SEATTLE HOUSING 4Q17: Rising Prices Push Buyers into the Resale Market – New Home Sales at only 10% of the Market and Going Lower in 2018
- Prices are at record highs with median new home prices up 54% from 2007 levels in King County, up 43% in Pierce County and Snohomish County up 32% from 2007.
- The new-resale price differential continues to grow and has pushed new construction buyers to only 10% of the market; we fear it will get even lower in 2018.
- While we still have a high number of buyers that can qualify it is just a matter of time until we price enough buyers out of the market that no matter the demand for housing a good percentage of want to be buyers will not qualify
The Central Puget Sound made up the vast majority of the 8% increase in year over year sales. King ended the fourth quarter only up 1%, Snohomish up 10% and Pierce County up 46% driven by the above mentioned affordable product being delivered to the market. There was also a shift within the counties to submarkets that have not seen a lot of sales in past few years.
Prices in the market continue to hit record highs. The median closed new construction home price is well above the summer of 2007. King County’s median closed price was $795,000 which was 54% above the 2007 median closed price of $515,000. Pierce County median closed price is at $465,000 which is 43% above 2007. Snohomish County comes in at a closed price of $566,000, a 32% increase from 2007 and Thurston County comes in at a modest 14% gain since 2007 at $340,000.
While we had a good spring in regards to the number of vacant lots brought to market we have still fallen short again for the 9th consecutive year. The region was down a net 965 lots for 2017. The good news is the vast majority of those lost lots were in Pierce and Thurston County. Snohomish county ended down 199 lots for the year while King County saw a net increase of 158 lots.
“I have been talking about the push of buyers 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 Todd Britsch, Director of Metrostudy’s Seattle market. “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 37%. The norm should be between 12% and 18%. The price differential has pushed the new construction buyers down from almost 17% of the market to 10% of the market. If prices continue to rise I am afraid that the NC market share will fall as low as 9% before the end of 2018.”
Interest rates and foreign investors are my number one concern. Rates are up a full point from this time last year and may rise up to 5% by the end of the year. In order to qualify for a $460,000 home at the current interest rates the household income must be near $125,000. Over the past three years when rates were in the 3.2% to3.6% range the household income needed to be $117,000. If rates rise to 5% that same home will require an additional $14,000 in income. While we still have a high number of buyers that can qualify it is just a matter of time until we price enough buyers out of the market that no matter the demand for housing a good percentage of want to be buyers will not qualify
In-migration remained strong throughout the year averaging 12,000 new drivers per month according to the Department of licensing. I do still expect a correction to come in from states reporting their number late to Washington for 2017 but I don’t think it will be a significant number. Changing some assumptions to be even more conservative with the demand for housing by increasing the number of drivers from 2 to 2.3 per household still creates a demand for 40,000 owner occupied homes left to be built.
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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