SEATTLE HOUSING 3Q17: It’s Officially the New Peak of the Market. Again.
- Lack of inventory continues to be an issue especially affordable inventory.
- The spread in price from new construction to resale is now over 36%, and the price differential has pushed the new construction buyers down from almost 20% to 12% of the market.
- In almost every submarket throughout the Puget Sound we have hit the peak of list prices. The median Home closed price will continue to rise through 2017 and likely into 2018. The question becomes what breaks first, price or sales velocity.
Metrostudy’s survey data from Q3 2016 to Q2 2017 of detached new construction in the Puget Sound region showed declining sales volume year over of 2% to 5%. That changed in Q3 2017 with a 4% increase year over year in sales. Lack of inventory continues to be an issue especially affordable inventory. While we have seen a rise in the unsold spec homes under construction our finished inventory remains low. King County for example has 55 completed spec homes which is a 10 day supply.
Skagit and Thurston Counties were the two counties that kept the region to only a 4% increase. Skagit was down 44% to 35 sales and Thurston was down 22% to 134 sales. While we saw 13% bump in King, 34% in Kitsap and 21 % in Pierce. Snohomish stayed essentially flat at 3% due to severe lack of inventory in the North Creek submarket. Sales are down 175 units when looking a 12 month rolling number compare to the previous year.
“It’s officially the new peak of the market – again,” said Todd Britsch, Director of Metrostudy’s Seattle region. “The median closed new construction home price is well above the summer of 2007. King County’s 2Q17 median closed price was $755,735 which was 47% above the 2007 number. However now the YTD median closed price is $788,000 – 53% above peak. Pierce County median closed price is $458,000 which is 41% above 2007. Snohomish County comes in at a closed price of $564,000, a 32% increase from 2007. Thurston County comes in at a modest 12% gain since 2007 at $335,000.”
The DOL numbers are still staggering. In the 3rd quarter alone we had an estimated 32,000 new drivers. Assuming two drivers live together we need 16,000 more dwelling units & if we apply only a 50% home ownership 8,000 owner occupied homes needed. Expect a correction soon in the numbers due to the possibility of states being late reporting numbers.
While we had a good spring in regards to the number of vacant lots brought to market we have still fallen short slightly. Year to date the region is down a net 551 lots. The good news is the vast majority of those lost lots were in Pierce and Thurston County. King County saw a net increase of 29 lots through the third quarter while Snohomish county lead the pack with a robust 58 net new lots.
“I have been talking about the push of buyer into resale due to the price increases we have seen in the market over the past couple years so I thought it wise to validate my thought process,” said Britsch. “In 2012 the spread in price from new construction to resale was less than 2% which is the lowest I have ever seen. 2013 was 8.25% and in 2017 the spread in over 36%. The norm should be between 12% and 18%. The price differential has pushed the new construction buyers down from almost 20% of the market to 12% of the market. If prices continue to rise I am afraid that the new construction market share will fall as low as 9% before the end of 2018.”
In almost every submarket throughout the Puget Sound we have hit the peak of list prices. The median Home closed price will continue to rise through 2017 and likely into 2018. The question becomes what breaks first, price or sales velocity. Answer: sales. Then we see prices begin to correct a little but there will possibly be some pain involved. If we see new construction fall below 10% of all sales labor will hopefully become less of an issue but we will still have the cost of dirt and materials to contend with. On the upside we still have an amazing amount of demand for housing but it may take the next generation a while to figure out that life’s little luxuries may have to be put on hold for a while so they can afford a home.
For information contact
Todd Britsch – firstname.lastname@example.org
About Metrostudy: Metrostudy is the leading provider of primary and secondary market information to the housing and related industries nationwide. Metrostudy provides research, data, analytics and consulting services to help builders, developers, lenders, suppliers, retailers, utilities and others make investment and business decisions every day. For more information, visit www.metrostudy.com
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