The Puget Sound housing market continues to splinter into hot and cold sectors — with substantially more heat the farther south you move — but the trend may be moderating as buyers and sellers adjust their expectations.

In Seattle and King County, home prices in May were down substantially from a year ago. The price of the median home in Seattle dropped 5.4 %, to $784,925, compared to May 2018, according to the latest data from the Northwest Multiple Listing Service .

The year-over-year slumps were even sharper in some pricier neighborhoods. In Capitol Hill, the median price fell 6.2%, to $984,000. In Ballard, they were off 7.8%, percent, to $785,000, and in Bellevue, they were down 12.4 percent, to $902,000.

Still, May’s decline was less severe overall than in April, when year-over-year prices plunged by nearly 8% in Seattle. Brokers speculate that’s a sign that lower interest rates and a less mercenary marketplace may be luring buyers back into the hunt.

“That may be inspiring people to give it another go,” said Sabrina Booth at Windermere Real Estate in Madison Park. “There were a lot of people who got discouraged from the bidding wars — they kind of dropped out.”

By contrast, prices continue to spike across Tacoma and the larger South Sound region, as these still semi-affordable neighborhoods remain attractive to priced-out buyers from Seattle as well as investors looking for new opportunities.

Real estate brokers “are working their butts off” responding to so many eager buyers, said Teri Bevelacqua, branch manager for RE/MAX Northwest Realtors in Tacoma. In Pierce County, the median price for May jumped 4.2% over a year ago, to $370,000, according to the MLS data.

Yet even in hot South Sound, price trends also may be moderating slightly.

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Pierce County’s 4.2% increase in May is slightly less than in April, when prices jumped nearly 5%. What’s more, brokers say buyers seem less willing to do things like waive inspections or overbid.

“It doesn’t feel as desperate,” said Bevelacqua.

Likewise, many of the people now coming into the Tacoma-Pierce County market to buy houses as investments are taking a more measured approach. For example, they’re choosing more carefully between homes that have high appreciation value versus homes whose value is their ability to generate rental income, Bevelacqua said. “They’re being more practical and smarter,” she said.

Despite these potential signs of moderation, the Puget Sound housing market remains light years from a normal state.

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Although the number of homes listed for sale is rising, inventories remain far below the six-month level that is a considered a balanced market. In King County, the inventory of listed homes would last just 1.71 months at current sale rates.

In Pierce County, inventory is just 1.4 months. And even in Snohomish County, where median prices barely budged in May (falling just 0.01% to $499,950), inventory is 1.5 months, according to the MLS data.

And lest anyone need reminding, affordability also remains deeply elusive.

In King County, just 13.8% of single family homes listed for sale have asking prices of less than $600,000, according to an MLS analysis — putting the vast majority of homes far beyond the reach of many residents.

Indeed, it is that dynamic that has helped push up prices in outlying areas, as residents priced out of Seattle and, increasingly, Tacoma, seek more affordable neighborhoods.

In areas around Tacoma, for example, prices are kicking up sharply. In Kitsap County, the median home price increased 6.9% over the past 12 months, to $385,000, in May — a significant jump from April’s increase of 4.5%.

In Thurston County, median prices went up by 11.3% year over year, to $345,000, compared to 8.2% in April, according to the MLS data.

Similarly, even counties out in Central Washington are seeing what some call “Seattle prices” as more Puget Sound residents and even some businesses relocate. In Kittitas, Chelan, and Douglas counties, median house prices in May had year-over-year jumps of 6.4% (to $$375,000), 4.2% (to $375,000), and 23.2% (to $343,450), respectively, according to the MLS data.

And, of course, in what’s left of the affordable market — homes under $400,000 — demand remains hot regardless of location.

Seattle realtor Danae Goss recently listed a three-bedroom, two-bath 1,450-square-foot fixer-upper in Lynnwood for under $400,000 and got 18 offers, including 6 that were all cash.

“People want a house,” Goss says, “but they can’t afford anything over $400, so they have to go further north.”

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