Washington State s Housing Market

Transcription

1 Washington State s Housing Market 3rd Quarter 2013 WASHINGTON CENTER FOR REAL ESTATE RESEARCH RUNSTAD CENTER FOR REAL ESTATE STUDIES COLLEGE OF BUILT ENVIRONMENTS DECEMBER 2013 Washington Market Highlights: Third Quarter 2013 u Existing home sales increased in the third quarter by 7.1 percent to a seasonally adjusted annual rate of 99,960 units, and jumped 30.0 percent above a year earlier. 30.0% Change in Home Sales, SAAR u Building permit activity increased 2.2 percent from a year earlier, totaling 7,626 new units authorized. Single-family permits declined 0.4 percent. u The median price home sold in Washington during the third quarter was $263,400, 8.4 percent above a year earlier. 20.0% 10.0% 0.0% -10.0% -20.0% u u u Housing affordability for both all buyers and first-time buyers declined from the second quarter as higher home prices and mortgage rates offset modestly increasing incomes. The All-Buyer Housing Affordability Index stayed above 100 in 38 of Washington s 39 counties, however. The first-time buyers index was barely above 80. Inventories of homes available for sale totaled 36,776 single-family homes at the end of the quarter, 0.3 percent above the year-ago level. This inventory level represented a 4.3 month supply, a modest shortage of homes on the market relative to demand. Seriously delinquent mortgages declined for the fifth consecutive quarter. The 55,900 Washington mortgages which are at least 90-days past due or in the foreclosure process represent a decline of nearly 4,000 from three months ago % 2006:Q1 2007:Q1 2008:Q1 2009:Q1 2010:Q1 2011:Q1 2012:Q1 2013:Q1 15.0% 10.0% 5.0% 0.0% -5.0% -10.0% -15.0% Percent Change in Median Home Price from Year Ago 20.0% Percent Change in Median Home Price from Year Ago -20.0% 2006:Q1 2007:Q1 2008:Q1 2009:Q1 2010:Q1 2011:Q1 2012:Q1 2013:Q1 2006:Q1 2007:Q1 2008:Q1 2009:Q1 2010:Q1 2011:Q1 2012:Q1 2013:Q1

2 Washington State s Housing Market is a quarterly report to the Washington Real Estate Commission and the Washington State Department of Licensing. Prepared by: Runstad Center for Real Estate Studies College of Built Environments University of Washington 424 Gould Hall, Box Seattle, WA Phone: (206) Web: wcrer.be.washington.edu wcrer@uw.edu Associate Director for Research: Glenn E. Crellin Copyright 2013 by the Runstad Center for Real Estate Studies. All rights reserved. The Runstad Center for Real Estate Studies will grant permission to use or reprint material from Washington State s Housing Market under appropriate circumstances. SUBSCRIPTION INFORMATION Washington State s Housing Market is published quarterly by the Runstad Center for Real Estate Studies The annual subscription price is $60 plus tax. Phone us, or visit our Website for more information. Survey Description Publication: Washington State s Housing Market is a publication of the Runstad Center for Real Estate Studies at the University of Washington. Coverage: At least quarterly, the Runstad Center receives data on single-family home sales from each multiple listing service located in, or providing market coverage to, Washington communities. In 2012, data on nearly 69,000 home transactions were received and processed. Sales Volume: Estimated total sales value of single-family homes in each county is compiled using a scale factor to transform the MLS sales to market totals. This scaling is required since a significant number of transactions are always completed as for sale by owner or are assisted by real estate licensees who do not participate in a MLS. Scale factors were developed by analyzing the relationship between MLS sales and measures of total single-family sales derived from the 2010 American Community Survey and data from individual county assessors. Data in this report represents closed sales transactions. Sales Price: Median sales prices represent that price at which half the sales in a county (or the state) took place at higher prices, and half at lower prices. Since the Runstad Center does not receive sales data on individual transactions (only aggregated statistics), the median is determined by the proportion of sales in a given range of prices required to reach the midway point in the distribution. While average prices are not reported, they tend to be percent above the median. Movements in sales prices should not be interpreted as appreciation rates. Prices are influenced by changes in cost and changes in the characteristics of homes actually sold. The table on prices by number of bedrooms provides a better measure of appreciation of types of homes than the overall median, but it is still subject to composition issues (such as square footage of home, quality of finishes and size of lot, among others). There is a degree of seasonal variation in reported selling prices. Prices tend to hit a seasonal peak in summer, then decline through the winter before turning upward again, but home sales prices are not seasonally adjusted. Users are encouraged to limit price comparisons to the same time period in previous years. Seasonal Adjustment: Volume statistics are seasonally adjusted using the X-11 method of seasonal adjustment originally developed at the US Bureau of the Census and used for adjustment of most economic statistics by government agencies. The procedure includes adjusting for trading day variation the number of Mondays, Tuesdays, etc., in a particular month or quarter. This type of variation in the data was found to be significant. Sales in each county are first seasonally adjusted, then aggregated to yield the statewide statistics. Seasonal indices are based on quarterly single-family home sales activity dating from first quarter New seasonal adjustment factors are constructed at the conclusion of each year. Data for the three preceding years are revised using these new seasonal factors. Seasonally-adjusted annual rate values are based on single quarter sales and indicate the number of sales which would take place in a year if the relative sales pace were to continue. They are not a forecast of annual activity and do not include the sales observations of previous quarters. Metropolitan/Micropolitan Areas: This report uses the definitions of metropolitan and micropolitan areas by the Federal Office of Management and Budget. Briefly, metropolitan areas are larger communities with at least 50,000 people in the urban core. Micropolitan areas are smaller cities, with 10,000-50,000 people in the urban core. Currently Washington has 21 metropolitan counties in 14 metropolitan areas (or divisions) and nine micropolitan areas. Metropolitan and microplitan area designations were revised in February 2013 based on Census Some rural counties are now included in metropolitan or micropolitan areas because of commuting patterns. Month s Supply: Estimates of month s supply of homes on the market compare the number of total MLS listings at the end of the quarter to the seasonally-adjusted annual rate sales for that county [(Listings/SAAR) x 12 = month s supply]. It is interpreted as how long the current inventory available for sale would be able to meet current demand if no additional homes were listed for sale. Housing Affordability: Two measures of housing affordability are presented. Each should be interpreted as the degree to which a median income family (or typical first-time buyer household) could afford to purchase the assumed home. The following table lays out the assumptions. In all cases it is assumed the lender would be willing to fund the loan so long as the principal and interest payments do not exceed 25 percent of gross income. Index values above 100 indicate housing is affordable to the specified income group. All Buyers First Time Home Price Median 85% Median Downpayment 20% 10% Mortgage Term 30 years 30 years Income Median Family* 70% Median Household* Third Quarter 2013 Issued December 2013 Mortgage Insurance No Yes (add 0.25% to mortgage rate) Mortgage Rate FHFA estimate of effective rate loans closed, existing homes * Family income is two or more individuals related by blood, marriage, or adoption. Household income includes single persons living alone.

