The housing market in Snohomish County has been on a wild ride lately.
The median sales price of single-family homes in Snohomish County fell 37 percent from its peak in June 2007 to the bottom in February 2012, or from $381,719 to $238,750. Since then, local home prices have increased a whopping 20 percent in just the last 20 months, with the median surging to $286,250 in October.
This past spring was a veritable feeding frenzy, as listing inventory hit rock bottom, home sales and prices shot through the roof, and bidding wars between buyers became the norm rather than the exception.
Between the bubble, the bust, and the bounce, it has been nearly a decade since the housing market has been “normal.” Will 2014 finally be the year that things settle down and the market becomes more balanced between buyers and sellers?
There are a number of factors that suggest next year will usher in a calmer housing market in Snohomish County.
The number of homes on the market declined for 52 of 57 months from late 2008. Since August, the number of homes on the market have increased every month. By October, county-wide inventory was up over 22 percent from the same time last year — the biggest jump in more than five years.
If inventory continues to make solid gains into 2014, buyers can expect less competition and more time to tour homes before they go under contract.
“Overall, I think we’re heading toward a meeting in the middle for buyers and sellers,” Escalle said.
So why did the market get so heated last year? The red-hot market in spring 2013 was the result of a perfect storm of factors:
- record low inventory
- increasing sales
- record low interest rates
- near-bottom home prices.
The lowest mortgage interest rates in well over half a century combined with declining home prices through early 2012 to drive affordability through the roof.
Snohomish County’s affordability index — a measure of home affordability based on median home prices, mortgage interest rates, and income data from the state, where 100 represents the median-income household paying 30 percent of their income on a median-priced home payment — averaged 129 in the years prior to the housing bubble. It fell to just 82 in mid-2007, then as home prices and interest rates both declined, the affordability index shot up to 176 by early 2012.
This record high affordability triggered an increase home sales, as buyers who had been sitting on the sidelines during the bust found deals good enough to entice them into the market.
Over the course of 2013, strong home price gains and slowly increasing interest rates have combined to drive the affordability index down. As of October, the affordability index sits just slightly above the pre-bubble average at 138.
“I think we will have more inventory come on the market, sellers become more realistic with their prices and not expect top dollar at or above list price and those buyers who backed out because they no longer wish to compete for a house will come back to the market,” Escalle said. “I think 2014 will be a very good year for everyone.”
Although a slight cool-down is likely on the horizon for the county’s housing market in 2014, the effects probably will not be distributed evenly across the county.
Cities where the hot housing market of 2013 benefited sellers the most are to cool in the coming year.
That includes Monroe, where the median price per square foot of single-family homes shot up 24 percent in the last year and sales increased 63 percent. Mountlake Terrace was not far behind, with an 18 percent gain in prices and a 50 percent gain in sales.
Condos around the county have been especially hot in the past year as well, with prices increasing 21 percent and sales gaining 25 percent. Expect a cool-down for condos next year as well.
The biggest local factor that could throw a wrench in the housing market? Boeing. With the future of the 777X production in Everett now in serious doubt, Escalle is already seeing trepidation among some potential buyers.
“I have a couple of clients who are on hold until they see how things pan out,” said Escalle.
Despite the adage that “real estate is local,” sometimes the biggest factor in a real estate market can be major national or international economic events.
Local indicators point to a more balanced 2014 housing market with home price gains coming back in line with historic trends as more inventory comes up for sale.
If the national economy faces another crisis or mortgage interest rates suddenly and dramatically increase, all bets are off.