The headlines are mostly positive – More Housing Supply Is Imminent.
We have covered over and over the scarcity of homes available for sale. It’s particularly true among homes priced at or below $500,000 in King County, where only 737 of those properties sold in August (36% fewer than in August 2019).
The good news comes from major national builders who have shared their forecasts for growth in the coming years. They informed shareholders of a 23% year-on-year increase of land purchases and about a 30% boost in single-family permits across the U.S. in the last 12 months.
Toll Brothers is among those big-time builders. It is developing several single-family and multifamily communities in King and Snohomish counties. The company forecasts an 8% YoY increase in new communities for 2021 across the U.S. and another 10% boost in 2022.
Others – Meritage Homes (+20% YoY in 2021) and Tri Point Homes (+15-30% YoY in 2022) – expect tremendous growth of new communities. And many of the new projects are larger than in years past.
Builders began construction on just under a million single-family homes in 2020. That’s the most since 2007.
Yes, more homes are coming to a neighborhood near you. While that’s promising, it’s still far short of how many would need to be built to ease the shortfall, plus there is no promise the properties will be appropriately priced for many of us to purchase.
“In the wake of a decade of underbuilding, we are still short several million homes for sale,” said George Ratiu, Senior Economist with realtor.com. “With Millennials broadly embracing homeownership as many move further into the third decade of life, the outlook for new home demand remains bright, which could give builders the confidence to pick up the pace.”
LIFESTYLE CHANGE
“Family friendliness” remains a prime focus for developers of master-planned communities, but a new survey indicates health & wellness amenities are becoming increasingly important.
The New Homes Trends Institute at John Burns Real Estate Consulting reported the once-prolific “resort lifestyle” is being unseated as the second-most important focal point.
Researchers from the Institute reported 76% of homeowners who were surveyed said they are taking more steps to promote their physical health compared to last year. For developers, the Burns consultants say this shift is “creating a surging emphasis on connection to nature, fitness, sustainability and local food sources.”
Forward-thinking developers will go beyond trails and lap pools, “which have become ordinary,” suggests the experts from Burns. The Institute outlined four ways innovative builders could accommodate the emerging buyer wants:
Immersion into nature. Successful master plans are offering outdoor adventures that bring wilderness to suburbia. Among examples, they cite the “Fish Camp Dock” in Manvel, Texas; a stargazing amphitheater in Dripping Springs, Texas; and, “The Campout” in San Juan Capistrano, Calif. These amenities are now available to owner-residents within certain communities.
Healthcare integration. Telehealth was growing pre-pandemic in response to consumer demand for convenient health services. The Trends report showcased Lake Nona in Orlando for making a healthy lifestyle easy, “with purposeful integration of collaborative health care, research and academic establishments into the community.”
Connection and community. Nearly seven of 10 homeowners told researchers they are taking more steps to promote their mental health when compared to last year. To address loneliness — a contributing factor to poor mental health — developers are creating welcome centers that support interaction between current and future residents (akin to a coffee shop) and plenty of “connection nodes” to promote frequent, informal gatherings.
Reinvestments in sustainable healthy food sources. Homeowners are shunning processed foods in favor of natural and locally sourced products. Amenities that support a healthy diet, like community crop-share programs and farm-to-table dining options, will fare well, according to experts from the Oregon-based Burns consultancy. A five-acre “agrihood” called Arden’s Community Farm and Barn in south Florida provides residents with organically grown produce, herbs and flowers year-round.
IOU IN THE FORM OF AN RSU
One of the hottest search phrases on Google today is, “When is the housing market going to crash?”
Not “Will the housing market crash?” but “When.”
And the answer is, It’s not going to crash. There are no signs of a real estate crisis, particularly in the Puget Sound region, where prices keep rising – up about 20% the past year and 68% in Seattle alone since 2016, by one measure – amid a dearth of inventory and surge of buyers. (See the August housing report further below, if you dare!)
As prices rise, some people need more time to save for a down payment. That’s fair. But consider this: Every year spent saving, the median price on a home will climb at a rate that is likely greater than a person’s income, further widening the affordability gap on a dream home.
We shared in a previous newsletter the many factors driving our buoyant housing market – and there is no end in sight to home appreciation.