3 Third Quarter 2013 The recovery of Washington State s housing markets continued in the third quarter with sales and construction continuing to increase, prices and median home prices advancing. However, the dark clouds of declining affordability, coupled with general angst about national economics, especially the government shut-down restraining the latter part of the quarter. While listings available for sale are beginning to grow, the shortage of inventory continues to plague the market. Home Resales Existing home sales approached 100,000 units at seasonally adjusted annual rate (SAAR) during the third quarter, registering a 99,960 unit rate. This level of sales activity was 30.0 percent higher than the third quarter of 2012 and 7.1 percent above the second quarter rate. This rate is similar to sales seen throughout the late 1990s and early 2000s, before the bubble formed. The last time the sales rate exceeded the current level was the second quarter of It is worthwhile to review the concept of seasonally adjusted annual rate data. First, it should be noted that most economic statistics released by government agencies are similarly adjusted. Seasonal adjustment allows meaningful comparisons of economic activity from period to period even when there are clear patterns of more and less active sales. In housing markets it is well known that sales activity is greatest in the late spring through the summer and less active in the fall and winter. The annual rate portion of the statistic indicates how many sales would occur if the relative pace observed during the period were to continue for an entire year. This is not a forecast of expected activity. Looking to the not seasonally adjusted data, there were 27,930 single-family home sales during the third quarter, 24.4 percent more than during the third quarter of While this number is close to the yearto-year change in the SAAR data, the difference reflects the changes in seasonal papers which are emerging from the seasonal adjustment process. These evolving patterns are the reason seasonally adjusted estimates are revised annually for the recent past (typically three years). The last time the actual number of homes sold during a quarter exceeded this level was also during the second quarter of Employment gains, especially in the greater Seattle area were clearly driving the improving market. At the same time the combination of higher prices and higher interest rates convinced some buyers they needed to move quickly before they could no longer afford the type home or location they preferred. There will be more affordability discussion shortly. SAAR quarter-to-quarter sales increased in 31 of Washington s 39 counties. By comparison, there were only 19 counties reporting increased activity three months ago. Small Wahkiakum County reported the greatest gain of 75 percent. Meanwhile Douglas County was at the other extreme with a sales rate 25.9 percent below the second quarter. Units, SAAR 170, , , ,000 90,000 70,000 50,000 Existing Home Sales Existing Home Sales Washington State s Housing Market - Third Quarter

4 Washington State s Housing Market has reported county-level activity and prices by whether those counties are metropolitan, micropolitan or rural, based on the definitions of promulgated by the Federal Office of Management and Budget. Unfortunately, the revised definitions released earlier this year resulted in some rural counties being incorporated in metropolitan areas because of computing patterns. Since the housing markets in those counties remains very small, it was decided to continue reporting those areas as rural. The affected counties are Columbia, Pend Oreille, Skamania and Stevens. The other definition changes moved Walla Walla County from micropolitan to metropolitan, and Adams County from rural to micropolitan status. The resulting 17 metropolitan counties represented 88,080 home sales at annual rates, 88 percent of the statewide total. The sales rate in those communities was 5.7 percent higher than during the second quarter. By contrast the micropolitan counties collectively jumped 20.5 percent while sales in the rural areas increased by 16.0 percent. Since the housing market had already made big gains, the smaller quarterto-quarter growth was not surprising, nor did it suggest a market slowdown. Among the metropolitan counties the greatest increase in sales compared to the second quarter was a 26.0 percent gain in Cowlitz County (Longview MSA) while Douglas County (Wenatchee MSA) declined by 25.9 percent. These are the same two counties highlighted last quarter, but in reversed positions. Looking to the micropolitan areas, the largest increase was a jump of 59.8 percent in sales activity from the second quarter in Grays Harbor County (Aberdeen) while the only decline was 2.0 percent in Clallam County (Port Angeles). Housing Construction Building permits for a total of 7,626 housing units were issued during the third quarter of 2013 in the 32 counties where some or all of the permit issuing jurisdictions provide monthly data to the Census Bureau. This represents an increase in permit activity of 2.2 percent compared to the construction rate in the July- August period of Multifamily construction remained stronger than multifamily as permits for individual homes were 0.4 percent below year-ago levels while multifamily permits increased by 5.5 percent. Remember that multifamily permits statistics are quit erratic because each project has a significant number of units permitted at the same time. It should also be noted that developers continue announce their intention to move forward with a significant number of projects, but in most cases permits have not yet been issued, and even with permits in hand, they may or may not really be built. Total value of residential building permits issued during the third quarter was $1,508.7 million. Single-family permit value was $1,093.9 million. Total permit value increased 1.4 percent while single-family permit value increases 2.2 percent. Coupled with the reduced number of singlefamily permits, it is clear the average single-family permit value has increased. 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Building Permits SF Multi 4 Runstad Center for Real Estate Studies / University of Washington

