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Pierce County Housing Report 2016 Recap / 2017 Outlook
The U.S. economy is providing a very positive backdrop of low unemployment, new highs in the stock market, and housing appreciation is firmly on the march. Pierce County is also enjoying it’s share of good news and economic fortune, 2016 was a great year of continued recovery. Looking ahead, Pierce County has some serious considerations that will determine it’s future and the role it plays in our region’s economy. First, here are the end of year end numbers as measured December 31, 2016.
Inventory – DOWN – 17%
Closings – UP – 7.9%
Median Price – UP – 10.5%
New Pending Contracts – UP – 13.8%
Pierce County, by these numbers, has only 1.7 months worth of inventory. We consider 3-5 months worth of inventory to be a balanced market so there is clearly need of more homes to sell in order to satisfy current buyer demand.
Prices in Pierce County are up 26% in the last 3 years (compounded rate of 8% annually) and the median price has fully recovered from the great recession.
As shown by our Pierce County Median Price Index we are at our pre-recession peak. By comparison, King County prices are 13% above their previous peak. The affordability index in Pierce is fully 45 points better than King County.
This recovery in price also means we have far fewer homeowners with negative equity. When a homeowner owes a mortgage balance greater than their home value they have negative equity. In 2011 & 2012 we were seeing negative equity rates in Pierce County upwards of 26% of all mortgages. Measured in the second quarter of 2016 the rate was a much improved 9.7%.
Price recovery is accompanied with Velocity and Volume recovery. Last year Pierce County sold 15,082 residential units representing a 13% increase over 2015. This amounted to just over 5 billion in sales and is expected to top 6 billion in 2017.
I feel bad clouding this good news with the following, but it clearly is an issue that is relevant to the health and future of our Pierce County Housing Market.
Here it is: Jobs, Jobs, Jobs.
The King County market is red, no….white hot! Why? The King County number of jobs per resident is 207, in Pierce County the number of jobs per resident is 82. The unemployment rate in Seattle is 3.7% while in Pierce County it is 6%. Compare Pierce to U.S. with unemployment rate of 4.7% and see the weak recovery path in the graph below.
After each of the 3 previous recessions, Pierce County unemployment recovery was better. In the 90’s Pierce recovered to 4.5% unemployment, the pre-recession recovery was in the 5’s, while the current recovery has only reached 6% and it appears to be a post recovery low.
Pierce County’s per capital income is $45,000 and would not be that good were it not for King County jobs. We are fighting a trend of becoming a bedroom community.
Fully 135,000 Pierce County residents have jobs outside the county. Put another way, 40% of the non-military work force don’t work here.
The effect on real estate is the commuter buyer/renter is a big part of our market and will continue to be that way until Pierce County improves it’s workforce skill and attracts new businesses.
With the Pierce County shortage of inventory and the pressure of high prices in King County, homeowners in our area will enjoy another year of increased values, likely in the 9-10% range.
Buyers will need to be fully pre-approved, able to react quickly, and be open to the idea they will likely compete for their dream home.
Yes, it will be a good year for real estate in 2017, but there is work to do if Pierce County wants to be more than just a place for Seattle skilled workers and executives to come home and sleep until they can afford a home closer to their job.
Second Quarter 2016 Pierce County Housing Report
When is a "HOT MARKET" not Hot? and….Are you one of the Pierce County Homeowners poised to "beat the market"?! There is a way to out-perform this crazy market using current trends! More on that below, first the Pierce County headline numbers
Inventory – DOWN – 21.5%
Closings – UP – 5.3%
Median Price – UP – 13.6%
New Pending Contracts – UP – 24.1%
These headline numbers show us the market continues to roll through the summer and buying in this market can be challenging with a high level of increased sales with the backdrop of decreased inventory. What would you say if I told you you could leverage this market in your favor? It's not for everyone but if you're in the market for a larger, or more luxurious home while selling your median priced home, you could be in for a big advantage. Maybe the waterfront or the view you've always dreamed of is within reach!
You know I love Sales Ratios as a tool for measuring market effectiveness. Click here for a refresher on Sales Ratios. The Pierce County Market is not performing with the same effectiveness throughout the price spectrum. You can see under $500,000 is HOT! Above $500,000 the market fundamentally falls off pretty drastically.