If you have access to emergency funds – a 401(k), pension, gift money from friends or family, or restricted stock units (RSUs) for some tech employees – consider using them toward a new home purchase.
Some mortgage companies are helping RSU holders to include this potential future income in the formula to determine a buyer’s credit worthiness. The minimum requirements are, generally:
- Primary residence only
- 30-year fixed product only
- RSU income is limited to 50% of total qualifying income
If you are looking to work with a real estate professional with connections to those lenders, please give me a call.
SMILE FOR THE CAMERA
Here’s a negotiating tactic that you may not have thought of: Sellers who “spy” on buyers when they are visiting the home. This is one of the most popular topics on my blog.
About three in every 10 sellers say they have used a camera on the property during an open house or showing at their home, according to a study of more than 2,000 consumers from LendingTree.
Those surveyed said they wanted to listen in on what buyers do and don’t like about the homes. Thirty-six percent of the group that uses surveillance acknowledged the information gleaned from the buyer conversations could be used when negotiating a deal.
The most common devices used to listen in are doorbell and security cameras. Baby monitors and nanny cams were less common.
BY THE NUMBERS
>> Buyers secured 3.8 million mortgages in Q2, a 3% drop from Q1, marking the first time since early 2020 that the total number of home mortgages decreased. Most notably, it’s the first time mortgages declined from Q1 to Q2 since 2011, according to ATTOM Data Solutions. The rare drop-off came as a decrease in refinance activity canceled out a rise in home-purchase and home-equity lending.
>> A Bankrate.com survey found that only 19% of homeowners who had mortgages before the pandemic have refinanced, despite interest rates plunging. A lack of knowledge regarding the potential savings was cited as the most common reason. Further, 38% of mortgage holders do not even know their current interest rate, and almost half (47%) have not considered refinancing despite many would likely benefit. After plummeting to less than 3.0% near the beginning of this year, the 30-year fixed interest rate slowly bounced back and peaked at 3.34% in March before dropping again to about 2.9%, according to Freddie Mac on Sept. 2. (Rates also vary based on personal circumstances.)
>> Research shows 17% of American adults are considering a home purchase within the next year, including 64% who are planning their first purchase. The same 17% of adults living in the West are planning to buy over the next 12 months, according to the Housing Trends Report.
>> Idaho leads the country with the state’s highest home-price appreciation from last year. It’s average sales price gained 37% YoY, with Boise leading all U.S. cities with an annual rise of 41%, according to a federal housing survey issued in late August. Seattle-Bellevue was ranked 25th among U.S. cities, with an annual price gain of 20%. The U.S. averaged a 17% home-price rise from Q2 of 2020 to Q2 of 2021 and prices have risen nationally each quarter since Q3 of 2011.
>> The pandemic seriously affected U.S. real estate sales from international buyers. New data show this subset of buyers accounted for 2.8% of the $5.8T in existing-home sales April 2020-March 2021. The 107,000 property purchases by foreign buyers were down 31% year-on-year. The dollar and sales volumes were the lowest for the international segment since 2011.
>> A full 34% of all mortgaged U.S. homes were deemed “equity rich” in a Q2 survey conducted by ATTOM. That’s up from 31% the previous quarter and is the largest quarterly jump in two years. Seven of the top eight states with the highest levels of equity-rich properties were in the West, led by Idaho (54% of all mortgaged homes), California (54%) and Washington (49%). Equity rich is a property with a loan-to-value ratio of 50% or less, meaning the owner has at least 50% equity.
>> Washingtonians have some of the lowest energy costs in the U.S., according to a WalletHub survey. Our state is second behind the District of Columbia for most-affordable energy bills, paying $262 a month on average for electric, gas and heating oil combined. The U.S. median figure is $320/month.
>> Recent data from the National Association of Realtors® show buyers put down an average 12% of the purchase price on a home. The youngest group of buyers, age 22-30, but down only half that amount while buyers 66-74 put down the most, 23% of the agreed price.