5 Home Prices Median prices, Case-Shiller Indexes, FHFA indexes, Zestimates measures of home prices have prolifereated, especially since the boom and bust.washington State s Housing Market uses the traditional median sales price to monitor home prices. This measure describes the mid-point of the home price distribution, and changes in the median indicate how much more or less buyers are paying for homes generally, but changes in the median cannot be used to measure appreciation in the values of individual homes. Assessment if whether the values of homes are appreciating requires a repeat sales measure like Case-Shiller or Federal Housing Finance Agency (FHFA). Regardless of the price measure chosen, prices during the third quarter continued to recover while remaining well below their bubble peaks. The statewide median sales price during the third quarter of 2013 was $263,400, 8.4 percent above the median price a year ago. The only other statewide measure of prices comes from the Federal Housing Finance Agency, which calculates an appreciation rate of percent for the same period. FHFA indicates that the stateside prices today are still 8.22 percent below five years ago, but that shortfall is narrowing quickly. Only four states had more rapid appreciation in home values in the last year, according to FHFA. Comparisons between appreciation rates and changes in median prices show that differences in estimates are especially apparent in the metropolitan area data. Although there are clear seasonal patterns to home prices, seasonal adjustment is not generally applied, and the Runstad Center follows that convention. Accordingly, comparisons are only made to the same quarter in previous years. Similar to the FHFA data, the current median price is 6.4 percent below the level of five years ago. With prices currently increasing while they were declining five years ago, the difference has narrowed significantly in the last three months. Median prices ranged from a low of $70,000 in Lincoln County (the only market under $100,000) to a high of $438,000 in King County. San Juan and Snohomish counties also registered median prices in excess of $300,000. While Lincoln County reported the only media below $100,000, the typical home in five other counties was below $140, % 15.0% 10.0% 5.0% 0.0% -5.0% Comparing Annual Home Price Changes 2013:Q2 Comparing Annual Home Price Changes, 2013 Q3 Price changes also varied widely. Median prices were lower than a year ago in five of Washington s 39 counties (compared to 15 last quarter). Meanwhile, 12 counties recorded median price jumps of at least 10 percent. In terms of extreme price changes, the biggest decline was 18.8 percent in Lincoln County, while the largest increase was 44.9 percent in Pacific County. Small numbers of transactions often result in large swings in median prices. $320,000 $280,000 $240,000 $200,000 $160,000 $120,000 Runstad FHFA Median Home Prices Washington State s Housing Market - Third Quarter

6 Among the metropolitan counties the range of price changes was from a high of 17.5 percent increase in Clark County to a decline of 2.8 percent in Chelan County (Wenatchee). Among the nine micropolitan areas, only Clallam County had a lower median than the third quarter of last year (5.9 percent). At the other extreme the median increased 5.1 percent in Whitman County (Pullman). Prices by Bedroom It is useful for buyers and sellers (and their agents) to understand price behavior for the specific types of homes they are dealing with, especially since the composition of what is selling changes from quarter to quarter or year-to-year. To address his issue Washington State s Housing Market presents statistics by the number of bedrooms in the home since this is the most consistently reported physical characteristic. The median price 2-bedroom single-family home (these statistics do not include condominium apartments) sold statewide during the second quarter was $176,200, 12.5 percent higher than a year ago. Moving to the much more typical 3-bedroom homes, the median increased 8.1 percent between the third quarters of 2012 and 2013, to $236,900.Among the homes with four or more bedrooms the median sales price was $341,600, a jump of 9.9 percent over the last year. These statistics reinforce the impression that housing prices are increasing across the board. Small samples often cause county-level detail on prices by number of bedrooms to exhibit unusual patterns, but larger communities generally have enough sales activity to offset the problems. Accordingly, Washington State s Housing Market limits analysis of the bedroom detail to metropolitan counties only (although the tables show the detail for all counties). The median price of a 2-bedroom home in Cowlitz County jumped by 65.9 percent between the third quarters of 2012 and Meanwhile in Chelan County smaller home prices fell by 13.8 percent. In the 3-bedroom category Clark County showed the biggest increase (17.8 percent) while Chelan County sustained a 4.9 percent slide. Larger homes experienced a price decline of 5.5 percent in Walla Walla County with the other extreme an increase of 21.2 percent in Whatcom. Washington 3rd Quarter Home 2013 Sales Washington by Number Home of Bedrooms, Sales by Number of Bedrooms Q 4+ BR, 36% 2 BR, 14% 3 BR, 50% The least costly 2-bedroom homes were located in Yakima County ($95,000 median). For 3-bedroom homes that distinction passed to Cowlitz County, which also had the lowest median for larger homes ($158,100 and $211,900, respectively). Regardless of number of bedrooms the most expensive urban homes were found in King County ($338,900, $383,600 and $549,500). Housing Affordability Households and families generally focus on the relationship between their potential mortgage payment and their income when deciding on home purchases. Of course, those relationships are influenced by lending standards, access to down payments, other recurring financial obligations and their confidence in the overall economy. These factors led to the creation of the Housing Affordability Index by the National Association of Realtors in 1982 when mortgage interest rates were in the teens making home purchases exceptionally difficult for most would-be home buyers. 6 Runstad Center for Real Estate Studies / University of Washington

