9/19/2014

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Seattle's median home price sets all-time record

Seattle's median home price sets all-time record
Home in a Seattle neighborhood (Wikimedia Commons photo by Joe Mabel)
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SEATTLE - The median house price in Seattle just set a record, topping the 2007 peak for the first time since the Great Recession.

The median price of a house that sold in the city last month was $543,500, up 16.9 percent from a year earlier and 8.9 percent from June, the Northwest Multiple Listing Service reported Wednesday. The previous peak was $501,000, in August 2007.

"Certainly those are extreme pricing numbers," Glenn Crellin, associate director of the Runstad Center for Real Estate Studies at the University of Washington, said Wednesday.

The countywide median was $468,000, up 7.8 percent from a year earlier (the year-to-year increase was the largest since March) and 3.2 percent from June, but still well below the July 2007 peak of $481,000.

Also Wednesday, Seattle-based online real estate company Zillow forecast that rising home prices and mortgage interest rates will boost the typical payment on a newly purchased home in Seattle by $299 over the next year.

A big reason for the price increases is a continued shortage of homes, despite some improvement in July.

Seattle had a 1.36-month supply of houses for sale in July, based on that month's sales pace. That was up from 1.33 months a year earlier and 1.23 months in June (seasonal variation complicates month-to-month comparisons). The county as a whole had a 1.82-month supply in July up from 1.73 months of inventory a year earlier and 1.8 months in June.

The city and county remain well below the four to six months considered the balance point between buyers and sellers.

"Obviously we've still got an inventory issue," Crellin said. "That's not a healthy supply for the market."

Crellin said he expected that months of talk about the inventory shortage, along with prices rising to the point where people who bought during the peak would no longer be underwater, would have spurred more owners to list their homes.

In a listing service news release, Mike Gain, CEO and president of Berkshire Hathaway HomeServices Northwest Real Estate, said: "Although the housing inventory locally is up slightly, we just don't have enough of the right inventory in the right neighborhoods to satisfy the demand. The lack of supply leads to multiple offers and many properties selling for above their list prices."

George Moorhead, designated broker and owner of Bentley Properties in Bothell, added in the release that buyers have been complaining that "there just isn't enough to look at, then when something great does come up there are multiple offers."

Why are prices rising so much faster in Seattle?

"People are looking to be as close to the center as they can," Crellin said. "People are saying, 'We want the neighborhoods that we want and aren't willing to put up with driving for an hour.'"

The number of homes for sale in Seattle actually fell by 6.2 percent in Seattle from a year earlier. Inventory went up because sales fell by even more, 7.8 percent. Pending sales -- which don't all close but do reflect more recent activity -- were down by 9.2 percent.

Sales may be down in Seattle in part because higher prices are pushing out potential buyers, Crellin said.

The situation was different countywide, with the number of homes on the market rising by 6.1 percent, closed sales increasing by just 0.7 percent and pending sales falling by 3.6 percent.

In its report, Zillow calculated the expected increase in payments using the current median home price, next year's forecasted price and an increase of 1 percentage point in mortgage interest rates.

"More often than not, buyers do not understand the profound effect of rising interest rates on affordability," Erin Lantz, vice president of mortgages at Zillow, wrote in the report. "Many buyers associate a 1 percentage point interest rate change with a 1 percent change on a piece of clothing or the price of a car, when in fact they are very different."

As a rule of thumb, boosting an interest rate by 1 percentage point reduces affordability by 10 percent, Lantz said.
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