>> The National Association of Home Builders/Wells Fargo Housing Market index declined five points to a reading of 75 in August, its lowest level since July 2020. Economists polled by Reuters had expected the index to remain unchanged. A reading above 50 means more builders view market conditions as favorable than poor. The index hit an all-time high of 90 in November 2020. The NAHB survey’s measure of single-family home sales expectations in the next six months held steady at a reading of 81 in August.
SEPTEMBER HOUSING UPDATE
Just when signs were looking up for an increase in new listings and more inventory, the tap was moved back to near shut. The steady stream turned to a trickle, as the number of new and end-of-August active listings declined in the double-digits from just one month earlier.
What happened? Real estate insiders shrugged and assumed people took a break from house-selling to enjoy the warm temperatures and travel (and you can’t blame them!).
August gave us 15% fewer new listings across all home types in King County from July, including 20% fewer in Seattle and 12% fewer on the Eastside. Active listings as of Sept. 1 were off 15% from Aug. 1 in both Seattle and the county overall and down 18% on the Eastside. The figures were about 44% off this time last year when the housing market was late to rev up for the year following the pandemic closures in the spring.
The August housing data was mostly consistent any way your sliced it. New single-family home listings were off 13% in King from month-to-month and down 17% for active listings at the start of September. New condo listings were down about 20% across Seattle, the Eastside and in the county overall, while active listings were down 13% from Aug. 1.
The declines are extraordinary for one month, even when counting the seasonal slowdown for people to enjoy the summer. The drop off is, in my view, a sign of a significant slowdown in available inventory until the new year.
A drying up of listings sent inventory figures lower. Overall, the county has 0.6 month’s of inventory for all home types (condo, townhome and single-family home), down from 0.7 the previous month and half of the inventory from this time last year (1.2). Single-family home inventory in King stood at 0.5 months, down from 0.6 in July, and condo inventories were 1.0, from 1.1 the previous month.
The cupboard was nearly bare on the Eastside, where inventories were at 0.4 months for all home types, 0.3 for single-family homes and 0.6 for condos – all slightly lower than at the end of July.
Despite the housing shortage, median home prices fell a smidge from July in most parts of King, where the county saw a 2.2% drop-off for all home types to $771,750, and down 2.4% for single-family home prices to $850,000. Seattle single-family homes were at a median $875,000, off 2.4% from July, and condo prices were down 2.5% to $480,000 in the city. Over the past 12 months, prices gained 14% across King County for all home types, rose 4.3% in Seattle and added a whopping 21% on the Eastside.
August did, however, see a big push in Pending sales. Just more than 4,000 homes went under contract last month across all home types in King, a 4.3% increase from July but down 8.9% year-on-year. That will translate into a nice increase in closed sales in September – likely the end of the busy housing period for 2021.
The Puget Sound region is on a pace to record the fifth most-active sales year since the start of the century. A rip-roaring start to 2021 – with uber-frenzy sales and skyrocketing prices – is cooling slightly and showing signs of a return to norms last seen in 2018 and 2019 when buyers and sellers perhaps focused more on school, work and the Seahawks than house shopping.
Buyers still on the prowl likely will still face intense competition through the waning months of the year. “Don’t expect deals in the fall if you are house hunting in the most desirable part of a market or competing for a particularly nice house,” Ali Wolf, chief economist at building-consulting firm Zonda told realtor.com. “Homes that stand out for one reason or another are still flying off the shelf.”
In addition to King County’s 2.2% median price decrease on all home types since July, to $771,750, Snohomish County experienced a 1.1% monthly drop ($667,410) and Kitsap saw median prices fall 1.7% ($498,925). Pierce County bucked the trend, as prices rose for all home types, up 1.0% month-to-month ($505,000). Similarly for single-family home prices, King experienced a 2.4% monthly decline in median home prices to $850,000, Kitsap prices fell 1.2% since July ($503,750), and Snohomish declined 1.0% ($694,900). Pierce, on the other hand, witnessed a 1.0% increase in median prices ($515,000). Year-to-year, single-family median prices continue to rise, led by a 25% jump in Snohomish, 19% in Pierce, 16% higher in Kitsap and 14% in King.
Click here for the full monthly report.
CONDO NEWS
The crown-jewel unveiling in 2021 among of Seattle condos took place a few weeks back. Spire began welcoming owners to its 41-story, glass-and-steel stunner where Belltown converges with Denny Triangle and South Lake Union.