7 Low mortgage rates have historically resulted in high levels of housing demand, but even low mortgage rates could not sustain the market during the recent recession, and the slow return to economic health has not driven housing demand until recently. Home sales prices and mortgage rates combine with income to determine the affordability of housing. Income for the majority of households has continued to increase slowly, even during the recession and the early stages of the recovery. Thus all three legs of the affordability stool worked to make the affordability of homeownership achieve record highs in recent quarters. However, during the third quarter the home price jumps combined with increasing mortgage rates resulted in affordability noticeably backing off from recent record highs across the state. Many buyers who waited for prices to hit bottom expecting rates to remain low were scrambling to purchase before both prices and rates moved above their comfort levels. Others who had believed homeownership was within their reach began to be priced out of the market. The Runstad Center calculates two measures of affordability. The all-buyer index measures the degree to which a median income family (two or more individuals related by blood, marriage or adoption) can afford mortgage payments on a median price home, assuming a 20 percent downpayment and a 30-year mortgage at prevailing mortgage interest rates. The calculation assumes the family can spend 25 percent of their gross income on principal and interest payments. While there may be some mortgages available in the marketplace with less restrictive terms, these assumptions fairly represent the current home purchase market and can compare affordability to other time periods. This is the same analysis approach which has been used by the National Association of Realtors since The second measure is the first-time buyer index. It is computed the same general way, but with different assumptions. It assumes a less expensive home (85 percent of area median), a lower downpayment (10 percent), lower income (70 percent of median household income, including single persons) and a requirement that mortgage insurance be included. While roughly a quarter of home purchases are financed with FHA loans which allow lower downpayments or VA or USDA no money down mortgages, the general affordability assumptions are still appropriate for most households looking to purchase their first home. In the third quarter the statewide all-buyer index was 144.4, meaning the median income family in Washington had 44 percent more income than the minimum required to afford the median price home. This represented affordability significantly lower than the recorded only three months earlier. This is the lowest level of affordability since the third quarter of The county-level all-buyer affordability measures in the second quarter ranged from a high of in Lincoln County to a low of 89.0 in ever-costly San Juan County, both rural areas. Since the index stood above 100 in all 39 counties except San Juan, middle-income families continue to have reasonable opportunities to find a home they can afford, despite the deteriorating 80.0 affordability. Among the metropolitan 60.0 counties the range was from a low 40.0 affordability of in King County to a high of in Cowlitz County. For the micropolitan areas the greatest affordability was in Grays Harbor County (214.1) and the least was in Island County (146.3). Housing Affordability Index Index First-time All Buyers Washington State s Housing Market - Third Quarter

8 The housing affordability index for first-time buyers statewide in the third quarter was 80.6, down from 93.2 in the third quarter of 2012 and from the 92.6 registered three months ago. Since an index value of 80 is generally considered to offer meaningful choice and access to ownership housing for first-time buyers, this current market statewide just meets that criterion. The first-time buyer affordability index exceeded 100 in 13 counties during the third quarter, only half as many as three months earlier. However, achieving homeownership is still a challenge in many areas, especially as rents are rising in many communities, making it more difficult to accumulate the downpayment. The counties which present the biggest challenges do not change much. San Juan and King s high prices, Jefferson s resource-based employment, and Whitman s student population keep those counties especially challenging. Among the metropolitan counties, the greatest affordability for first-time buyers was in Benton County (120.5) and was least in King County (58.9). For the micropolitan areas, the most affordable for current renters to move to home ownership was Grays Harbor County (120.6), while Whitman County presented the greatest hurdle (65.6). Rural communities, San Juan County (48.8) and Lincoln County (264.0) provided the affordability extremes. Availability of Affordable Housing Rather than rely on a single measure of housing affordability, it is helpful to examine home affordability for several income levels and compare this with the available housing inventory. Moreover, higher-income households typically make larger downpayments (perhaps assisted from equity acquired from sale of an existing home), while lower income households (including our hypothetical first-time buyer) may only be able to make a minimal downpayment. The four income/asset groups considered are: $30,000 income, 5% downpayment $60,000 income, 10% downpayment $90,000 income, 20% downpayment $150,000 income, 35% downpayment. In each case it is assumed that the household is willing to spend 25 percent of gross income on principal and interest payments and overall debt levels are average. It is also assumed that these buyers could find mortgages at an interest rate of 4.5 percent (which is very close to the prevailing rate during the quarter). Based upon these income, downpayment, and debt-service assumptions we can estimate the purchase price of an affordable home for these income groups. The table below shows the maximum affordable home for each of these income groups based upon the financial assumptions just described. Affordable Home Purchase Prices for Selected Income/Asset Groups Income P&I Expense (25% of Income) Mortgage Amount Downpayment Maximum Home Purchase Price Approx. Percent of Home Market $30,000 $625 $123,351 $6,492 $129, % $60,000 $1,250 $246,701 $27,412 $274, % $90,000 $1,875 $370,052 $101,216 $462, % $150,000 $3,125 $616,754 $ $948, % The table clearly illustrates how income growth, coupled with ownership of homes with generally increasing values can move a household up the ladder of homeownership (providing they retain the equity in their existing home and avoid home equity loans or second mortgages). When reviewing these calculations the reader should recall that the median family income in the state during the second quarter was $73,650, although the county-level medians ranged from a low of $46,550 in Adams County to a high of $90,550 in 8 Runstad Center for Real Estate Studies / University of Washington

