“Firstly, it is a remarkable piece of “fluff” and, quite frankly, nothing more than scaremongering. Why do I say this? Let’s look at some of the quotes –
1. “Homes that should have vanished in days were sitting on the market for weeks”
So a market where homes are no going pending in days is a bad thing? I would hardly suggest that this is troublesome. In King County, homes took an average of 15 days to sell – exactly the same as seen a year ago and 4 days less than seen 2 years ago.
2. “There was a three-bedroom fixer-upper just north of the city going for $550,000, down from more than $600,000.”
Oh woe is me……..! Now, there is something that should be said and that is the issue of perception. Sellers are starting to have unrealistic expectations regarding the value of their own homes. As I said on stage at Inman last week, brokers have a far better grasp as to how much a home is worth. If a seller disagrees then they may well feel that they have lost money but let’s be serious, they haven’t as their valuation is perception, not reality.
3. “Buyers are getting squeezed by rising mortgage rates and by prices climbing about twice as fast as incomes, and there’s only so far they can stretch.”
Now this is, in part correct. Prices are climbing at unsustainable rates (as I have said for quite some time) and that does concern me; however, mortgage rates are still remarkably low and I do not see any negative connotations when it comes to rates until they get above 5% (and we have a way to go to get there).
4. “Inventory, which plunged for years, has begun to grow again as buyers move to the sidelines, sapping the fuel for surging home values.”
GREAT!!!!! We need inventory and this is likely to cool price growth which I am all in favor of!
5. “Prices for existing homes climbed 6.4 percent in May, the smallest year-over-year gain since early 2017, and have gained the least over three months since 2012.”
But not here! In King County, Y/Y median prices are up by 9.8% and average prices up by 11.9%. As I allude to above, this is unsustainable and I WANT it to slow down – I just don’t see it any time soon.
6. “Home prices are plateauing,” said Ed Stansfield, chief property economist at Capital Economics Ltd. in London. “People are saying: Let’s just bide our time, there’s no great rush. If we wait six or nine months we’re not going to lose out on getting a foot on the ladder.”
Never trust an analyst from the UK!! (Just joking!) I do see would be buyers having a little more breathing room as inventories rise and, again, that is a good thing.
7. “Some of the most expensive markets, where sales are falling under the weight of prices, are now seeing substantial increases in supply, according to Redfin. In San Jose, California, inventory was up 12 percent in June from a year earlier. It rose 24 percent in Seattle and 32 percent in Portland, Oregon.”
The jump in supply was noticeable with single family listings in King County up 43% Y/Y but let’s look at the longer term trend. With 3,718 listings on the market, we are still way below the long-term average. In fact, the average number of single family homes for sale in King County in the month of June averaged 6,265 between 1999 and now. Inventory is up but still way lower than the level needed to meet the needs of new household formations.
To conclude, bad press sells. We are not in a balanced market and I hope that price growth slows to a sustainable level; however, I do not see that happening yet. New construction activity is at woefully low levels and unlikely to improve soon which will continue to put upward price pressure on the resale market. Am I worried? Quite honestly, no I am not. Prices are too high, I admit that, but I expect growth to continue to slow through this year and into 2019 and we will not see any significant period of downward price pressure. Remember that long-term price growth has averaged around 6% – 6.5% and that is where we will end up but not for at least another 18-months. I hope that this makes sense (it’s more a stream of consciousness than a prepared commentary) but I would be happy to answer any questions you may have.” – Matthew Gardner | Chief Economist