Home sales in Snohomish and Island counties dropped in July, while the number of homes on the market increased.
The law of supply and demand and even common sense would tell you that means the area’s soaring home prices finally have started to fall.
But common sense is wrong.
Median home prices in Snohomish and Island counties rose 18 percent and 19.5 percent, respectively, during the past year. And they’ll likely continue to go up for a while.
In addition, analysts said, there’s little chance here of the sort of bursting housing bubble that has pushed down home values dramatically in other parts of the country.
The combined median price for single-family homes and condos was $334,000 in Snohomish County in July. In Island County, the median was $297,450. The price increases in both counties were among the highest for the month in the Puget Sound area. Only Skagit County, where prices rose 22 percent, was higher.
Windermere broker Vern Holden of Mill Creek said the housing market is slowing down in comparison to last year. But he added that’s a good thing, since 2005 was his best year of the last 17.
“I am not complaining one bit,” he said. “It’s always cleansing to some degree to get things back to reality.”
The market is clearly slowing, and some sellers are taking longer to sell their homes and are sometimes forced to lower prices a bit, Holden said.
But he added that prices are remaining high, in part, because of a lot of new home construction in his portion of the county.
“Those builders paid the prices for that land a year ago or two years ago and are reluctant to lower the price because they’re into it for what the market demanded,” Holden said.
He said many builders are adding things such as landscaping or special interior features to keep buyers satisfied with paying their prices.
“These are nice homes,” he added. “They are 3,000- and 4,000-square-foot homes with two stories and a lot of amenities inside. Many are giving incentives as opposed to a price drop. They may pour a patio, landscape the front and back and add an irrigation system.”
Holden said he expects homes to continue to appreciate in this area.
“I don’t believe we’ll see a bubble,” he said. “We have a limited amount of product on limited land in a desirable area with a strong economy. We are a port community, we sit on a north-south corridor. We have manufacturing, we have technology and all sorts of amenities for people. We’re lucky. We’re doggone lucky.”
He expects homes to continue to appreciate, but he’d like to see it at a rate closer to 8 percent or 10 percent that the current 18 percent.
“Once you’re above 8 to 10, things get kind of scary,” Holden said.
In a July 31 analysis of the Seattle region’s home prices, the National Association of Realtors said price changes here shouldn’t be dramatic.
“A thorough analysis of the metro market reveals that there is little danger of this,” the report stated. “The local housing market is in excellent shape with a potential for significant housing equity gains, particularly for homebuyers who plan to remain in their house for the long run.”
Homes are currently appreciating at about 20 percent a year, which compares to the national rate of 13 percent, and 25 percent in the top 20 metropolitan areas. The Seattle area price is about 1.5 times the national average.
The report notes that area housing prices have risen faster than incomes, but it also noted that income levels are still plenty high enough to service home mortgages, a figure the Realtors said is more relevant.
It said the mortgage debt serving cost-to-income ratio is favorable at 20 percent, compared to a national average of 16 percent and a 30 percent rate at the top 20 metro areas.
In summary, the report said that the relationship between housing starts and job growth is about neutral. And it noted that a small number of risky loans means that the area has a minimal risk for loan foreclosures.
“The region is a highly sought-after region with mild weather and being near the Pacific Ocean and the mountains. The local market will benefit from second home purchases by U.S. baby boomers as well as by wealthy foreigners,” the report stated.
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