9 King County. Similarly, household incomes are lower by definition, had a statewide value of $57,794, with county-level incomes ranging from $32,760 in Ferry County to a high of $70,323 in King County. These median income values demonstrate that the first two income/asset categories are more relevant for most state residents. This assessment has described the maximum affordable home price for these income/asset groups, but the question remains as to how much opportunity there is to buy a home within the affordable price range. The final column in the table indicates the proportion of homes currently on the market with asking prices below the affordability threshold. The affordable share of homes on the market increases for each income/ asset group, as expected. The opportunity to purchase changed most significantly for the second income range since the second quarter. Remember, these are estimates since these MLS systems typically handle around 80 percent of the market but do not cover all areas of the state equally. Also, recall that these are offered prices and actual sales may occur above or below these prices, depending upon local market conditions and the motivations of buyers and sellers. Additionally, there may be additional affordable homes available through foreclosure options, but buyers must be wary of potential defects in those units. Falling inventory levels have reduced the proportions of listings considered affordable for each income group, and the remaining more affordable units may require substantial maintenance and repair. In addition, condominiums, which are not currently included in this analysis may present an affordable option, but buyers will need to factor in the home owners association dues when making their affordability analysis. The statewide data shows that only 3.8 percent of homes statewide on the market at the end of September were priced under $80,000. No more than 2.0 percent of homes on the market are priced less than $80,000 in seven Washington counties. These statistics emphasize that in many parts of the state modest income households, especially those looking for their first home, still face very limited access to the ownership housing market. Including homes priced at or below $160,000 raises the affordable percentage statewide to 20.8 percent. Among the metropolitan counties the proportion of homes priced less than $160,000 ranged from a low of 2.5 percent in King County to a high of 43.2 percent in Yakima County. Available Inventory Economics analyzes demand and supply looking for equilibrium or balance. Existing home sales, discussed earlier, is the measure of demand. Inventory available for sale represents the supply side of the equation. During the period of rapid home sales and escalating prices there was excess demand and very limited supply. During 2008 while sales plummeted, inventories available for sale surged and remained high during much of the recession. As the recession continued would-be sellers realized they would be unable to sell without needing to add their own cash to satisfy the loan obligation, and decided to continue with the current mortgage and wait out improvement in prices. This has kept the inventory available for sale low. Prices have clearly improved and a few sellers are reentering the market, but the imbalance between supply and demand remains, resulting in the current pressure on prices. Listings available for sale throughout Washington, at the end of the September 2013, stood 0.1 percent above the listing inventory a year earlier. There were 36,776 homes listed on the various Multiple Listing Services, an increase of 99 homes compared to last year. It must be emphasized that these counts do not include any homes being offered for sale directly by the owners, without the assistance of real estate licensees, or those marketed by real estate licensees who are not members of a multiple listing service, and may not include homes marketed by financial institutions after foreclosure. However, it appears the price increases have resulted in many of those properties being listed and sold, limiting the continuing impact of the shadow inventory. Washington State s Housing Market - Third Quarter

10 Ten markets each have over 1,000 homes listed for sale, collectively representing 64.4 percent of all listings. The 5-county Central Puget Sound region accounts for 13,540 of the active listings. Active listings actually increased compared to the prior year in 12 of the 35 counties for which listing data is available. The most rapid growth of listing inventory was 22.6 percent in Snohomish County, while the largest reduction in homes available for sale was 14.2 percent in Asotin/Garfield counties. Listings alone, however, only tell part of the story. They need to be linked to prevailing sales rates to determine how the current availability might influence aggregate housing markets in the months ahead. The Runstad Center computes estimates of the month s supply of housing by price range. A month s supply statistic measures how long it would take to sell all the homes currently available for sale if no new listings were added to the inventory. The seasonally adjusted annual rate of sales for the quarter is compared to the end-of-quarter listing inventory to determine the month s supply. This prevents higher sales rates in previous quarters from producing unrealistically optimistic estimates of market activity. Similarly, it prevents exceptionally low inventories and actual sales during the slow winter months from making inventories seem exceptionally large relative to sales. Units 60,000 50,000 40,000 30,000 20,000 10,000 Listing Inventory and Month's Supply Listing Inventory and Month s Supply 0 05:Q1 06:Q1 07:Q1 08:Q1 09:Q1 10:Q1 11:Q1 12:Q1 13:Q1 Listings Mo Supply The quarter-end month s supply for Washington was only 4.3 months, compared to 5.8 months a year ago. A 5-7 month inventory is considered normal or balanced, consistent with changes in median prices which are similar to overall inflation rates. Accordingly, the current market statewide would usually be characterized as a modest shortage. This is consistent with the increasing prices already discussed. While the statewide market is marginally undersupplied, the same cannot be said for individual local markets or price ranges. Eleven counties have an overall month s supply in excess of 10 months, with Northeast Washington (Stevens/Ferry/Pend Oreille) having a 39 month supply of homes on the market. King, Snohomish and Thurston counties have the most extreme shortage of homes on the market relative to sales, with month s supply measures under 3.0 months overall, and especially for homes priced less than $500,000. Accordingly, it is no surprise that bidding wars and rapid price increases are common in the greater Seattle region. However, the imbalance was even more severe in those counties three months ago. As expected, the least expensive homes have the most limited supply compared to sales rates, but a broad range of prices have very similar supply conditions. Homes priced above $500,000 statewide have the greatest month s supply. But even then it is a limited 4.0 month inventory. Outside the urban markets the very expensive homes represent a very small share of the overall market, so the month s supply numbers are often unavailable or very long, even if there are only a handful of homes in those price ranges on the market. Of course, even during active real estate markets those properties typically take longer to sell because they can be afforded by a much more limited clientele Months 10 Runstad Center for Real Estate Studies / University of Washington

