PULLMAN Second quarter statistics on existing home sales, median home prices, and housing affordability suggest that the $8,000 first-time buyer tax is drawing entry-level buyers back to the Washington’s housing market. Affordability is improving with lower prevailing prices and continued low interest rates.
Statewide home sales increased 11.6 percent at seasonally adjusted annual rates from the first quarter of this year to 74,830 units. This is a sales rate 15.6 percent below that of a year ago, but only half the year-to-year decline reported for the first quarter. The Washington Center for Real Estate Research at WSI indicated this was the first quarter-to-quarter improvement in home sales in over two years. Glenn Crellin, WCRER director cautioned, however, that a one quarter improvement should not be considered a trend, especially since improved sales are driven by a program which is currently scheduled to expire the end of November.
Seasonal adjustment allows comparisons from quarter-to-quarter by taking into consideration that sales are always lower in winter months and stronger in spring and summer. While market improvement was widespread, statistics were quite different from county-to-county with the sales rate declining in eight counties. Among urban counties, all except Thurston achieved an increasing homes sales rate, led by a 21.0 percent surge in King County, and a nearly identical 20.7 percent jump in Snohomish County.
Glenn Crellin commented: “While sales improved compared to the first months of the year, it is necessary to look to price levels from a year ago to assess whether stabilization is underway.” The median home price during the second quarter was $265,100, a level 9.2 percent below a year ago. It should be noted that this represents a slower rate of decline compared to a year earlier than was seen in the first quarter statistics. Still, the decline resulted in the lowest second quarter price since the second quarter of 2005.
Only four counties bucked the trend of lower median prices all located in Eastern Washington. Yakima County led the way with a 3.6 percent increase with Grant, Benton, and Franklin counties all registering modest increases. The sharpest price decline was in San Juan County, relinquishing the most expensive crown to King County for the first time since early 2004. The highest median price among the urban areas was $387,500 in King County, while the lowest was $155,200 in Asotin County.
There were just over 50,000 homes listed for sales with multiple listing services at the end of June, 6.5 percent less than a year ago. At current sales rates that is enough inventory to sustain the market for 10.6 months. While somewhat below the month’s supply a year ago, this suggests the housing market is still oversupplied, especially for higher cost properties, and further price adjustments should be expected. In theory the increase in home purchases by first-time buyers should be providing an opportunity for sellers to move up as well, but it appears much of the sales activity has taken place in the foreclosure and short-sale market, providing the sellers with little opportunity to re-enter the home sales market immediately.
Lower prices and lower mortgage interest rates would ordinarily have produced improving affordability, but the recession resulted in lower incomes, keeping affordability virtually unchanged. The statewide All Buyer Affordability Index (which measures the ability of a median income family to purchase a median price home) was 123.2 in the second quarter, indicating this median income family has a 23 percent income cushion in terms of purchasing a median price home.
The index presumes lenders are willing to offer loans to families making a 20 percent down payment and who will allocate a quarter of their gross income to principal and interest mortgage payments. This index was a bit below the first quarter, but still represents a much more affordable market than prevailed last year. Only San Juan County’s index was less than 100, indicating that affordable housing was available throughout the state. “For families secure in their job prospects with good credit, there are bargains available and very affordable interest rates,” emphasized Glenn Crellin. “Even if prices decline a bit more, payments will probably not decline much since interest rates are already showing signs of increasing.”
Affordability remains a problem for first time homebuyers, however. Like the All-Buyer Index, the First-Time buyer measure slipped a little, but at 72.2 it indicates that bargains are available for well-qualified buyers who can take advantage of the $8,000 tax credit. Greg Wright, 2009 President of Washington Realtors, emphasized that “time is running short for first-time buyers to take advantage of affordable prices, affordable interest rates coupled with the government assistance, which expires the end of November.”
Current conditions in the mortgage market indicate that closing times are increasing as new appraisal standards are being enforced, and if the property is a short sale the financial institutions are slow to put their stamp of approval on the deals negotiated between the buyer and the seller of the property. First-time buyer affordability ranged from a low of 50.5 in San Juan County to a high of 126.2 in Columbia County. Among urban areas the least affordable was King County with an index of 57.7 while the most affordable was Benton County at 114.4.The first-time buyer index assumes a lower price, a lower down payment, and lower income than the all buyer index.
