How much longer can this madness continue? That's surely what buyers must be asking themselves as home sales continue to sizzle, sending...

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How much longer can this madness continue?

That’s surely what buyers must be asking themselves as home sales continue to sizzle, sending prices skyward as buyers compete for too few properties in almost every Puget Sound-area county, according to monthly statistics released yesterday by the Northwest Multiple Listing Service.

Here’s an example. Last month, King County buyers had 5,242 single-family homes to choose from. That’s a 22 percent drop from the previous February. Meanwhile the median asking price climbed 15 percent from a year ago to $415,000. The same dynamic was repeated with condominium sales.

This fast-paced, high-priced market could continue for some time, said Bill Riss, chief executive of Coldwell Banker Bain.

“If interest rates stay down, I’d say indefinitely,” Riss said.

But as he and others explained, mortgage rates aren’t the only factor fueling market intensity.

“It’s like an alignment of the planets,” said economist Matthew Gardner of Gardner Johnson, a Seattle-based land-use economics firm. “If you look at the bigger picture, the dynamics are a fact of supply and demand.”

State-mandated urban-growth boundaries mean a finite supply of land, and that translates to too few new homes being built to meet the demand, Riss and Gardner said.

At the same time, the economy is pulling out of the doldrums; employers are adding jobs; and the unemployment rate is at its lowest level in four years. All that spells more demand for scarce housing.

Adding to the scarcity, Gardner said, is a strong tendency among homeowners to stay put rather than sell and move up.

“They’ll add on a bedroom or redo the kitchen because they don’t want to lose that incredibly favorable rate,” he said, noting that some homeowners have rates as low as 4.5 percent.

Nationally, the rate for a 30-year-fixed-rate mortgage stood at 5.79 percent last week, according to mortgage backer Freddie Mac, and while that’s still low by historical terms, it does reflect the third rate increase in the last three weeks.

“Concern that long-term interest rates are too low and comments from Fed officials this week helped push mortgage rates higher this week,” Frank Nothaft, Freddie Mac’s chief economist said in a statement. “We’ve been expecting this for some time, so the rise in rates for the third consecutive week really doesn’t come as a surprise to the market.”

If rates keep climbing the market may soften slightly, Riss said, but it won’t happen soon.

“For the next four to six months, we’ll keep high demand and low inventory,” Riss said. “Then I think it will start tailing off if interest rates climb over 6 percent.”

Economist Christopher Cagan, director of research and analytics for First American Real Estate Solutions, agreed. He predicted that higher mortgage rates will translate to less housing demand and a slowing of appreciation. “You may be pretty near a peak,” Cagan said, pointing to the 12 percent appreciation of single-family homes in King County last year.

Gardner thinks the coming year’s appreciation would be in the range of 4 to 6 percent. He considers that a good thing. “I don’t like markets that go up to horrendous levels because they’re unsustainable,” he said.

And unsustainable means bubble. That, Gardner said, is not in the cards here.

Elizabeth Rhodes: