05 Mar Moving Forward and Looking Back: 2015 Market Summary and Predictions for 2016
In 2016, we have seemingly stepped off the decade-long roller coaster ride of a housing market. On a national level, home prices rose 4% in 2015 after a 6.4% increase in 2014. Although most parts of the U.S. are still regaining lost ground from the 2007 market crash, Seattle remains relatively unaffected.
Taking a closer look at the Puget Sound region, Seattle boasts home price gains of 10.6%, making it one of the most significant increases among the largest cities.
Puget Sound Region
Trends in the Puget Sound region continued from 2014 to 2015 by exhibiting increased sales prices, reasonable sales volumes, and limited inventory of homes for sale. Sales volumes in King, Pierce, and Snohomish County collectively increased from $22.2 billion (in 2014) to $27.2 billion (in 2015); a total incline of 23.5% from one year ago. Broken down further, King County accounts for $18.4 billion of closed sales, $4.9 billion in Snohomish County, and $3.9 billion in Pierce County. Also unsurprisingly, all three counties demonstrated an increase of roughly 9% in median home prices throughout 2015.
The imbalance between supply and demand are still moving in seller’s favor for 2016, as inventory continues to drop with less than one month of supply in some key submarkets. For the past three years, the inventory has been so low during Winter that it creates an intense real estate market the first of the year, as people are frantically trying to acquire properties. Pending sales now outpace new listings, resulting in a frenzy amongst brokers to replenish inventory as total active listings significantly drop.
Bidding wars are becoming increasingly common as a lack of inventory is discouraging homebuyers in the region. Today’s inventory is at an all-time low due to several factors including: a local booming economy, a surplus of first-time homebuyers, and an increased external interest in the area.
In King County alone, the inventory for single-family homes is down 30% from one year ago, causing housing prices to soar; jumping from $429,900 to $514,975 last month. Of the 23 counties served by the NWMLS, 10 others reported double-digit price increases for single-family homes sold in the last month.
“Buyers who are looking for houses cannot start looking at the top of their affordability range — they should look 15% or 20% below their limit and be prepared to go over list price if they have any hope of success,” said Frank Wilson, immediate past chair of the NWMLS board.
“We’re in for another crazy spring real estate market,” said J. Lennox Scott, chairman and CEO of John L. Scott.
With continuously low inventory levels in the Puget Sound region, homebuyers are beginning to seek inventory in the outlying areas of the local market. Since the low inventory levels aren’t projected to change in 2016 and mortgage rates are on the rise, condos and townhomes are becoming the more popular option for first-time homebuyers. Past MLS chairman, Mike Grady has said that “a steady increase in pending sales is projected favorably into 2017”.
Kiplinger has forecasted that home prices will rise 3% in 2016, which is at the low end of the range over the past few years.
The economy around the world may impact the prices and economy in the U.S. as well. Namely: China’s collapse, low and still falling oil prices, and venture capital funding that is drying up; which will result in a slowdown of the tech start-up scene.