Doug Davis has worked Eastside real estate for 47 years and can’t remember seeing so few midpriced single-family homes for sale in Bellevue, Kirkland and Redmond.
“On the residential side, we just don’t have enough supply,” said Davis, president of Hallmark Realty Corp. in Kirkland.
Too few homes for sale to meet buyer demand pressures prices higher.
In June, the most recent data available at press time from the Northwest Multiple Listing Service, there was less than a month of inventory in Snohomish County and just slightly more than a month in King County. Inventory indicates how long it would take to sell every active listing at the current rate of sales. A balanced market is considered four to six months by most industry experts, according to the NWMLS, which serves 23 counties in the state.
That imbalance is reflected in pricing. The median closing price of single-family homes and condos combined rose 6.67 percent over June 2019 to $521,544 in Snohomish County, and the median price rose 5.85 percent to $675,000 in King County, according to the NWMLS data.
Lack of inventory is a common refrain in King and Snohomish counties, where too few homes are on the market in an Eastside environment where tech-heavy employment remains strong, buyers have income, and interest rates are low. But why so few homes for sale?
Homes didn’t hit the market in normal rates in spring due to the coronavirus pandemic, some potential sellers are hesitant to have buyers walking through their homes during COVID-19, and sellers face the prospect of having to buy into a sellers’ market themselves if they remain in the area.
James Young, director of the Washington Center for Real Estate Research at the University of Washington, expects supply to remain down.
“The whole COVID thing has got people kind of reflecting on safety; not just safety for their health, but financial safety, financial security, how much the bills are going to be, and kind of preparing for what might come next,” Young said.
If potential sellers are hunkering down and inclined not to trade up, while new jobs in tech and other industries continue to attract people and renters seek to buy into the market, the imbalance will continue.
“As people trade up, that provides a house on the market for someone to buy as a first-time buyer, or it provides a house for someone to trade up to, and the market filters through the existing supply,” Young said. “If people aren’t trading up, well, then you’re not getting the filtering taking place.”
EJ Bowlds, principal manager broker of Coldwell Banker Bain of Bellevue, said in a news release in mid-July that no one could have predicted what happened in the second quarter.
“We went from a slowly recovering market staggering in the wake of the COVID-19 outbreak in April to a fast-paced, dynamic market by the end of June, with low inventory and higher prices setting the tone,” Bowlds said.
The number of Eastside listings added to the market in the first six months of 2020 declined 22 percent from the same period in 2019, and inventory was half of that at the same time last year, but the number of closed sales was down only 30 percent, he said.
Median prices for the Eastside were up nearly 2 percent over last year, and the average market time for a home listed on the Eastside fell from 32 days last year to 20 days currently, he said.
“In our area, low-interest rates, low inventory, a large number of thriving technology firms, all translate into a very strong real estate market (that) should continue at least through most of the third quarter,” Bowlds said.
In Snohomish County, David Maider, owner/broker of Windermere Real Estate/M2 LLC in Everett, said inventory is almost at a half-month in the central to southern parts of the county.
The pandemic likely has increased the number of people who wish to stay in their homes a little longer, said Maider, who also has an office near Alderwood Mall in Lynnwood. They know they can sell quickly, but might worry about having to rent before they buy and don’t want the disruption of two moves, he said.
There’s uncertainty, too, about how many homes might come on the market from Boeing’s staff reductions through early retirement and layoffs, he said.
Maider doesn’t see market conditions easing this year.
“I think the cost of money is a big factor,” he said of low interest rates wooing buyers, and he doesn’t see inventory rising significantly. “Historically, we get to the end of summer, and our inventory starts to drop through the end of the year and into June; I expect that will likely happen. That, combined with interest rates where they are … will make homeownership pretty attractive.”
As more people work remotely, there also could be more movement farther away from the major business districts in Seattle and Bellevue as people seek a little more space and house for the money, he said.
“What has been, and prepandemic, pushing people both north and south to Pierce and Snohomish counties is just the affordability of King,” Maider said, a trend that might continue as people have more options to work remotely. He also sees more people pushing farther out in Snohomish County, and noted a lot of new construction in Lake Stevens getting bought at a rapid clip. “Lake Stevens, Snohomish, Monroe — those markets are moving at a pretty good rate. Stanwood at the north end of the county, as well.”