The amenities stand out for me. They start from the bottom up, with a first-of-its-kind (for Seattle residential property) automated-valet garage that incorporates the world’s latest parking-system technology. Check out this quick video explainer of the 266-space system that eats up eight levels below ground:
For more on Spire, please check out this blog post and watch for more information in the coming weeks.
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There was buzz this summer about the conversion of an apartment to condo with The Goodwin in Belltown. Admittedly, sales have been somewhat slow but nothing out of the ordinary in a city that is easing back from an historic business slowdown in 2020.
That made this August’s condo news quite stunning within local real estate circles: A new condo project preparing to open its doors next year in South Lake Union as Shoresmith abruptly switched business plans and announced it would cancel presales agreements in favor of becoming a rental property.
“The developer made a pretty quick pivot … and is taking the entire building (to) rental,” one insider shared. The Shoresmith name will remain, as the builder believes rentals will generate more revenue sooner than selling the 100-plus units.
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Congratulations to The Emerald. The downtown Seattle high-rise condo recently surpassed the 50% sold mark. That’s impressive for a 262-unit, luxury building that has only been open since late December.
Learn more here about the upscale residential tower that overlooks Pike Place Market and contact me to schedule a tour of the remaining inventory.
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It was only in June when I shared an initial look at Avenue Bellevue, a grand residential and hotel community that is under construction in the heart of the city. I noted in that blog post the highest-priced condo for sale started with the numeral “8” and, lo and behold, a unit just sold for $8,004,000.The three-bedroom, 3.5-bath penthouse in the ultra-luxe Estates tower covers 2725 sq. ft., with an additional 765 sq. ft. balcony. That comes to a jaw-dropping $2937/sq. ft. – reportedly a record-high figure for a condo sale in the Pacific Northwest.
LUXURY LIVING
Let’s start with the priciest home on the market across all Western Washington. It’s a 4-bedroom, 4.25-bath, 4376 sq. ft., 2-story home on Lake Washington in Hunts Point. Known as The Sophisticate on the Westside, this gated residence boasts a Tudor brick exterior, massive ground-floor windows, rooftop deck, infinity pool facing the lake and boat slip. It truly is a gem of a home. Asking price $28.5M, $6513/sq. ft. [Update: The home is now Pending Inspection…sorry!]
Staying in the neighborhood, this 3-bedroom, 2-bath, 3160 sq. ft., 2-bedroom home is a charmer in Medina. The contemporary design by Curtis Gelotte includes rounded edges, modern kitchen and baths, private outdoor pool and views of the Seattle skyline to the west. The sellers are seeking $3.86M, $1222/sq. ft.
Basketball Hall of Famer Bill Russell is selling his Mercer Island home after some 50 years. Following his storied career with the Boston Celtics, Russell, now 87, became head coach of the Supersonics in 1973. He recently told the Puget Sound Business Journal, “When I took the job, I was a single parent and chose Mercer Island because it had the best schools in the Pacific Northwest. The house was not built for me. I was actually looking at the house next door, but it was not private enough. I not only purchased this house but the two lots above me for the added privacy, and a number of years ago sold them but still maintained my privacy here at the house.” Check out the details here. Selling price: $2.6M, $612/sq. ft.
Instead of being near the water, why not have a home in the water? This 2-bed, 2.5-bath, 3-level floating home on Portage Bay offers a stunning chef’s kitchen with Dekton countertops, radiant-heat floors, walk-in closet and custom-wide spiral staircase that connect two decks. The home feels larger than the 2622 sq. ft. space. Listing at $3.85M, $1468/sq. ft.
And we finish with a massive masterpiece on the south shores of Lake Sammamish. It’s a 4-bed, 5.5-bath, 7280 sq. ft. multi-story home with more than 150 sq. ft. of waterfront on 1.5 acres in East Bellevue. This is one of my favorite listings of the year: tall ceilings, stone pizza oven, wood and stone accents, floor-to-ceiling windows, large walk-in closet, luxurious spa baths, gym, office and wine cellar. Every room is perfectly designed. Want it? The owners are asking $13.95M, $1916/sq. ft.