The recent national residential housing market numbers were disappointing but not unexpected. The homebuyer’s stimulus program expired at the end of April. The result was a sharp decline in sales and new home starts.
One of the exceptions occurred in the local market, which by comparison was far more stable. The housing market performance is measured by five variables.
Closed sales
In King County, closed sales improved 14 percent – from 1,655 to 1,879 – compared to the same period a year ago. Likewise, there is a rising monthly trend for closed sales in residential real estate with an almost 11 percent increase month-over-month.
This past year there has been no question that the two residential housing stimulus programs were vital in revitalizing the housing market. And there is emerging evidence that, at least in the short term, these gains are proving to be sustainable.
Active listings
A comparatively meager increase of 2 percent occurred in active listings compared to a year ago. However, the short-term trend hints at diminished seller optimism as June showed a 16 percent decrease in active listings. When the month’s supply of unsold inventory is computed, there was a month-to-month decrease of 14 percent, from 6.95 to 5.25 months.
Median prices
The biggest tell of the state of the local real estate market is median home prices, or the mid-point in the price distribution of homes sales. Compared to last year, King County’s median home price has declined by a mere 3 percent. Generally, the monthly trend reflects increasing stability, which for sellers and homebuilders is encouraging news.
However, the local economy is experiencing a slight overall price deflation – depending on what is included and excluded, of course. One of the current economic challenges is maintaining values in all areas of consumer and wholesale products and services. The fact that the largest consumer expenses have shown price stability is critical for future growth of the real estate sector.
Mortgage rates
Another sign pointing towards price stability is interest rates which are 4.7 percent for conforming 30-year fixed loans, and a declining average of 5.49 percent for non-conforming 30-year fixed rates – down from 6.73 percent a year ago. If the Federal Reserve continues to see low inflation, no improvement in employment, and sluggish demand in housing, interest rates should remain low and stable throughout most of this year.
New building permits
New residential home construction, similar to manufacturing, has a strong multiplier effect on employment. Nationally new housing permits declined sharply, while the local market compared to a year ago increased 52 percent in King County. The recent monthly change, however, was down -3 percent to 219 single family permits.
Unlike actual housing sales and listing activity, housing permits in the local market are affected by two other variables. First, commercial lending to builders remains highly constrained by creditors, who are both under increased regulation and very cautious. Secondly, building permits processed are dependent on approvals from either King County government or one of the incorporated cities. As collateral damage of the recent economic malaise, many of the municipal staff members who approve building permits have been eliminated, which adds delays in this economically critical process.
Jim Hebert is the president and founder of Hebert Research, Inc., an international real estate, land use, and statistical research firm in Bellevue.
