King County home prices have fallen from the peak reached earlier in the year as home sales hit their lowest point for the month of July since the market bottomed out in 2012.
Homes are sitting unsold for weeks. Bidding wars are becoming less common. More sellers are even dropping their asking price to attract buyers.
For the first time in four years, the Seattle-area real-estate market is finally starting to trend in a positive direction for buyers, though only after many were already priced out following years of punishing price hikes.
The change began suddenly in May — normally the peak buying season — and has only accelerated since, according to new data released Monday.
The number of homes for sale across King County jumped 44 percent in July from a year ago, the biggest increase in a decade and the third straight month of huge inventory growth, according to the Northwest Multiple Listing Service. Inventory now exceeds 2015 levels, reversing three years of steep declines.
There was a slight uptick in the number of new listings, but the inventory jump has mostly been due to homes sitting on the market longer as demand for homes starts to dry up. Home sales hit their lowest point for the month of July since 2012, when the market bottomed out.
King County’s median house price of $699,000 in July was down $27,000 from the record highs reached a couple of months prior. That’s not a normal seasonal drop; just the opposite: Last year, July was the most-expensive month of the year in local real estate.
Seattle’s median house price of $805,000 was down $25,000 from the high point reached in the spring and was the lowest since last winter, as inventory in the city shot up a whopping 60 percent. Prices on the Eastside fell $30,000 in one month, to $947,000.
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Prices countywide were still up 6.3 percent year-over-year, but that was the smallest annual increase in three years, and about half the average price growth the region has become accustomed to in recent years.
“I think we’ve hit a bit of a plateau, pricewise,” said Allie Howard, a Windermere broker in Seattle. “We’re starting to see what the ceiling looks like.”
Zillow reported that the share of local home listings with a price cut has grown to its highest point in four years, and has doubled just in the past four months. About 12 percent of listings in the Seattle metro area had a price cut in June, just behind the national rate of 14 percent.
The market cool-down is part of a national trend as inventory finally starts to tick up after years of decline, and price growth continues to moderate. But the Seattle area stands out on the national stage: It saw the second-biggest jump in homes for sale in the country, according to Realtor.com.
Why is market cooling?
Real-estate experts pointed to a variety of factors driving the cool-down: Rents have stabilized, putting less pressure on first-time buyers to get out of their apartments. Mortgage rates are at their highest point in years, eating away at buying power. Population and job growth in the region, while still strong, has waned. Some agents have reported falling interest among Chinese buyers.
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Brokers on the ground also report a bit of buyer fatigue after an unusually fast winter market zapped the energy of buyers who are now bowing out. And prices have gotten so high that the pool of potential bidders is lower than it used to be.
There’s also a sort of rethinking of the market going on among buyers now that it’s showing its first cracks after years of solid-gold status.
“I hear people saying, ‘We’re at the top of the market right now, this is it, I don’t want to buy at the top of the market,’ ” said Javila Creer, a managing broker with Windermere in Seattle.
Creer said sellers are on top of the shifting market, as well: They’re no longer deliberately underpricing homes to create a bidding war, since it’s more common now to receive only one offer. Sellers are also being more flexible about timing; for a while it was common for an offer review date to be set one week after a home hit the market; now it can take two to three weeks to sell.
Both Creer and Howard passed along stories of clients who successfully bought houses in recent weeks by underbidding by $20,000 to $100,000 below the list price — a strategy that likely would have gotten an offer thrown in the trash as recently as four months ago.
Of course, the cool-down is too little, too late for many prospective homebuyers. Seattle remains one of the most expensive places in the country to buy a house, and prices have roughly doubled in the last six years.
Blip or new normal?
The natural question now becomes: Is the market simply taking a breather before surging back up again, or is this the beginning of a new normal — or, even, a sign of a bubble beginning to form?
It helps to start with some context: Even though things have gotten better for buyers in the last few months, that is only because things were so bad for so long. The current level of inventory, while at its highest point in years, would still need to triple to reach the levels seen during the aftermath of the recession, the last time home prices dropped. Inventory is also below the levels seen throughout last decade, including during the peak of the housing bubble.
Then again, while the market has seen some dips here and there over the current six-year run of surging home prices, they usually last only a month or so. This is the longest slowdown since 2014, when inventory rose slightly and price growth was well below 10 percent for most of the year. But then things went back to brutal for buyers in 2015, and stayed that way until recently.
“I think we are going to see a gradual slowing of the housing market. I don’t think we’re headed for a crash,” said Aaron Terrazas, a senior economist with Zillow. “It’s going to be a little more balanced of a market over the next year.”
The new July data shows an even more drastic surge in listings among condos in King County, as condo listings are up 68 percent in the past year. Prices still rose 12 percent year-over-year, however, and the typical condo in the county sold for $414,000.
Snohomish County also saw an increase in single-family-home listings, while prices rose 9 percent from a year prior. The median house cost of $495,000 was down $16,000 from the record high reached a month prior, however.
Pierce and Kitsap counties continue to see inventory drop, on the other hand. Prices rose 13 percent year-over-year in both counties, with a new median home value of $353,000 in Pierce (down slightly from the high point a couple of months ago) and $364,000 in Kitsap (a record).