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February 2004 Where Have All the Listings Gone?For the last several years, WCRER has been supplementing basic reports on home sales, home prices, and housing affordability with data on listings available for sale. Rather than reporting statistics on how many homes are on the market, or how long the homes sold had been listed, the Center has followed the conventions of real estate market analysts, with estimates of months’ supply of homes for sale. This allows meaningful comparison between large and small markets. Each quarter WCRER computes the number of homes sold through multiple listing services [in a given county] over the previous 12-month period, divides the sum by the number of single-family homes listed on the MLS at the end of the quarter, then multiplies the resulting fraction by 12 to estimate how many months it would take to exhaust the current inventory if the sales rate remained steady and no additional homes were listed for sale. WCRER has usually indicated that a 5-8 month supply is required in an average market, that anything less than 5 months indicates a shortage of inventory which would be consistent with rapid price increases, while more than 8-month inventories would suggest price stagnation or discounting. At a presentation in Spokane in late February, Joel Singer, the Chief Executive Officer (and former economist) for the California Association of Realtors®, indicated similar beliefs with inventories less than five months characterized a seller’s market, five to ten months as a Realtor’s market (where the professional skill really pays off), and over ten months as a buyer’s market where discounts abound. What is the character of the current market in Washington? Inventories at year-end 2003 were remarkably short, with a state-wide month’s supply of only 2.8. Of the 21 communities (25 counties) where WCRER computes month’s supply, only seven had month’s supply estimates of at least five months, with the greatest inventory a 6.9-month’s supply in Northeast Washington. These statistics imply we should continue to see real increases in housing prices all over the state throughout 2004, or at least until mortgage rates increase appreciably. Three counties had especially short inventories at year-end, less than half the inventory required to be characterized as a balanced market—King, Kitsap and Thurston counties each had only a 2.4 month’s supply of homes on the market. The inventory was only a few days longer in Pierce County or Spokane County (2.5 and 2.6 months, respectively). Such short inventories frequently lead to multiple offers and bidding wars. Aggregate statistics are useful, but the situation is illustrated even more clearly when the linkage is made to price ranges. In virtually every community there was excess inventory priced above $500,000, but in the $80,000 to $250,000 price range, where most homebuyers focus their attention, the listings could sustain sales for a much shorter period. For homes priced from $80,000 to $160,000 the inventory at year-end could sustain the market for less than two months in each of six counties (Kitsap had only a 1.2 month supply). In the next higher range, $100-250,000, King and Kitsap still had less than a 2-month supply. There is little doubt the urban areas of Washington need more affordable ownership housing, but the limited availability of buildable land, especially convenient to employment centers, makes it nearly impossible to develop affordable new housing, meaning the demand pressure will continue to foster rapid home price increases as would-be buyers devote ever-increasing proportions of their income to purchasing that critical element of the American Dream—a home of their own. |
Media ReleaseGlenn
E. Crellin, Director PO Box 644861 Statistics on Washington’s housing market and other useful information are available on WCRER’s Web site: www.cbe.wsu.edu/~wcrer. For other information on real estate markets around the State of Washington, or general information about the real estate industry in the state (excluding legal questions), readers can reach the WCRER at 1-800-835-9683. |