Evidence of Slowing Appreciation and Reversion to Normalcy.
Also, how King County's trending may soon affect our local market.
Markets Continually Seek Balance The Pierce County Housing market as measured by August 2014 numbers gives us a clear indication it is efficiently balancing and allowing home buyers and sellers to participate with predictable results.
Inventory – UP +11%
Closings – Down -02%
Pending Sales – UP +21%
Months of Inventory – UP last year +3.2 this year + 3.6
Median Price – UP +5%
With inventory at 4,282 units it is the highest it has been all year. In fact it was December 2011 since we had that many homes for sale in Pierce County. At that time we were steadily coming off the crazy high level of inventory that was the result of the housing crisis which peaked in August of 2007 at 9,022 units for sale. So how much inventory should we have? To have a balanced market, we need 3-5 months worth of inventory. In the last 14 years, which includes pre and post bubble markets, Pierce County has sold an average of 11,766 homes per year. Using that average we have 4.4 months inventory. Pendings are up 21% as we close out the summer so we may exceed 12,000 units with a strong finish in 2014.
The peak of the Pierce County price index was 7 years ago! It has taken a long time to work through the huge impact of the housing market spinning out of control. Prices fell consistently for 5 years until reaching bottom in February 2012 and as of this month we are 39% up from that low! We've seen peak inventory levels as mentioned above when we had as much as 12 months worth on inventory and we've seen shortages like in March of 2013 with only 2,800 units for sale. It is refreshing to be at or near a normal inventory level!
Our recovery experience is comparable to other parts of the country. This CoreLogic map shows the State of Washington still 10.8% below it's peak market levels compared to other parts of the country that are either fully recovered or, like hard hit Nevada, still down over 37%. Ouch! It's always a good idea to break the numbers down to more localized evaluation and in this case I can tell you Pierce County is still 18% below the peak. What's interesting is Pierce County is at the same price level as June of 2005 while King County is at June 2006. With King County that much closer to the all time high, doesn't it seem logical that more of those buyers will be exploring Pierce County?
The road ahead. The Home Price Expectation Survey is a nationwide panel of over 100 economists, real estate experts, and investment or market strategists. I like this report because it is not the opinion of just one market expert, but a cumulative average of over 100 experts. Their 3rd quarter report is out and the graph is posted here. If Pierce County continues to generally follow the pattern of the rest of the country we will see cumulative appreciation of over 18% by the end of year 2018. This would put the Pierce County median price at about $280,000.
If you're a buyer in this market you can make your purchase decision with confidence that you're making a good long term investment. If you're a seller it is nice to know there is a balanced market with predictable fundamentals and a pool of buyers you can strike a deal with!