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Originally published May 6, 2014 at 2:38 PM | Page modified May 7, 2014 at 7:03 PM

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No thaw in home inventory despite April’s rising prices

Home sales have tumbled more than 20 percent for two consecutive quarters as the supply of home listings in King County drifts toward the record low set in March 2013.


Seattle Times business reporter

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Home owners spend the better part of the last 8 years underwater on their home. They're just now starting to get in... MORE
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The median price of single-family homes in King County climbed in April to $430,500, an increase of 7.6 percent from a year ago, the Northwest Multiple Listing Service said Tuesday.

Snohomish County’s median price rose 8.5 percent to $320,000; prices cooled in Pierce County to a median $220,000, with essentially no growth over the year, according to the MLS.

Sales slowed again in April, which real-estate brokers blamed on a stubbornly tight inventory of homes and sluggish new-home construction.

“A lot of potential sellers who would like to move up are reluctant to list due to uncertainty that there will be something on the market they would want or be able to purchase,” said Diedre Haines, Coldwell Banker Bain’s regional managing broker for Snohomish County.

Home sales have tumbled more than 20 percent for two consecutive quarters as the supply of home listings in King County drifts toward the record low set in March 2013.

Many real-estate experts had expected rising prices and a sharp decline in the number of underwater home­owners — those who owe more than their home’s market value — to translate into a burst of new listings this year, but so far it hasn’t.

“That’s been a disappointment,” said Casey Bui, managing broker at Rockwell Realty, which has offices in Seattle and Kirkland. “I had hoped there would be a big push. If your home is in decent condition and in a decent location, you’ll get top dollar.”

Contributing to the scarcity of homes for sale are several factors, experts say.

At the end of last year, 15 percent of mortgaged homes were still underwater in King County and 23 percent in Snohomish County, according to Seattle-based Zillow, the online real-estate marketplace.

Another source of inventory unlikely to come back to the market anytime soon: homes whose owners bought or refinanced between 2011 and 2013, when mortgage interest rates were below 4.25 percent. If those homeowners sold and bought a similar home, their mortgage payment would be 29 percent higher because of rising rates and prices, according to Seattle-based Redfin, an online real-estate brokerage.

Meanwhile, investors own just over 2 percent of homes in the Seattle metro area, Redfin reports, and another 12 percent of homes that aren’t underwater were bought or refinanced within the past seven years.

Put those together and some 58 percent of homes in the Seattle metro area are unlikely to be listed for sale this year, Redfin says.

Move-up buyers are financially ready to sell, but their fear of not finding a new home is affecting the broader market, said Tommy Unger, a real-estate data analyst at Redfin.

“It’s leading to more stagnancy and tighter inventory in Seattle than you might get in other metropolitan areas,” he said.

Move-up dilemma

Consider the Lewis family: A year ago, they put their Kent house on the market — and it sold in three days for $256,000, giving the family until July 1 to move out, said Greg Lewis, 41.

Their Redfin agent showed them bigger houses in Maple Valley that could accommodate Lewis’ son and daughter and were in a school district the parents liked — but every time they spotted a potential house, it was gone before they could act.

“We didn’t have a chance to blink,” Lewis recalled. “Houses were going so quickly.”

With the moving deadline upon them, the family had to live with Lewis’ parents for three months.

Dinnertime was difficult, he said, because the children — toddlers at the time — lacked table manners and occasionally flung their food.

“It made for some uncomfortable nights,” he said.

Eventually the family found the home they live in now, Lewis said. They managed to snag it because the seller didn’t have a for-sale sign in the front yard and the photos online were of poor quality.

A new bubble?

Rockwell Realty’s Bui said the inventory is so tight in some areas that he’s seen houses sell for $100,000 over their list price in close-in Seattle neighborhoods like Capitol Hill and Madison Valley. Brokers are supposed to list property at fair-market value, he said, so it’s hard to see how lenders would approve financing deals so far above list price.

“Just on the face of it,” he said, “it makes you think, ‘Bubble.’ ”

It’s true that this first quarter’s double-digit annual price gains were way above historical norms, said Dick Conway, co-publisher of The Puget Sound Economic Forecaster, which analyzes data on King, Snohomish, Pierce and Kitsap counties.

From 1970 to 2003, the region’s home prices grew by an average 8.1 percent annually, or 3 percentage points above general inflation, he said. But overall in the decade from 2003 to 2013, home prices rose only 2.9 percent annually, barely above inflation, because the decline in prices after the bubble burst was so deep.

“The recession had a huge impact on housing prices — it knocked them well below trend,” Conway said. “One possible implication of that is the run-up in prices we’re seeing now is simply getting back to trend.”

But others say a pro-homeownership government policy — namely, lower underwriting standards by the Federal Housing Administration and the Fed’s prolonged easing of interest rates — is inflating home prices once again at a rate that’s unsustainable. That’s the contention of Edward Pinto, Fannie Mae’s former chief credit officer until the late 1980s, and Stephen Oliner, a senior fellow at UCLA’s Ziman Center for Real Estate.

Fully half of recent home purchases nationally backed by federal guarantees had a down payment of 5 percent or less, Pinto and Oliner say. And in nearly half, borrowers’ monthly payments on their mortgage and other debt exceeded 38 percent of their pretax income, the historical threshold for an acceptable household burden.

“Such borrowers could find it difficult to make their monthly payments if they came under even moderate economic stress such as a temporary layoff or a reduction in work hours,” Pinto and Oliner wrote in a newsletter published last month by the Ziman Center.

Glenn Crellin, associate director for research at the University of Washington’s Runstad Center for Real Estate Studies, said he was pleased to see that April’s annual price appreciation in King County was in the single-digit range.

“I think it needs to come back down a bit more to be a balanced healthy market,” he said.

The countywide increases in median price mask large differences in appreciation in different areas.

On the Eastside, King County’s most expensive submarket, the median home price was $618,000, up 11 percent annually. The median price in Seattle, the second most expensive submarket, rose 6 percent to $479,000.

Southwest King County, the most affordable submarket, saw median price increase 7 percent to $247,460.

The biggest annual change was in North King County, where the median price jumped 19 percent to $392,500.

Meanwhile, condominium prices showed wildly different gains across the region — up 8.7 percent to $250,100 in King County, up 28 percent to $206,000 in Snohomish County and down 28 percent to $115,500 in Pierce County.

Sanjay Bhatt: 206-464-3103 or sbhatt@seattletimes.com



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