UW’s Young said areas in Snohomish County and parts of the far Eastside where density is lower, such as Carnation or North Bend, could prove more attractive.
If someone has to quarantine or is looking at staying home a lot more, “Do I want to stay in a one-bedroom apartment in the city of Seattle or a two-bedroom apartment in the city of Seattle, or would I be better off gardening in a place with a little bit of land in Snohomish County, especially if I don’t have to go into the office that often and worry about the commute?” Young postulated.
Hallmark Realty’s Davis sees a lot of people who work in the Kirkland area who have to buy farther away, like Snohomish County, for affordability.
“Everett, Marysville — Marysville’s one of the hottest markets,” he said. “You look at what’s going on: If I can buy in the $450 (to) 600 range there, I can’t buy that here unless it’s a condo.”
The median listing price in Kirkland was about $1.4 million in early July, he said. It was about $1.5 million for Bellevue, Kirkland, and Redmond combined, he said.
Karl Lindor, a broker at Windermere Real Estate/East Inc. in Bellevue and part of the Kritsonis & Lindor Team, is familiar with high-end Eastside properties. He and his business partner, John Kritsonis, specialize in waterfront and view homes, with average transaction prices approaching $2 million.
“We’ve been fortunate, especially on the Eastside, where so many of our buyers are tied to the tech equity market and the strength in the tech equity market has put people in maybe buying price points that they didn’t see themselves in one or two years ago, and they’re taking advantage of that, and they’re out shopping,” Lindor said. “We’re seeing it in our own business; (the) last 60 days have been as strong as any two-month period we’ve had in probably the last two or three years.”
He sees the same supply constraints in the luxury market. He noted a shared waterfront home on West Lake Sammamish that he had listed two weeks earlier at $3.2 million received a full-price offer within 48 hours with the possibility of two other parties showing interest as well. He said about 1 in 3 Eastside homes is selling over listing price.
If a home is near the core, where the jobs are; the school district is highly rated; and it has an interesting element, such as waterfront, view, or shared waterfront, there’s a lack of inventory in that segment, too, up to about the $4 million price point, Lindor said.
Another thing he’s starting to see is people realize in the pandemic-driven remote work environment that they can keep their Eastside job and live in places like Suncadia or Cle Elum.
“I think people are starting to realize now that that is appearing to be not only possible, but in some companies maybe encouraged,” Lindor said. “And so I think you’re going to see certain markets like that maybe see a nice uptick.”
Coldwell Banker Bain agents are seeing that, too.
In the Bain release, Mike Grady, Coldwell Banker Bain president and chief operating officer, said Bain agents “are reporting a lot of movement to and diminishing inventory in outlying areas such as Bellingham; Bainbridge Island; Eastern Washington; Bend, Oregon; and other recreational-type locations, given the ability to work from home or take an early retirement. We hope that this trend may open up additional inventory in the Puget Sound region.”
Grady also said virtual transactions are becoming more common, “with brokers reporting an increase in transactions that are handled 100 percent virtually — with the buyers purchasing the homes without ever personally stepping inside.”
Lindor also is seeing people who want more than one home office, instead seeking two private functional home offices, and he’s noticed home gyms going from a nice luxury to mandatory — at least in the short term, and maybe long term.
“I think the most important thing that we’re seeing is there’s still a buyer confidence in the local economy that is quite strong,” Lindor said.
He also doesn’t see demand softening anytime soon in the face of limited supply.
Houses are getting consumed quickly. A house that normally would sit on the market for two to three months now might sit on the market for one to two weeks, he said, so inventory isn’t building.
Also, psychologically, a lot of people prepare to list their homes in the spring, which was when the pandemic hit this year, derailing many plans, Lindor said. Some people feel they might have missed that ideal listing time, and maybe are waiting until next year. Some people also have safety concerns about people in their home, he added.
Does Hallmark Realty’s Davis, with nearly 50 years of real estate experience, have any words of wisdom for buyers and sellers in the current market?
“Buyers (have) got to be patient and persistent; stay in the game if you want to do it,” he said.
“If you’re a seller, it’s a good time to sell, but you (have) got to figure out where you’re going to go,” he said, referring to putting the shoe on the other foot as a buyer.
“The issue though, especially on the investment side of it, is people need to be looking at 1031 exchange while we still have that — it’s a beautiful part of the tax code currently,” Davis said.