quarters, we learned that the tax credits, which expired in April of 2010, simply pulled spring and summer sales into the first quarter. This year appears different. With more types of buyers in the market, demand and confidence is higher all around. Without the tax credit stimulus, the market appears to be standing on its own.
Another sign of growing health in the market is the number of homes for sale. We have to look all the way back to February of 2006 to find supply this low. With 1,248 homes currently on the market, the standing inventory is now just half of what it was when the market started to drop.
These low levels of inventory are actually creating a need for good homes to sell. We are once again seeing multiple offers on the best priced homes, and the average time on the market is quite low. These competitive situations aren’t just happening at the lowest price ranges; nearly all price ranges are experiencing this activity. Short sales and bank-owned properties continue to account for one quarter of the homes for sale. These types of homes were non-existent back in 2006. Absent these distressed properties, current inventory is well below 1,000 homes.
As a result of these conditions, people who had planned to postpone a sale are getting into the market now. The amount of trade-up and trade-down buyers looking to sell and take advantage of the prices on the next home is at multi-year high.
With this supply and demand picture it is not surprising to see that prices have stabilized. The market’s average sales price has held steady since August of last year. Besides the market-wide data, we see some encouraging anecdotal evidence of this as well. Quite a number of homes that failed to sell a year ago have sold this year without further price adjustment. To be sure, many homes on the market are still overpriced, but after years of declining prices, it is promising to see a real pattern of stabilization take hold.
Heading into the busy summer selling season, we anticipate that the market will continue this better balanced (and healthier) trend. We have not seen balance like this in more than a decade.
DID YOU KNOW?
- In a recent Gallup poll, 62% of respondents say they own a home. This is down from 68% in 2011.
- Locally, the homeownership rate is 67% according to the Thurston Regional Planning Council.
- 70% of people surveyed by Gallup said it is a good time to buy.
- The amount of people who purchased a home due to affordability conditions has tripled in the last three years, according to the most recent survey of homebuyers by the National Association of Realtors.
