“Spring 2020 is going to be a perfect time to sell your house!”
That’s the advice public-school employees Kristine Nelson and her husband, Will, received when they decided late last year to sell their Vashon Island home.
They planned to list it in the mid-$500,000s, a competitive price point. The butter-yellow 1957 rambler at the south end of Vashon Island, where they’d lived for 15 years, is “an honest house,” Nelson said. “Over time, we’ve improved it and put love into it, tended it and cared for it.”
As winter turned to spring, Nelson kept track of market trends. “We saw that listings wouldn’t even make it to the Beachcomber and already be sold,” she said, referring to Vashon’s local paper. “Things were selling off-market.”
Then the pandemic hit, and early 2020’s white-hot housing market cratered.
Typically, housing-market activity strengthens through the spring before peaking in May. But last month, many metrics of housing-market activity fell by double digits, compared both with last month and with last year, according to new data from the Northwest Multiple Listing Service (NWMLS).
Next month’s data will be more telling of the coronavirus’ effect on the housing market, said Windermere chief economist Matthew Gardner, who cautioned against interpreting April’s figures as a trend.
“There are clearly effects of coronavirus on housing, but I don’t like looking at things on a myopic basis. One month does not a summer make,” he said.
Homebuying activity appeared to be trending upward in the latter weeks of April, though new listings and pending sales are still well under 2019 levels. The Nelsons might be stuck with two mortgages if they can’t find a buyer for their Vashon Island home.
In late March, near the apex of the spring buying frenzy, they put a successful offer on a new house, in Tacoma’s Point Ruston neighborhood, after being outbid on nine other homes.
“The minute a house dropped, we would drop everything and go see it,” Nelson said. “We would make offers on houses we hadn’t even seen yet. It felt like a frenzy. We would wake up at 3 a.m. and think, ‘What are we doing?'”
But by the time they listed their Vashon Island home, for $550,000 on April 2, buyer interest had tanked, according to NWMLS data on home showings.
Despite lowering the price, they haven’t had any offers. Only one potential buyer has toured. If the market doesn’t pick up, come July, they might be stuck with a double mortgage bill, nearly $6,000.
“For us, that’s a car,” Nelson said.
Sales and listings down
Housing-market indicators are down throughout the 23 Western Washington counties served by the NWMLS.
New listings are down, by 35% year-over-year and 25% month-over-month. Pending sales fell by 12.3% year-over-year and 17.5% from March to April.
Median prices have also fallen month-over-month, from $720,400 in March to $715,000 in April in King County, and from $470,000 to $466,500 in Western Washington as a whole. The last time prices fell from March to April was during the housing-market collapse a dozen years ago, according to Zillow.
Even the metrics that are up don’t necessarily spell a healthy housing market. Total active listings rose from March to April, a sign older listings aren’t selling.
And while closing prices fell month-over-month, prices were still higher in April than they were the same time last year. In part, that’s a holdover from March’s stronger market, brokers said: Most homes that closed in April went under contract in March.
And as the market heated up in early 2020, Seattle-area prices rose faster than anywhere else in the nation, save Phoenix, putting prices well over 2019’s when the pandemic hit.
Pierce and Snohomish counties also saw strong price growth, year-over-year, but relative price stagnation on a monthly basis. In April, the typical home closed at $405,000 in Pierce County, down from $410,000 in March; in Snohomish County, prices stayed constant at $525,000.
An NWMLS release says brokers are “adjusting to new ways of operating.”
But the combination of fewer closings and falling prices has cratered the dollar value of sales volume, according to NWMLS data compiled by Realogics Sotheby’s International Realty research editor William Hillis. Last month saw fewer sales by total dollar value than any April since 2014, when median sale prices were much lower than they are now.
Hillis said the fall in listings is “scary” for real estate brokers, as inventory is already tight. More sellers and more buyers could enter the market when the stay-home decree is lifted, but that doesn’t preclude a further decline in prices.
“My concerns now are the effects of rising unemployment and vanishing small businesses,” he wrote in a message. “Whenever the economy is opened, it seems likely there will be a flood of new supply just as demand craters. Then, you’ll get your price reductions.”
Fewer mortgages available
A crimp in the mortgage market might be contributing to the April slowdown, particularly at the higher end of the market.
The largest month-over-month price drop in King County was on the Eastside, where median closing prices fell nearly $100,000 to land at $936,995 in April, still 1% higher than the same month last year.
In Seattle, prices actually rose month-to-month, from $790,000 in March to $815,000 in April — though not in the city’s most highfalutin’ neighborhoods. In Queen Anne and Magnolia, median prices tumbled from $1.2 million in March to just over $1 million in April.
It’s become harder to get any type of mortgage as lenders tighten underwriting standards to hedge against the rising risk of borrower default — but the availability of jumbo loans, which in King County start at $741,750, has been especially reduced, according to the Mortgage Bankers Association, as lenders shy away from issuing mortgages not guaranteed by the government.
That could be putting a strain on the higher end of the market, said Carl Self, branch manager of Thrive Mortgage in Bothell. In early March, real estate investment trusts, which purchase many jumbo loans, halted their jumbo programs or tightened lending standards significantly.
Many homeowners are also struggling to navigate the pandemic-wracked mortgage industry. Borrowers with federally backed mortgages are able to defer payments for up to a year by extending the term of their loan. But for the roughly 38% of homeowners with a private loan, forbearance terms are more hit-and-miss.
Linda Sikora bought her Bryn Mawr house in 2017. When the pandemic hit, most of the clients at her market research firm backed out of their contracts. Sikora’s wife has been furloughed from her job as a pet groomer.
Until Sikora is approved for a federal small business loan, “we have no income coming in,” she said. Her lender, First Savings Bank, agreed to defer her mortgage payments for three months, but told her that “on the first day of that fourth month, I would owe all three months of mortgage plus the current balance,” Sikora said — $11,000, an amount she knows she can’t pay.
“I’ve got this impending date. I keep looking at it, then not wanting to look at it,” she said. “We’re in this black void.”