For yet another month, home prices were squeezed to new heights by a combination of low inventory and high demand.
The median King County home sold for $742,950 last month, the second consecutive month of record-setting price growth, according to new data released Friday by the Northwest Multiple Listing Service (NWMLS). Median means half the homes sold for more, half for less. The previous record high last month was $727,500.
Median home prices elsewhere in the Puget Sound region also broke records after year-over-year price growth in the double digits throughout Western Washington. Across King, Pierce, Snohomish and Kitsap counties, median home prices jumped 17% year-over-year, from $500,000 to $585,000.
New listings, which cratered after coronavirus lockdown measures began in March, had been steadily rising through the summer, easing some of the pressure on prices.
August saw that trend reverse. Across the 23 Western Washington counties the NWMLS tracks, 529 fewer homes went on the market last month than the month prior. Fewer homes were for sale last month than in any August in the past 20 years. Recent months’ breathtaking plunge in mortgage rates has helped keep inventory off the market, as many homeowners choose to refinance rather than sell.
But demand — from legions of home shoppers eager to take advantage of historically low interest rates, some to leave apartments or upsize into larger spaces in the new work-from-home universe — didn’t let up, the data shows.
Interest was especially fierce along the I-5 corridor. In Pierce and Snohomish counties, every home on the market would have sold in just over two weeks at the current level of demand. That’s led prospective buyers to “do some pretty illogical things” to win out in cutthroat negotiations — including waiving inspections, said Poulsbo broker Frank Wilson of John L. Scott.
Home price hikes are one of the most obvious ways COVID-19 has underscored existing inequalities in the Puget Sound region.
Even as the economy tentatively reopens, employers have continued to lay off workers, and statewide jobless claims remain historically high. Last month saw the expiration of an additional $600 weekly federal unemployment benefit for people who lost their jobs as a result of the pandemic. Some of those workers are eligible for a continued $300 weekly stipend, but it’s unclear how long funding for that program will last.
The region’s many white-collar workers, especially those at technology companies, many of which have posted gigantic gains in stock prices this year, have been less affected by the economic pain. For some, the pandemic has added urgency to their home search as the sixth month of remote work winds up and digital schooling begins.
Hannah Kwon, who works in human resources at a logistics technology firm, closed last month on a five-bedroom new construction home in Black Diamond, where in August, home prices jumped 16.5% year-over-year. After years of being a renter — most recently in a 2,100-square-foot Federal Way home — Kwon, 37, said she was ready to stop paying someone else’s mortgage and size up into a home where each of her three children could have their own room and she could have an office.
“It was important that the kids had enough space,” Kwon said.
As the surviving spouse of a veteran, Kwon qualified for a zero-down Veterans Affairs loan on the $599,950 property with an interest rate of 3.625%. That’s higher than the jaw-dropping 2.75% she could have gotten if she’d purchased a home under the VA’s loan limit (which is lower than typical loan limits) but still a cheaper rate than nearly anytime in the past decade.
Low mortgage rates and high demand have created “the perfect storm of frustration” for home shoppers, said Windermere chief economist Matthew Gardner.
Another indication that buyers are facing relentless competition: The number of homes appraised lower than the sale price is on the rise, noted Coldwell Banker Bain principal managing broker John Deely, suggesting shoppers are willing to pay more than a house is worth.
Seattle saw slower price growth than King County as a whole. Median home values rose 8.6%, year-over-year, to $825,000. Growth was particularly torrid in North Seattle, where median prices rose more than 18% over the past year, to $899,500. More affordable south King County neighborhoods also saw rapid price increases. In Skyway, where King County Councilmember Girmay Zahilay has warned longtime residents are at risk of being displaced by higher-earning newcomers, median prices rose 31.2% to $602,250. Compared to the rest of the county, that price point looks affordable. Compared to the neighborhood’s median annual income — $49,104 — it does not.
Home shoppers also drove up prices in more affordable suburban and rural parts of the county. Apart from Black Diamond, Carnation, less-dense parts of Bellevue, Kent, Auburn and Federal Way all saw year-over-year price hikes of more than 10%.
Developments in the condo market were more variegated. Slightly more condos hit the market than in August 2019, and King County median prices rose a modest 3.75%, to $415,000. The opposite took place in Snohomish County, where listings dropped 36% over August 2019 and prices rose 12.7%, to $400,000.