The way to trick this intense market into working in your favor will begin to be revealed with a look at where the home sales are concentrated. It doesn't take long to see the "high-end" is not performing the same as the median or lower price ranges. I defined the high end in Pierce County as; 2.5 x median price in combined markets of North Tacoma, University Place and Gig Harbor. So, $359,000 x 2.5 = $900,000. Looking at the chart below and the layers of market intensity are quite visible.
By the way, turns out this is nothing new, Pierce County has recorded about 95% of all sales below the $500,000 price level for….well….ever.
The strategic move here says Captain Obvious, "If it is possible with your circumstances to sell in a lower price sector and buy up into a higher one, the negotiation table should be in your favor." If you are selling in a price range where there is only 1.3 months of inventory and a sales ratio of 87%, prices are likely moving up and you can sell at a premium. The farther up the price tree you climb the worse the fundamentals are for sellers and the more things are in favor of buyers.
This market condition is important for high end sellers to realize. It may be "new" news to Pierce County luxury home sellers because there has been so much talk of the "hot" market, but I haven't seen a report break it down by price.
As you can see the overall market averages are impressive and the market is really good! That said, it reminds me of an old saying. "If you have one bare foot in a bucket of hot coals and the other in a bucket of ice, 'on average'…you should be fine!"
Drop me a line if you have any questions or comments, it's always good to hear from you!
Pierce County Housing Report Supply vs. Demand
Last week I talked about the shortage of houses for sale in Pierce County being notably below the demand and how this condition makes the home buying and selling experience a little testy for many. Buyers have to make decisions quicker than they might otherwise like to, sellers face tricky waters getting their price right, and the negotiation process can have some tension that both may prefer to be without.
In the process of preparing that report I began to wonder; “Is demand really high or supply just super low?” I referenced some historical Pierce County housing data for perspective. The chart below represents 14 years of Pierce County housing activity. The bright green bars represent supply of homes; the dark green bars represent closings while the red line tracks Pending sales.
As soon as I prepared this graph the Pending line caught my attention, I call it the “Demand” line, and it is shown in red on this graph. When stepping back 14 years we can see there is certainly some fluctuation in the “Demand” line, but it looks relatively flat compared to the “Supply” line! Getting a little geeky I set out to measure the two, here’s what I learned after sifting through 14 years of data.
Next I wondered how often the demand or supply fluctuated higher or lower than 25% of the median. I wanted to know what, if anything is out of whack with our market “today”.
As you can see, in the last 14 years 63% of the time demand is within 25% of the median, and surprisingly has only been more than 25% above the median 22 out of 168 months (13%). Currently, demand for Pierce County housing as measured by 1st Quarter 2016 is in the high side of the “Normal” range. At 1,380 Pending sales it is 22% above our 14 year median. Not the same story for supply.
Our 1st Quarter supply average is 1,941 which is 61% below the median. Insert shocked face – here! – Pierce County is low on inventory! What is extraordinary about right now is the inventory has actually been in this “more than 25% below median” status for 29 of the last 36 months. Additionally, while I earlier stated that the 1st Quarter average demand is within the “norm”, if we only look at March demand it is 54% above the median making it one of the highest demand months in 14 years.
So what are we saying here?
Even though the market feels like there’s an extraordinary amount of pressure it’s been like this 80% of the last 3 years. March has us feeling market tensions in an exaggerated way due to a spike in demand along with the chronic low supply of homes we have been living with. It is also important to remember that the conditions described here are going to vary (sometimes a lot!) depending on where and what price range in Pierce County you are looking. This is one more reason why it is so important to have a Realtor at your side that can show you the #’s for your area. There are opportunities to sell into a High Demand/Low Supply sector and buy into a Normal Demand/Normal Supply sector. More on that next time!
First Quarter 2016 Pierce County Housing Report
You don't need me to tell you the market is great! The market is really back! Media is buzzing with positive housing news complete with rising prices, inventory shortages & bidding wars coupled with low interest rates and a strong economy! What's not to like? It is great, but like so many things there's two sides to the coin and the answer is, "it depends!" First, a look at the numbers for Pierce County as measured on March 31st.
