There aren’t enough homes for sale in Pierce and Thurston counties to meet demand, which is driving up prices for buyers, area real estate professionals said in December, as a busy 2019 sales and purchase season wound to a close.
“The problem we’re having is there’s no inventory,” said Steven Roggow, broker at FirstPoint Real Estate in Puyallup and 2020 president of the Tacoma-Pierce County Association of Realtors.
The inventory of homes and condominiums for sale in Pierce County was 1.12 months in November, meaning if no new homes were listed, the existing number of homes would be gone in just more than a month. A balanced inventory is about four to six months, he said.
Pierce County’s inventory fell to 0.87 months in December.
Christina Janis, a broker with Epic Realty in Olympia and 2020 president of the Thurston County Realtors Association, echoed that, calling the inventory supply “brutal.” The county had a 1.06-month supply in November, down from 1.7 months a year ago.
“It’s just getting to the point of ridiculous,” Janis said.
In December, Thurston’s inventory fell below a month, to 0.68.
In a Northwest Multiple Listing Service (NWMLS) news release after December figures were released, Dick Beeson, principal managing broker at RE/MAX Northwest in Gig Harbor, remarked, “This market is unlike any market I’ve seen in the South Sound over the past 40 years. Too many buyers chasing too few properties.”
Roggow said buyers need to be prequalified for loans, be ready to make an offer quickly, and potentially be willing to offer more than asking price.
Some of the factors fueling the price hikes, according to Roggow and James Young, director of the Washington Center for Real Estate Research at the University of Washington, include:
◉ Converging forces of high prices in the Seattle metro area are pushing more people south to look for more affordable real estate;
◉ Californians and others with cash from home sales in more expensive markets are reinvesting in the region; there are strong economies in Greater Seattle and Tacoma with continued job growth fueled, in part, by a strong tech sector; and
◉ Low interest rates.
Young, in a NWMLS news release announcing November results, noted that Pierce County continues to be one of the hottest markets in the United States.
A separate federal measure demonstrates that.
The Tacoma-Lakewood metropolitan statistical area division (MSAD) in the third quarter of 2019, the latest federal data available in late December, registered a 6.7 percent jump in housing prices over the 12 months from third quarter 2018 to third quarter 2019, which ranked as the 16th-highest rate of appreciation among the top 100 MSADs, according to the Federal Housing Finance Agency (FHFA) House Price Index. Prices rose 2.2 percent from the second to third quarters last year.
FHFA’s purchase-only house price index is a long-running and geographically comprehensive measure of house price appreciation in the United States. It is a weighted, repeat sales index using purchase transaction data from Fannie Mae and Freddie Mac, who own or guarantee more than half of all conforming mortgages in the United States, FHFA said.
Tacoma-Lakewood outperformed the national average price gains, which were 4.9 percent from third quarter 2018 to third quarter 2019, and 1.1 percent from this year’s second to third quarters.
By comparison, price appreciation was slower in the Seattle-Bellevue-Kent MSAD, where home prices rose 1.9 percent from third quarter 2018 to third quarter 2019, which ranked 92nd among the top 100 markets, according to FHFA’s House Price Index. Prices rose 1.5 percent from the second to third quarters this year.
While prices are slowing down in King County, they’re still high relative to Pierce County, Roggow said, noting the markets’ November median sales prices for homes and condos combined were $612,000 and $373,000, respectively. In December, the gap widened even more, $615,000 in King County, $365,000 in Pierce.
The average number of days a home was on the market was 10 in November, he said. For comparison, it was 25 days in January 2016.
UW’s Young doesn’t see any South Sound price relief on the horizon.
“The only relief you’re going to get in South Puget Sound region is, unfortunately, when the economy slows down. That’s the only relief you’re going to get because supply can never keep up with demand — it’s just the nature of the beast,” Young said.
Of course, a slowing economy affects everyone, dampening demand as jobs decline, he said.
Young expects prices to continue rising in the South Sound.
“The South Sound is a bit — I’m not saying behind in a bad way — but I think that it lags quite a bit (behind) what’s happened at Seattle and what’s happened in the greater Seattle area, and so I think that the South Sound area in particular is going to see more rapid house price growth than the city of Seattle or King County,” Young said. “Because there’s no place else to go (in the Seattle area). You can’t go farther north; you’ve got Californians and everybody else moving farther north. You can’t really get farther north of Seattle anymore and call it affordable.”
So, Young said, “There’s no other place to go other than south I-5 — and Tacoma and Olympia have demand in their own right” from their own economic activity. “So your pockets like Chehalis and Centralia are going to be taking off. Shelton, I’m surprised it hasn’t taken off more than it already has.”
He expects to see more people forced to commute from those locations to Olympia and Tacoma.
Janis, of Thurston County, said Joint Base Lewis-McChord drives a lot of housing activity in her region, both active-duty military and civilian contractors. A lifelong resident, she remembers the base mostly affected the northeast part of the county’s real estate market in the past, but with housing choices limited, “Now you’ll see soldiers living as far south as Rochester just because of affordability, and they’ll make that extra 45 minutes or an hour drive.”
Lack of inventory is particularly problematic for starter homes, Young said. When reasonably priced homes aren’t being built for renters trying to move up to home ownership, rental housing will fill the void and prices will rise as it becomes more attractive for homeowners to rehab non-prime properties for rentals. As rents rise, they become less affordable for people on the lower end of housing, resulting in relocations or homelessness, he said.
Additionally, people get stuck in the rental market and are not able to save enough money for a home deposit because the rental market fills the vacuum that is traditionally filled by first-time buyer housing, starter homes, or condos, he said.
Also, as older buyers trade down with cash to spend from their previous homes, they’re competing with first-time buyers for the same type of home, he said.
“So you’ve got double the demand in the market where it’s hardest to build,” he said.
In the NWMLS news release on November data, J. Lennox Scott, chairman and CEO of John L. Scott Real Estate, said, “The housing market is virtually sold out in the more affordable and mid-price ranges, where 75 percent of sales activity occurs in each market area.”
With December typically marking a low point for new listings coming on the market, and the lower level of unsold inventory, Scott said, “The pressure is on despite the winter chill.” This pressure is sending prices higher in the more affordable and mid-price ranges, according to Scott, who does not expect any easing until spring, when new listings begin to increase.