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The Seattle metropolitan area is made up of three counties - King which encompasses the city of Seattle and spreads eastward; Snohomish county to the north and Pierce to the south. Puget Sound forms the western border of the Seattle area and stretches 100 miles north and south and connects to the Pacific Ocean via the Straits of Juan de Fuca. The region was formed by ancient glaciers which carved out the many waterways that are spread throughout the area. To the east of Puget Sound rises the Cascade range of mountains and Mt. Rainier, the tallest and most prominent of the mountain chain. The Seattle area and Puget Sound was first explored by George Vancouver in 1792, who claimed it for Great Britain and named the sound after his Lieutenant - Peter Puget. The first non-native American settlers in the area started a town in present day Tumwater with the Seattle area adding its first in 1852. Seattle was the main travel and trade port with Alaska and the rest of the United States and grew around a shipbuilding industry in its early years. The Tacoma area south of Seattle had a significant smelting industry where copper, gold and silver were processed. In the world war years the Seattle area developed a number of heavy industries with the Boeing company building airplanes and a number of companies building ships around Seattle and Tacoma. The Boeing company maintains a large presence throughout the Seattle area to this day with multiple facilities in and around Seattle. In recent years the Seattle area has expanded its growth around the technology industry with Microsoft and Amazon leading that new era. The Seattle area is the most populous part of Washington state with an estimated population of over 3.7 million.
The Seattle area real estate market as we start 2020 is currently experiencing a market with a home sales pace increasing over the slower period of mid-2018 through early 2019 due to demand that is increasingly higher than supply making for a growing inventory shortage.
Year-over-year prices for single family homes (excluding condominiums) increased about 6.1% system-wide, jumping from $410,000 in 2018 to last year's median price of $435,000. Condo prices were flat, rising less than one percent from the 2018 figure of $352,000 to last year's median selling price of $355,000.
Inventory shortages persisted throughout 2019. Brokers added 110,940 new listings (down 5.3% from the 2018 total of 117,177), but that volume was outpaced by pending sales. Member-brokers reported 114,410 mutually accepted offers during 2019, a slight gain (1.9%) over 2018 when they logged 112,267 pending sales.
In 2019 the area-wide supply, as measured by months of inventory, averaged 1.78 months, about the same as 2018. Among the counties in the MLS service area, Thurston had the lowest level, averaging just 1.14 months, followed by Pierce at 1.3 months. Five other counties reported averaging less than two months of supply. In general, industry analysts use a 4-to-6-month range as an indicator of a balanced market, favoring neither buyers nor sellers.
Newly released figures from Northwest MLS show inventory at the end of December was down 31% from the same month a year ago, with only 8,469 active listings compared to the year-ago total of 12,275. The figures include single family homes and condominiums across the 23 counties in the MLS service area.
December 2019 marked the sixth straight month of declining inventory. MLS figures show inventory peaked in June 2019 when the database had 16,680 active listings, about twice as many as December. Inventory for single family homes and condos (combined) was down by more than 30% in seven counties: The inventory of single family homes (excluding condos) is especially tight in several counties, notably Thurston (-54%), King (-41.4%), Pierce (-40%), Snohomish (-36.1%), and Kitsap (-34.3%).
The sharp drop in King County marked the first time since March 2018 that the supply of homes dropped below one month. Going all the way back to 2012 when home values first began recovering from the crash, King County has only logged six months with supply levels lower than where we currently stand.
Northwest MLS brokers recorded 7,093 completed transactions during December, a gain of more than 11% from the 6,374 closed sales of the same month a year ago. Prices on last month's closed sales of single-family homes and condos rose 8.75% from a year ago. For the MLS market overall, the price was $435,000 versus the year-ago figure of $400,000.
The four-county Puget Sound region (encompassing King, Kitsap, Pierce and Snohomish counties), the median sales price for December 2019’s closed sales was $495,000, up 10% from the year-ago figure of $449,950. In King County, which had the highest volume of sales and the highest prices, the median sales price for last month's closed sales was $615,000. That was an increase of about 3% from a year ago. Prices in King County peaked in May at $645,000.
Kitsap, Mason, Pierce and Thurston counties continue to have constrained inventory, and the market remains very competitive in all price categories there. NWMLS figures show December 2019 inventory in those four counties declined more than 35% from those of a year ago, while prices jumped 10.4%. Collectively, there is less than a month's supply (0.94 months) in these South Sound counties. We are frequently seeing multiple offer situations in the median or lower prices ranges. Price growth in Pierce County continues to be above 8% year-over-year for the past three years and will likely maintain or exceed that in 2020.
With inventory back below one month in King County, we expect that 2020 will show a return to faster rising home prices as a result of the lack of inventory and continued robust job market. While buyers continue to benefit from low interest rates, there are simply not enough homes for sale. These elements indicate that the first quarter of 2020 will likely be an active market.
As to be expected in a market with an imbalance of supply vs. demand, prices continue to rise significantly. What makes this current market different from what happened in 2007-08 is that it is being pushed upwards by the lack of supply and not speculation or exotic loan products. However even as mortgage rates remain very low and attractive, buyers are not necessarily jumping on just any home that comes on the market. Although it’s still slightly a sellers market, buyers have become increasingly price-conscious and conservative. This is reflected in home price growth slowing a little from where it was in 2014-2018 however indications are that 2020 may return to those levels as supply has dropped back down to levels seen during that last mini boom.