Inventory – DOWN – 35%
Closings – UP – 16%
Median Price – UP – 9%
New Pending Contracts – UP – 28%
These year over year numbers are astounding. We have over 1/3 fewer homes offered for sale while at the same time we have an increase in the number of closings by nearly 1/3 creating a classic demand exceeding supply scenario. Pierce County houses are selling in an average of 59 days, the shortest length of time measured since July 2006.
In the past I've referred to sales ratios as being one of the most accurate way of describing the strength of the market. (To read a past description of Sales Ratios click here.) We know a balanced market has a sales ratio of 55%, currently the numbers give Pierce County a 95% sales ratio. We have nearly as many houses Pending as we do Active. Yikes! Another key measurement of a housing market is Months of Inventory. The target here for a normal "breathe through your nose" market is 3-5 months….Survey Says!! 1.4 !!
Most would say, "This is a great time to be a seller and a challenging time to be a buyer". There is some truth to that, but in reality, it can be a challenging time to be on either side of the table. Sellers naturally want to price their home accordingly to take advantage of the favorable market conditions and not leave any money on the table but proper pricing strategies right now can be elusive. Meantime, no buyer wants to "get in a bidding war" and the result is a tension from both sides that can get interesting. Consider this scenario that recently played out;
Our new listing just hit market – Within days we have two offers! No, wait three! Buyers are notified, "we have multiple offers!" First one raises offer – second stays put – third one goes dark! Aghh! Then, just before time to review and sign off, first one lowers to original amount…..oooookkkkayy! So second one goes away to chase another house. Wait!, first one has gone dark now too! What the..?! day goes by….first one is out! Good grief! Word is #2 didn't get the other house they were chasing….so go get #2, right?! Ohhhhh we can't! #2 has now decided house is too close to a relative she doesn't want to be so close to!
Day 15 – still on the market.
With the added tension of this fast paced market sometimes decisions have to be made quicker than we would like and the resulting flip flopping can be hard on everyone!
Despite the obvious inventory shortages and low market times it is not hard to find homes that have been on the market for 100 days or more. That shows us the market is not all forgiving and throwing any high price on a property will fail. For sellers it is a delicate balance between pushing the envelope and being realistic. For buyers, the last house is not the last house. Find good counsel in a trusted Realtor, have a pre-approved loan in your pocket, and the right house will come to you at the right time.
Markets seek balance and the current shortage of good homes will not last forever, it never does. Yes, prices are going up, and that erodes buying power. In the process new neighborhoods evolve as qualified buyers gentrify more affordable areas. The dream of having the right home to call your own is still obtainable.
Incredible 4 bedroom Home with a Separate 3 Car Garage and Apartment in Downtown Puyallup!
411 4th Ave NE, Puyallup
The Essentials:
3,058 Sq. Ft. Home
14,332 Sq. Ft. Lot
4 Bedrooms / 3 Bathrooms
Attached 2 Car Garage
Detached 3 Car Garage with 675 Sq. Ft. Apartment Above
Offered for $525,000
Click here to view the listing
Welcome to your oasis in the city in downtown Puyallup. Through the gated entry and down the tree lined driveway is a 3,058 sq. ft. 3 bedroom / 2 bathroom custom built home with an attached 2 car garage and wrap around covered porch. The classic charm of a craftsman with all of the modern amenities including air conditioning!
Step into the great room and you are greeted by gleaming hickory hardwood floors with a cherry inlay. Through the custom French doors is the den / office which is perfect for keeping an eye on the happenings in the house and out front.
Handsome den / office with tray ceiling, wainscoting, and a built in bookcase. All of the millwork is custom; fir with a cherry finish.
Hickory floors continue through the great room, dining room, and kitchen. Stately stone fireplace is fueled by gas making it easy to stay cozy! When the weather heats up you can crank up the air conditioning and enjoy the modern amenities this home offers! If the power goes out never fear, the home is wired for a generator!
Continue to the chef's kitchen. Walk in pantry is to the left. Custom cherry cabinets, under counter lighting, granite countertops, stainless steel backsplash and appliances.
If you're looking to grab a bite out there is a plethora of options in downtown Puyallup. Casa Mia is blocks away and offers fine Italian fare. You can also walk to Puyallup's original craft brewery, Power House Brewery, for more casual meals and an assortment of beers on tap or check out Charlie's of Puyallup for fresh home style meals. Visit the famous Puyallup Farmers Market on Saturdays from 9 am – 2 pm at the Pioneer Park and Pavilion for some fresh local produce or Thursdays from 4 pm – 8:30 pm you can visit the Sunset Market to enjoy live entertainment, produce, and merchandise from local vendors.
