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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.
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.
Pierce County Real Estate continues to lag behind King County
The Pierce County real estate market continues to lag behind King County, but there is light at the end of the tunnel and values are approaching 2004 – 2005 levels. For more details see the full article that was on yesterday's front page of the News Tribune.
Thousands in Pierce County trapped in underwater mortgages
