MarketWatch.com Article: Seattle home buyers devour new listings as inventory keeps shrinking
This article originally appeared as part of MarketWatch.com’s Location Scouts series that features housing-market updates from real estate professionals in cities across the country. The original article can be read here.
by Sam DeBord, managing broker of Seattle Homes Group with Coldwell Banker Danforth and 2016 president-elect of Seattle King County Realtors
Seattle real estate is continuing its streak of increasing home sales and decreasing supply. For nearly two years now, the number of available homes has been dwarfed by buyer demand in the greater Seattle metro market.
While prices continue to rise in the high single-digit range, the inventory of homes for sale has shrunk to historically low levels. Buyers are absorbing new listings faster than sellers can create them.
“Absorption rate” is the measure of how quickly a real estate market’s supply of homes will be purchased. It’s the inverse of “months supply of inventory.” In a nutshell, it tells sellers how quickly the current buyer demand will absorb all of the homes available today.
A balanced market will have an absorption rate near 20%. Seattle’s neighborhoods are averaging 100.4% absorption.
Highest absorption rates – Seattle ZIP codes
. 219.1% – Green Lake, Fremont, Wallingford, Phinney Ridge (98103)
. 183.1% – Roosevelt, Ravenna, Maple Leaf, Sand Point, View Ridge (98115)
. 182.4% – Ballard (98107)
. 179.6% – West Seattle, Admiral, Harbor Drive (98126)
. 170.6% – North Ballard, Sunset Hill, Crown Hill (98117)
The numbers are staggering. The absorption rates are based on 6-month running averages of total available homes and sold homes. These neighborhoods are devouring real estate listings twice as fast as new listings come on the market.
It’s not just in the core of the city where inventory is struggling. Nearby cities which are popular commute locations are seeing competitive markets as well:
Highest absorption rates for cities near Seattle:
. 171.6% – Mountlake Terrace
. 170.7% – Shoreline
. 114.8% – Redmond
. 104.7% – Sammamish
. 95.1% – Lynnwood
The fifth-highest absorption rate is just under 100% in Lynnwood. That’s not a sign of a balanced market. It’s just a lesser version of a breakneck sales pace.
Remember that a balanced market would have an absorption rate closer to 20%. There are only two markets in Seattle with comparable rates, and they get there with some unique characteristics:
Lowest absorption rates in Seattle:
. 20.0% – Downtown Seattle (98101)
. 21.9% – Pioneer Square, International District (98104)
. 72.0% – Georgetown, South Park, Beacon Hill (98108)
. 74.8% – Madison Park (98112)
. 78.9% – Riverton, Boulevard Park (98168)
There’s a clear anomaly with Pioneer Square and downtown Seattle. These areas have a much higher number of high-end condos which are unfinished or sitting long-term because they’re ultra-luxury properties which are out of the reach of most buyers. This bloats their inventory numbers to the point that they appear to be balanced markets.
Boots on the ground locally know that’s not the case. Downtown is still a highly competitive market. The other neighborhoods range from affordable and under the radar in Georgetown and Riverton, to luxury in Madison Park where homes sell a bit more slowly.
Lowest absorption rates in cities near Seattle
. 38.7% – Normandy Park
. 41.0% – Tukwila
. 55.0% – Burien
. 60.3% – Mercer Island
. 63.7% – Kenmore
We see a more balanced spread of real estate inventory absorption across the greater Seattle metro, especially in the south end. Home prices are more affordable in most of these areas. Demand isn’t quite as high as it is in the core of the city, and far from the constricted inventories in North Seattle where demand is highest.
Seattle is struggling with growing pains. Its population continues to boom, thanks to a thriving economy and an attractive environment. Its leaders are searching for solutions to transportation and housing issues.
If one thing is clear, the region needs more housing stock. From condos to town homes and single-family homes, the creation of new housing units is not keeping up with the growth of the population and household formation.
The real estate market in Seattle is devouring itself daily. Its appetite keeps increasing while its stock continues to shrink. Seattle’s leaders need to think big to keep the region growing in a healthy and affordable fashion.
(Statistics based on 6-month rolling averages of listings available for sale and listings sold via NWMLS statistics. The Northwest MLS did not compile or publish this information.)