11 Market Risks A strong job market, especially in the greater Seattle area, has reduced many fears about the local housing market, but there are still some risks. The economic recovery remains fragile, with many of the gains coming in financial markets rather than in areas employing middle-income workers. Once again the Federal budgetary issues have been kicked down the road in hopes the problems will magically be resolved. Boeing is threatening to move the next generation of aircraft manufacturing to a Right to Work state since the union wouldn t cave to their demands for pension reform and unequal treatment of workers. Problems with seriously delinquent and underwater mortgages remain, although the number of seriously delinquent properties is rapidly coming down. Data from the Mortgage Bankers Association of America suggests that 20,000 fewer Washington mortgages are at least 90 days past due or in foreclosure than a year ago. Unfortunately, more than 50,000 homeowners in the state remain in jeopardy of losing their homes to foreclosure, and the pace of foreclosure has picked up now that mediation periods under the Foreclosure Fairness Act have run their course Serious Delinquency and Foreclosure Serious Delinquency and Foreclosure % of Mortgages :Q1 08:Q2 08:Q3 08:Q4 09:Q1 09:Q2 09:Q3 09:Q4 10:Q1 10:Q2 10:Q3 10:Q4 11:Q1 11:Q2 11:Q3 11:Q4 12:Q1 12:Q2 12:Q3 12:Q4 13:Q1 13:Q2 13:Q3 US WA 8,000 6,000 4,000 2,000 0 Quarterly Foreclosures Completed in Quarterly Foreclosures Completed in Washington Source: RealtyTrac ( In summary, it is often said that all real estate is local, and that remains abundantly clear in this report. Sheer numbers of people and home sales mean that greater Seattle drives the state. Today, the strong Seattle-area market counterbalances some weaknesses in less populous areas of the state, but the overall third quarter story remained positive. Higher interest rates, and another round of Federal budget posturing means uncertainty remains, but the general mood is still optimistic. Washington State s Housing Market - Third Quarter

12 12 Runstad Center for Real Estate Studies / University of Washington

13 HOUSING MARKET SNAPSHOT State of Washington and Counties Third Quarter 2013 Home Resales (units) Building Permits* Median Resale Price Housing % Change % Change % Change Affordability First-Time County SAAR (last qtr) (year ago) # (year ago) $ (year ago) Index (HAI) HAI ADAMS % -46.7% $140, % ASOTIN % 5.3% $173, % BENTON 3, % 23.5% % $189, % CHELAN % 16.2% % $225, % CLALLAM % 35.2% % $196, % CLARK 7, % 38.6% % $238, % COLUMBIA % 100.0% 0 N/A $200, % COWLITZ 1, % 86.2% % $161, % DOUGLAS % 30.3% % $215, % FERRY % 50.0% 0 N/A $136, % FRANKLIN 1, % 22.9% % $189, % GARFIELD % 0.0% % $173, % GRANT % 83.7% $153, % GRAYS HARBOR 1, % 47.0% % $126, % ISLAND 1, % 54.6% % $258, % JEFFERSON % 45.2% % $254, % KING 28, % 24.9% 2, % $438, % KITSAP 4, % 30.9% % $248, % KITTITAS % 43.1% % $202, % KLICKITAT % 35.3% $197, % LEWIS % 44.1% % $146, % LINCOLN % 42.9% $70, % MASON % 32.8% % $168, % OKANOGAN % 16.7% % $172, % PACIFIC % 46.4% $134, % PEND OREILLE % 52.9% 0 N/A $136, % PIERCE 12, % 36.1% % $228, % SAN JUAN % -4.2% % $385, % SKAGIT 1, % 43.6% % $230, % SKAMANIA % 75.0% % $250, % SNOHOMISH 10, % 15.7% 1, % $309, % SPOKANE 6, % 39.2% % $181, % STEVENS % 55.1% 1 N/A $136, % THURSTON 3, % 19.4% % $228, % WAHKIAKUM % 133.3% $155, % WALLA WALLA % 13.8% % $194, % WHATCOM 2, % 33.3% % $272, % WHITMAN % 66.7% % $219, % Source: Runstad YAKIMA Center for Real 2,000 Estate Studies, 20.5% University 26.6% of Washington % $161, % Statewide 99, % 30.0% 7, % $263, % Source: Runstad Center for Real Estate Studies, University of Washington NOTES: Home Resales are Runstad Center estimates based on MLS reports or deed recording. SAAR means data presented at Seasonally Adjusted Annual Rates allowing quarter-to-quarter comparison. Building permits (total) are from the U.S. Department of Commerce, Bureau of the Census. Median prices are Runstad Center estimates. Half the homes sold at higher prices, half lower. Affordability index measures the ability of a typical family to make payments on median price resale home. It assumes 20% downpayment and 30- year amortizing mortgage. First-time buyer affordability index assumes a less expensive home, lower downpayment and lower income. Washington State s Housing Market - Third Quarter

