SEATTLE 3Q16 HOUSING: Sales Velocity will Begin to Slow as We Price Too Many Buyers out of the Market

  • New Home Starts are up 21% in 3Q16 – but we see that as a “Catch Up” number from 1H16 Sales
  • Prices Continue to Rise with King’s County Median Price up 13.68% YoY and more modest increases in the rest of the Puget Sound region.
  • Lot Availability will continue to be an issue into 2017; Lot Supply in the highest demand areas is about half the levels it should be

Metrostudy’s 3Q16 survey of the Seattle housing market shows that the entire region saw a quarter over quarter increase of 2% in sales volumes, lead by Snohomish County at a 12% increase. Pierce County brought the region’s average down with a 15% reduction in sales volume. Thurston County saw only a 5% gain while King county remained relatively flat at only a +1%. The regions % of growth has begun to level off.

“I anticipate the following year to fluctuate 5% each quarter up and down,” said Todd Britsch, Director of Metrostudy’s Seattle region. “Starts rose near 21% in the 3rd quarter but it is only to play catch up after falling behind contract sales during the first half of the year. King County’s median closed price rose 13.68% year over year – currently at $719,000. The rest of the Puget Sound Region has seen a modest increase of 5% or less in the median closed price of new homes. However the median available price for new homes have risen 30% in Pierce County to $487,000 and 35% in Kitsap County to $364,000.”

Both King and Snohomish Counties have seen the median list prices drop due to builders and buyers moving further away from the core because of the lack of inventory with either lots and/or homes. Months of supply continue to be an issue within the region. Snohomish County is the greatest concern with only a 10 month supply of VDL and a 2.4 month supply of unsold spec inventory. The rest of the Puget Sound either saw sales decline or stay flat which increased months of supply after having a number new lots enter the market. None of the counties are over supplied nor will they for the foreseeable future.

With fewer lots being delivered to the market than sales consistently since 2009 we have seen a net negative flow of lots totaling 16,870 lots. When looking forward at the number of lots pre‐ paring to come online this theme appears it is not going to change any time soon. As of the 3rd quarter of 2016 the region has had 5,913 sales but has only delivered 3,866 lots in 2016. Moving into 2017 the issue of lot availability will continue to be an issue. Of the 3,808 lots at final plat approval about 25% will enter the market during the fourth quarter and another 40% during the first or second quarter of 2017. “I would like to see a six month supply of lots at final plat approval to ensure a lot supply equilibrium,” said Britsch. “The two highest demand areas in the region (King & Snohomish Counties) have only a three month supply of lots at Final Plat Approval which is half the supply they should have.”

Fundamentals are strong, the region continues to add jobs. Amazon is estimated to absorb another 12,000,000 square feet of office space in Seattle according to recent articles. While it is impossible to know exactly how many more employees Amazon will hire, by doing some simple math one could estimate another 50,000 to 60,000 jobs in the near future.

“Pricing is an issue, and the growth in sales is slowing from double digit to single digit percentage growth,” said Britsch.  “Prices should follow closely but this is unrealistic based on the lack of lots and the prices being asked for new finished lots. While I can’t see prices heading much higher for finished homes there will be pockets within the region that can sustain higher pricing but sales velocity will begin slow as we price too many buyers out of the market. In a nut shell…. Be careful what you are paying for dirt.”

For information contact
Todd Britsch – tbritsch@metrostudy.com
Tel: 425-953-4714

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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