The master suite is conveniently located on the main floor and opens up to the patio, a lovely owner's retreat. There is an attached five piece bathroom with skylight, dual vanities, cherry cabinets, jetted tub, and dual shower heads in the walk in the shower.
There is another bedroom, a full bathroom, and laundry room with extra storage on the main floor as well. Upstairs you'll find two spacious bedrooms, a full bathroom, and a loft area, the perfect spot to put a comfy chair.
Step out into the backyard and enjoy the fully fenced and landscaped yard including a tranquil water feature, and sprinkler system with drip irrigation.
Sit out on the stamped concrete patio in the shade of the mature trees and feel as though your miles away from everything, while being within walking distance of amenities.
Multiple seating areas on the patio and plenty of space to play on the 1/3 acre lot! If you need more room to roam head to Grayland Park, a 3 acre park that is located adjacent to the Memorial Center and has a playground and picnic area! Or visit Pioneer Park, a 2 acre park with a sprayground, grassy area, and playground and is also the location of the Pavilion which can be rented out for special events.
Side view of the home and detached 3 car garage with an apartment above.
Inside the detached 3 car garage … imagine the possibilities!
Above the detached 3 car garage is a lovely apartment with the same quality finishes found in the main house. A few details to be completed, but this would make a wonderful guest suite, spot for your college student home for the summer, artistic retreat, home office, source of extra income, or the perfect spot for your in-laws!
Bedroom with skylight and quality finishes above the detached garage.
Lovely finishes in the bathroom as well.
View of the gated entry from the street. The extremely commuter friendly location is great if you work outside of Puyallup. Easy access to Hwy 512, Hwy 167, and the Puyallup Sounder Station is only 1/2 mile away, or a 10 minute walk!
Click here to schedule a showing
October 2014 Pierce County Housing Report
It's that time again to check in on the Pierce County Housing Market. This month we have another neutral month based on the year over year stats I always lead off with, but I also found a few goblins we may want to keep an eye on. Here are the headline numbers as measured on September 30:
Inventory – UP 6.5%
Closings – UP 9.1%
Median Price – UP 1.4%
New Pending Contracts – 31.7%
These are Year Over Year Numbers and they look pretty good. Inventory is UP, we like that, the market needs more houses to sell as we still have less than 4 months supply based on closed sales. Median Price is UP only slightly but that's not a surprise, we talked last month about price increases slowing. Pending contracts are UP so much that it is a great indication we are in store for a strong sales flow during the 4th quarter as we wrap up 2014! While I prefer the pumpkin is "half full" viewpoint, I have to say the market hasn't "felt" like these numbers. When talking with other brokers recently, I've noticed some chatter about a slower market; so I dug a little deeper.
Month Over Month transaction volumes are much different with Pierce County DOWN 13.4%. Turns out this August vs September drop in closed sales is normal, at least compared to 2013 when the same thing happened. However in arriving at this conclusion I viewed the volumes by price range and saw a couple of items you may find interesting. In the chart above you can see the very important $250,000 – $500,000 price range things really took a break with volume dropping 20%. These are the homes that buyers are "moving up to" and it is just this year we have been able to say the recovery took hold in this sector. This segment of the market represents over 35% of our Pierce County transaction volume. I don't know if it is widely understood that 95.7% of the Pierce County Market happens in this price sector….and below!
This shows that only 4.4% of all Pierce County transactions were over $500,000. In case you were wondering, listing inventory over $500,000 disproportionately makes up 13.3% of the total number of homes for sale. Pierce County Housing Market participants need to know, the "Work-Horse" price sector is under $250,000 with 41% of the inventory creating over 60% of the sales!
We have a healthy volume of Pending Sales so if history repeats itself the coming months should provide a nice increase as we wrap up 2014.
September's numbers are a fitting reminder that there's a limit to how robust our recovery can be characterized.
Month by month we are achieving normalization and as I've always said; "markets don't recover in a straight line" so there may be a bump in the road from time to time. Those that approach this market with realistic expectations based on detailed market analysis will find success.
Give me a call or shoot me an email, it is always good to hear from you!
