Home sales tepid despite low interest rates and prices

  • SCBJ staff
  • Wednesday, August 25, 2010 3:20pm

KIRKLAND — Housing activity during July held few surprises for members of Northwest Multiple Listing Service, although some brokers wondered why more buyers aren’t taking advantage of historic low interest rates. Both pending sales and median prices on closed sales showed slight improvement from June, according to the latest report from NWMLS.

“It’s a housing trifecta,” Meribeth Hutchings, a director for Northwest Multiple Listing Service, said about July’s activity.

The combination of the lowest interest rates on record, plenty of inventory and low prices offer an unprecedented opportunity for buyers, Hutchings said. The broker-owner of Windermere Real Estate-Lake Stevens Inc. said homes have never been this affordable in her 28 years in the business.

Nationally, sales of previously occupied homes plunged in July to the lowest level in 15 years, despite the lowest mortgage rates in decades and bargain prices in many areas. July’s sales fell by more than 27 percent to a seasonally adjusted annual rate of 3.83 million, the National Association of Realtors said Aug. 24. It was the largest monthly drop on records dating back to 1968, and sharp declines were recorded in all regions of the country.

Sales were particularly weak among homes priced in the lower to middle ranges, the association reported.

Local brokers reported 5,571 pending sales across the 21 counties in the Northwest MLS service area. That’s up slightly from June when they reported 5,547 pending sales, but down about 23 percent from one year ago when there were 7,279 pending sales.

The MLS report showed year-over-year increases in inventory, a double-digit decline in closed sales and a drop in prices in Snohomish County:

At month end, Snohomish County had 5,908 active listings, up 4.4 percent from 12 months ago.

Brokers reported 727 closed sales in Snohomish County, down 15.27 percent from 12 months ago.

The median price for July’s closed sales was $270,000 in Snohomish County, down 7.53 percent from the year-ago figure of $290,000. Prices rose in nine other counties.

“The tax credit pulled some first-time buyers from the second half of the year into the first half,” said NWMLS director Pat Grimm, managing broker of Windermere RE-Capitol Hill Inc.

The National Association of Realtors echoed his comment. In a statement accompanying its report on nationwide pending sales for June, NAR said it expected near-term home sales to be noticeably lower in contrast to the spring surge, when buyers rushed to take advantage of the federal homebuyer tax credit.

Dick Beeson, NWMLS director and broker-owner at Windermere Commencement Associates in Tacoma, suggested the market has adjusted to a “nonstimulus environment.” The lack of a tax credit has caused some buyers to postpone their purchase, he said, but added, “Many others are continuing to take advantage of superlative interest rates and bargain prices.”

Hutchings said business was “typical” for July, “usually a slow month because of vacations.” Nevertheless, she noted, despite the expiration of the tax credit, sales volumes for her office were comparable with a year ago.

Brokers also report some encouraging activity for newly built homes.

“We see sales occurring in new construction where large builders have reset their prices to 2004 levels,” Beeson said.

The Monthly Monitor newsletter from Bothell-based New Home Trends Inc. also said new home sales activity is trending up in the Puget Sound region.

“The number of new construction home sales written in the last 12 months exceeds the previous year by 28.1 percent. The Puget Sound area continues to show a demand for new housing,” the report stated.

Industry officials believe interest rates, jobs and consumer confidence are critical to building momentum.

MLS director Matt Deasy, managing broker of Windermere Real Estate-East, suggested some would-be buyers may not fully understand the advantages of today’s low interest rates.

Citing examples from Windermere’s affiliated mortgage company, Deasy said a buyer saves $374 a month on a $300,000 loan compared with three years ago. The principal and interest on a $300,000 mortgage at today’s rate of 4.375 percent would be $1,498. Three years ago, when the rate averaged 6.375 percent, the P&I payment would have been $1,872.

On a $400,000 loan, the savings would be $498 ($1,997 compared to $2,495). For the past 30 years, the average mortgage interest rate is approximately 9 percent, which puts the payment on a $300,000 loan at $2,414 — a difference of $916 per month.

“Buyers are motivated when they see these comparisons,” Deasy said. He also believes there’s a pent-up demand based on the number of pre-approvals for loans in the mortgage company’s pipeline. He expects many of these potential buyers “will pull the trigger” once rates or prices start edging up.

Bystanders are still waiting for a piece of the puzzle to fall in place, Wilson said. For some, the missing piece might be jobs, the economy, confidence in the future or direction of the stock market.

J. Lennox Scott, chairman and CEO of John L. Scott Real Estate, praised recent action to help households purchase homes in rural areas after the federal government recapitalized the USDA’s Single-Family Housing Guaranteed Loan Program.

Washington was rated “fourth-best state” for building a nest egg and has the country’s most promising real estate market in the near term, according to an index created by U.S. News that considered each state’s housing market, unemployment rate, per capita income and taxes. Citing data by Moody’s Analytics, the report indicated home prices in the state are expected to surge by “a whopping 6.6 percent per year” between 2010 and 2013.

NWMLS, owned by its member brokers, is the largest full-service MLS in the Northwest. Its membership includes more than 24,000 brokers and agents serving 21 counties in Western and Central Washington.

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