14 EXISTING HOME SALES State of Washington and Counties Seasonally Adjusted Annual Rate Percent change County 12:Q1 12:Q2 12:Q3 12:Q4 13:Q1 13:Q2 13:Q3 Last qtr Year ago ADAMS % -46.7% ASOTIN % 5.3% BENTON 2,460 2,470 2,460 2,500 2,750 2,700 3, % 23.5% CHELAN % 16.2% CLALLAM % 35.2% CLARK 5,330 5,130 5,320 5,960 5,830 6,600 7, % 38.6% COLUMBIA % 100.0% COWLITZ , , % 86.2% DOUGLAS % 30.3% FERRY % 50.0% FRANKLIN , % 22.9% GARFIELD % 0.0% GRANT % 83.7% GRAYS HARBOR 1,070 1, , , % 47.0% ISLAND 1,000 1,080 1,180 1,240 1,300 1,410 1, % 54.6% JEFFERSON % 45.2% KING 22,220 23,200 23,740 25,360 25,180 27,450 28, % 24.9% KITSAP 2,760 3,070 3,120 3,180 3,390 4,000 4, % 30.9% KITTITAS % 43.1% KLICKITAT % 35.3% LEWIS % 44.1% LINCOLN % 42.9% MASON , % 32.8% OKANOGAN % 16.7% PACIFIC % 46.4% PEND OREILLE % 52.9% PIERCE 9,760 9,390 9,730 10,280 11,510 12,100 12, % 36.1% SAN JUAN % -4.2% SKAGIT 1,260 1,330 1,500 1,580 1,510 1,830 1, % 43.6% SKAMANIA % 75.0% SNOHOMISH 9,090 9,340 9,790 9,340 9,860 10,540 10, % 15.7% SPOKANE 5,490 4,690 4,930 5,510 6,310 5,800 6, % 39.2% STEVENS % 55.1% THURSTON 2,870 3,100 3,340 3,070 3,580 3,750 3, % 19.4% WAHKIAKUM % 133.3% WALLA WALLA % 13.8% WHATCOM 2,230 2,160 2,270 2,460 2,370 2,620 2, % 33.3% WHITMAN % 66.7% YAKIMA 1,530 1,580 1,630 1,700 1,660 1,660 2, % 26.6% Statewide 77,110 76,900 80,230 82,950 88,470 93,310 99, % 30.0% Source: Runstad Center for Real Estate Studies, University of Washington NOTES: Number of single-family units sold, excluding new construction. 14 Runstad Center for Real Estate Studies / University of Washington

15 EXISTING HOME SALES State of Washington and Counties Not Seasonally Adjusted County 12:Q1 12:Q2 12:Q3 12:Q4 Source: Runstad Center for Real Estate Studies, University of Washington NOTES: Number of single-family units sold, excluding new construction. Year Total :Q1 13:Q2 13:Q3 Percent change (Year ago) ADAMS % ASOTIN % BENTON , % CHELAN % CLALLAM % CLARK 1,120 1,420 1,490 1,400 5,430 1,220 1,830 1, % COLUMBIA % COWLITZ % DOUGLAS % FERRY % FRANKLIN % GARFIELD % GRANT % GRAYS HARBOR , % ISLAND , % JEFFERSON % KING 4,360 6,530 6,690 6,100 23,680 4,940 7,740 8, % KITSAP , ,070 1, % KITTITAS % KLICKITAT % LEWIS % LINCOLN % MASON % OKANOGAN % PACIFIC % PEND OREILLE % PIERCE 2,030 2,500 2,680 2,580 9,790 2,400 3,220 3, % SAN JUAN % SKAGIT , % SKAMANIA % SNOHOMISH 1,880 2,590 2,650 2,290 9,410 2,040 2,920 2, % SPOKANE 910 1,380 1,440 1,360 5,090 1,050 1,720 1, % STEVENS % THURSTON , ,020 1, % WAHKIAKUM % WALLA WALLA % WHATCOM , % WHITMAN % YAKIMA , % Statewide 15,210 22,450 22,450 20,600 80,710 17,440 25,880 27, % Washington State s Housing Market - Third Quarter

