PULLMAN – The first-time buyer tax-credit program enacted in early 2009 helped Washington home sales improve during the third quarter, according to statistics released today by the Washington Center for Real Estate Research at WSU.
And while the concentration of buyers at the lower end of the home-price spectrum kept median prices below a year ago, the rate of price decline slowed.
Statewide home sales increased 15.6 percent at seasonally adjusted annual rates from the second quarter of this year to 86,930 units. This is a sales rate 2.6 percent above that of a year ago, the first year-to-year improvement in sales activity since the closing quarter of 2005.
WCRER Director Glenn Crellin said two successive quarters of increasing sales rates suggest the tax-credit program was having the desired effect of stabilizing the housing market.
The center conducted supplemental research in late September and early October that indicated roughly half of home sales during the quarter were to buyers claiming the credit. Research also showed that real-estate licensees indicated their clients would not have purchased a home in the absence of the credit.
Crellin said last week’s congressional action extending and expanding the program should help the housing recovery continue.
Only nine of Washington’s 39 counties had a slower sales rate during the July-September period than during the April-June quarter.
Rural communities in eastern Washington saw most of the declines. Urban markets throughout the state saw significant increases in sales volumes.
“While sales improved compared to earlier this year, it is necessary to look at price levels from a year ago to assess whether stabilization is under way,” said Crellin. “The median home price during the third quarter was $260,000, a level 7.6 percent below a year ago.
“It must be noted that this represents a continued slowing in the rate of decline in prices,” he said.
“We must also remember that the median is driven by which segments of the market are most active, and during the third quarter that was first-time buyers, typically seeking the most affordable properties. Changes in medians are not changes in values of individual homes.”
Eight counties recorded higher median prices than a year ago, but only Benton/Franklin (Tri-Cities) represented the entirety of a metropolitan area.
Median prices ranged from a high of $515,000 in San Juan County (King County was second with a $382,000 median) to a low of $125,000 in Adams County. Seven additional counties had median prices less than $150,000. The lowest median price in an urban county was $147,000 in Asotin County (Lewiston, ID-WA).
There were just over 49,000 homes listed for sale with multiple listing services at the end of September, 14.3 percent fewer than a year ago. This is the smallest September inventory since 2006.
At current sales rates, that inventory level would sustain the market for 8.4 months.
While below the month’s supply a year ago, the inventory suggests the housing market is still somewhat oversupplied, especially for higher cost properties, and further price adjustments should be expected.
In theory, Crellin said, 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 with sellers who have little remaining equity and limited opportunities to re-enter the market as buyers.
While median prices declined, mortgage interest rates increased a shade during the quarter, leaving affordability (which considers prices, mortgage rates and income) basically unchanged.
The housing affordability index statewide stood at 122.8, meaning the median income family had 22.8 percent more income than the bare minimum required to qualify to purchase a median price home with a 20 percent down payment and a 30-year mortgage. This index level is considerably improved from a year ago, but has remained quite stable since the beginning of 2009.
In normal times an index of this level would have produced an active market, but the fear of increasing unemployment and concern that prices may continue to decline are keeping many potential buyers, especially those who have a home to sell, on the sidelines.
“Good affordability conditions, coupled with the new tax credit for repeat buyers, should result in housing markets providing stability to the rest of the economy, helping lead the recovery,” said Greg Wright of Chelan, president of the Washington Realtors.
Affordability remains a problem, however, for first-time homebuyers. Like the All-Buyer Index, the First-Time Buyer measure remained stable, but at 72.0 indicates confidence in the future that was required for first-time buyers to drive the summer recovery.
“Home prices in higher-cost communities continue to present serious barriers to homeownership for first-time buyers,” Crellin said. “Often the tax credit, even though it was not available at closing, provided the little bit extra to make the sale happen.”
First-time buyer affordability measures ranged from a low of 33.7 in San Juan County to a high of 109.3 in Adams County. A total of 12 counties had measures of at least 90.0, offering real opportunities for renters to make the transition to ownership.
WCRER has produced these home sales statistics in partnership with the Washington REALTORS® since early 1994. Each quarterly release is timed to coincide with news releases of existing home sales by state and median home prices by metropolitan area from the National Association of REALTORS®. Sales data is available for each county, and median home prices and affordability are reported for 38 of Washington’s 39 counties.
View a pdf of the housing market snapshot here.
