Persistent action by the Federal Reserve Board, evidenced by 16 one-quarter point increases in the discount rate (4.0 percent) has resulted in an uptick in mortgage interest rates and a flat home sales market in Washington during the first quarter of 2006, reported the Washington Center for Real Estate Research at Washington State University.
Glenn Crellin, director of WCRER, said that, “While some parts of the country are reporting substantially fewer sales and significantly increased inventories of homes available for sale, here in Washington the market is flat and inventories are very modestly improved. The market remains very strong.”
Roughly half of Washington’s 39 counties reported fewer sales between Jan. 1 and March 31 than a year ago, but the statewide total was only
0.3 percent (120 sales) below the strongest opening quarter on record.
Local sales patterns were inconsistent, with King County home sales 10.0 percent below a year earlier while both Snohomish and Pierce counties reported roughly nine percent more sales. In Eastern Washington, Spokane was the only urban market to report increasing sales, but the real stars were Kittitas (Ellensburg) and Walla Walla where sales rates were nearly 50 percent above a year ago. Statewide there are enough listings available for sale to sustain the market at current sales rates for nearly three months, about half the inventory required to avoid significant inflationary pressure on housing.
The strong market continued to be reflected in rapidly increasing prices, although the pace of increase is showing signs of moderating. The statewide median soared to $280,200 during the first quarter, a level 17.1% above a year earlier, but a slower increase than during the fourth quarter.
Grant and Yakima counties were the only areas to report median prices below a year ago, and sparsely populated Columbia County was the only market in the state reporting a median price below $100,000.
Double-digit price increases were again observed in 29 counties. San Juan County retained the title as the most costly housing market in the state, with a median price of $625,500, 33.8 percent above last year. King County remains the most expensive urban market, with a median price during the first quarter of $399,500, while Yakima has the least expensive homes among urban communities, with a median price of $129,400.
Terry Sullivan, 2006 President of Washington REALTORS® from Spokane County said, “Washington’s population centers continue to face markets with limited inventory available for sale and restricted opportunities for builders to profitably produce affordable homes for middle income households. These problems will make it difficult for Washington to compete for the new businesses necessary for our state to continue to prosper.”
The Housing Affordability Index, which measures the ability of a middle income family (two or more persons related by blood, marriage or adoption) to afford to purchase a median price home using a 30-year mortgage at prevailing interest rates highlights the growing problem. In the first quarter, the all-buyer index slipped further below 100, registering 93.3.
This means that a typical family has only 93 percent of the income required for the purchase of a median price home. Actually purchasing the home will require a larger than average down payment or a lender willing to extend the usual underwriting standards.
Buyers in seven counties faced index values below 100, with the problem especially apparent in San Juan, Jefferson and King counties, which had all buyer index values ranging from
37.1 to 77.1. At the other extreme, four counties had index values above 150, suggesting the typical family would not have much difficulty qualifying for a median price home in those mostly remote areas.
“The biggest challenge if finding affordable starter homes,” said Crellin.
“Only three counties offer the typical entry-level buyer the opportunity to afford a typical starter home.” The first-time buyer affordability index for the first quarter stood at 54.3, the fourth consecutive quarter of record low affordability (since 1994). Among urban areas first-time buyer affordability index values ranged from a low of 43.1 in King County to a high of 106.7 in Benton County.
WCRER has produced these 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 35 of Washington’s 39 counties.
The First Quarter 2006 Housing Market Snapshot can be viewed on-line at the WCRER Web site, www.cbe.wsu.edu/~wcrer/.