16 MEDIAN HOME PRICES State of Washington and Counties Time Trend County 12:Q3 12:Q4 12 Annual 13:Q1 13:Q2 13:Q3 % Ch Q3 ADAMS $133,300 $135,700 $128,900 $103,300 $140,000 $140, % ASOTIN $157,000 $156,500 $150,800 $156,000 $165,800 $173, % BENTON $184,800 $189,300 $183,400 $181,800 $186,500 $189, % CHELAN $232,400 $226,400 $221,100 $195,600 $231,500 $225, % CLALLAM $208,300 $195,600 $191,700 $184,000 $189,000 $196, % CLARK $203,000 $210,800 $196,500 $219,200 $228,000 $238, % COLUMBIA $150,000 $125,000 $146,200 $143,300 $130,000 $200, % COWLITZ $140,800 $142,200 $137,000 $140,000 $149,200 $161, % DOUGLAS $212,900 $203,700 $202,400 $199,100 $199,600 $215, % FERRY $135,000 $158,700 $136,700 $113,000 $125,600 $136, % FRANKLIN $184,800 $189,300 $183,400 $181,800 $186,500 $189, % GARFIELD $157,000 $156,500 $150,800 $156,000 $165,800 $173, % GRANT $147,300 $163,600 $155,000 $151,200 $159,300 $153, % GRAYS HARBOR $125,300 $112,300 $115,000 $102,700 $115,300 $126, % ISLAND $258,500 $269,600 $250,000 $249,200 $253,100 $258, % JEFFERSON $231,200 $260,000 $240,000 $253,300 $267,300 $254, % KING $379,900 $381,100 $365,000 $384,300 $421,900 $438, % KITSAP $249,800 $238,600 $233,000 $233,300 $245,400 $248, % KITTITAS $198,200 $213,700 $195,100 $213,600 $206,200 $202, % KLICKITAT $218,700 $209,400 $185,600 $156,700 $209,100 $197, % LEWIS $142,900 $154,000 $145,000 $154,500 $139,800 $146, % LINCOLN $86,200 $155,000 $83,000 $65,000 $67,500 $70, % MASON $167,700 $157,800 $154,900 $123,600 $146,700 $168, % OKANOGAN $158,000 $151,700 $155,000 $137,100 $158,300 $172, % PACIFIC $92,500 $107,000 $105,000 $113,300 $108,000 $134, % PEND OREILLE $135,000 $158,700 $136,700 $113,000 $125,600 $136, % PIERCE $204,600 $201,600 $195,000 $199,400 $219,600 $228, % SAN JUAN $382,100 $335,700 $362,500 $412,500 $375,000 $385, % SKAGIT $218,400 $218,700 $207,400 $207,200 $230,500 $230, % SKAMANIA $175,000 $200,000 $175,700 $170,000 $156,700 $250, % SNOHOMISH $273,800 $270,500 $260,000 $280,800 $299,700 $309, % SPOKANE $175,300 $171,300 $169,600 $166,300 $174,800 $181, % STEVENS $135,000 $158,700 $136,700 $113,000 $125,600 $136, % THURSTON $217,800 $217,100 $218,000 $218,500 $221,800 $228, % WAHKIAKUM $170,000 $130,000 $143,300 $75,000 $140,000 $155, % WALLA WALLA $171,000 $179,000 $166,800 $174,200 $174,700 $194, % WHATCOM $254,500 $261,300 $250,000 $245,600 $257,900 $272, % WHITMAN $208,700 $200,000 $197,000 $202,100 $212,900 $219, % YAKIMA $151,400 $161,300 $154,500 $146,800 $157,600 $161, % Statewide $242,900 $241,800 $234,200 $237,600 $251,100 $263, % Source: Runstad Center for Real Estate Studies, University of Washington 16 Runstad Center for Real Estate Studies / University of Washington

17 HOME PRICES BY NUMBER OF BEDROOMS State of Washington and Counties Third Quarters 2 Bedroom 3 Bedroom 4 or More Bedrooms County % ch % ch % ch ADAMS $50,000 $90, % $130,000 $135, % $166,700 $170, % ASOTIN $110,000 $120, % $156,700 $165, % $200,000 $222, % BENTON $95,000 $106, % $166,600 $171, % $239,900 $235, % CHELAN $192,000 $165, % $226,700 $215, % $278,300 $303, % CLALLAM $155,000 $176, % $213,600 $200, % $287,500 $243, % CLARK $126,000 $147, % $179,100 $210, % $268,000 $298, % COLUMBIA $75,000 $55, % $120,000 $208, % $156,700 $225, % COWLITZ $67,500 $112, % $149,500 $158, % $187,500 $211, % DOUGLAS $90,000 $113, % $210,000 $202, % $246,400 $250, % FERRY $106,700 $96, % $148,300 $150, % $143,300 $156, % FRANKLIN $95,000 $106, % $166,600 $171, % $239,900 $235, % GARFIELD $110,000 $120, % $156,700 $165, % $200,000 $222, % GRANT $101,700 $112, % $141,400 $146, % $192,900 $201, % GRAYS HARBOR $100,000 $101, % $139,000 $142, % $135,000 $145, % ISLAND $255,800 $245, % $253,700 $256, % $282,100 $313, % JEFFERSON $221,900 $255, % $241,700 $246, % $225,000 $500, % KING $297,700 $338, % $331,700 $383, % $464,600 $549, % KITSAP $162,900 $156, % $246,600 $248, % $296,500 $299, % KITTITAS $140,000 $156, % $209,400 $203, % $300,000 $268, % KLICKITAT $110,000 $200, % $250,000 $190, % $170,000 $275, % LEWIS $103,300 $93, % $150,800 $156, % $180,000 $180, % LINCOLN N/A N/A N/A N/A N/A N/A N/A N/A N/A MASON $133,300 $158, % $172,300 $172, % $300,000 $200, % OKANOGAN $130,000 $163, % $160,000 $175, % $250,000 $180, % PACIFIC $70,000 $113, % $110,000 $152, % $140,000 $225, % PEND OREILLE $106,700 $96, % $148,300 $150, % $143,300 $156, % PIERCE $120,000 $128, % $190,900 $213, % $244,400 $276, % SAN JUAN $333,300 $287, % $416,700 $457, % $500,000 $660, % SKAGIT $170,000 $150, % $212,100 $227, % $260,000 $285, % SKAMANIA $150,000 $70, % $180,000 $262, % $190,000 $275, % SNOHOMISH $168,800 $191, % $244,400 $277, % $334,500 $377, % SPOKANE $98,000 $110, % $157,900 $166, % $211,400 $221, % STEVENS $106,700 $96, % $148,300 $150, % $143,300 $156, % THURSTON $156,700 $183, % $203,900 $208, % $266,600 $274, % WAHKIAKUM N/A N/A N/A N/A N/A N/A N/A N/A N/A WALLA WALLA $76,200 $100, % $178,000 $188, % $253,600 $239, % WHATCOM $182,000 $203, % $257,800 $267, % $292,900 $354, % WHITMAN $120,000 $80, % $190,000 $198, % $228,800 $241, % YAKIMA $79,200 $95, % $167,100 $165, % $196,700 $216, % Statewide $156,600 $176, % $219,200 $236, % $310,900 $341, % Source: Runstad Center for Real Estate Studies, University of Washington Washington State s Housing Market - Third Quarter