‘Exceptionally low’ inventory slows year-end home sales, spurs price hikes across region

Source: Northwest Multiple Listing Service

For real estate brokers, the year 2017 was marked by historic lows for inventory and year-over-year price gains in most areas. That’s according to a report just released by the Northwest Multiple Listing Service, a not-for-profit, member-owned organization of over 28,000 real estate professionals in the Pacific Northwest.

For the MLS area overall, inventory shrunk 19 percent, from 10,569 active listings at the end of 2016 to last month’s figure of 8,553. That’s the smallest selection for any month in the past decade. For the fourth time this year, monthly inventory dipped below the 10,000 mark, a level not reached at any other time during the 10-year comparison.Despite the paltry supply, last month’s sales remained remarkably strong, with closings up slightly (0.88 percent) from a year ago. Northwest MLS members reported 7,642 closed sales, about the same volume as a year ago when completed transactions totaled 7,575, the report said.

Year-over-year pending sales of single family homes and condos (combined) fell about 3 percent, from 6,390 to 6,198, but far outgained the number of new listings added to inventory (4,053).

“December, which has historically been a slower month, picked up momentum and never let up,” reported George Moorhead, designated broker at Bentley Properties. Unlike October through November, which he described as slower than what had been seen the past three years, “December drew aggressive buyers, some motivated by expectations of a flattening market, with others trying to beat anticipated interest rate hikes.” Purchasers were from all buying demographics, noted Moorhead, a member of the Northwest MLS board of directors.

Northwest MLS statistics show prices rose 11.4 percent system-wide for the 7,642 completed sales of homes and condos. Thirteen of the 23 counties in the report had double-digit price hikes from a year ago. Two counties reported price drops: Chelan (-11.2 percent) and Douglas (-6.5 percent).

Within the Puget Sound region, King County registered the sharpest escalations at nearly 16 percent. Year-over-year prices jumped from $505,000 to $585,000. For single family homes in King County, the hike was similar (about 15.5 percent), rising from $550,000 to $635,000 at year end.

Condo prices surged 28 percent in King County over the past twelve months, from $315,000 to $402,000. During the same year-over-year period, active listings fell from 346 units to 206 (down more than 40 percent), leaving only about 10 days of supply (0.35 months of inventory).

System-wide, there is a little more than a month’s supply (1.12 months) of homes and condos, with the shortages most pronounced in the four-county Puget Sound region. Three of those counties — King, Kitsap and Snohomish — have less than a month’s supply; Pierce County is somewhat better off with 1.1 months.

“While all year we’ve been bemoaning lack of inventory and escalating prices, the statistics show 2017 was a banner year in many respects for real estate in the Puget Sound region and throughout the Northwest,” stated Mike Grady, president and COO of Coldwell Banker Bain. He cited year-over-year gains in both prices and values, commenting “As a result of this strong market, homeowners are experiencing bountiful gains in property values.”

Brokers expect momentum to continue despite uncertainty about interest rates and taxes.

“As we look forward to 2018 we continue to believe this is a great time to buy real estate,” Grady said. “We see only positive returns for homeowners and real estate investors this year and likely for several years to come.”

Moorhead anticipates aggressive buyer activity through May, but expects some short-term flattening thereafter with single-digit appreciation in the range of 5-to-7 percent. Builders still have memories of 2008, but with moderate activity and price increases likely to be sustained, “they are cautiously optimistic.”


  1. In my 44 years as a residential Broker ( 25+ of those years with the Windermere/Edmonds office) this has certainly been one of the most challenging buying markets with the lack of inventory….more buyers than sellers which has continued since 2015.
    Homeowners that are even ‘thinking’ about selling may wish to investigate the idea further.
    Having been through 4 crashes ( over 4 decades in real estate cycles) 2018 may just be the year to get ‘top dollar’.
    So many buyers priced out of the Seattle market have moved north to Snohomish County.
    Especially those of us ‘Baby Boomers’ thinking about scaling down to a condo the sun or closer to Family.

  2. There is plenty of inventory. Realtors have created their own definition for “Inventory”, which just means the number of houses that would sell if they were for sale. There are more [what I call] Beds-Per-Capita than there ever has been. King County has created more living units in the last year and a half than in the last 50 years in total. In economics Inventory has more meaning when considered Supply, and ultimately there is more housing supply than there ever has been. Trump campaigned that the US economy leading into the recession is in bubble territory. Putin mused that the US economy was just people buying and selling each other’s houses. Now, Trump is taking credit for the bubble and he will own the economic collapse going into the mid-terms. Seattle is in real trouble, and not from there being relatively few homes for sale (even though there is plenty of homes nominally). People aren’t selling bitcoins either, not because there are so few bitcoins, but because everyone long-ing bitcoins. People expect houses to be worth more no matter what, and it’s impossible for most of us to articulate the mechanics behind that. Houses are really like most any other expense, they aren’t an investment any more than a hotel is an investment for the people who stay there. It’s all a function of rent. Artificially low interest rates, artificially long mortgage terms (multi-generational loans are on the horizon), strict building codes and construction bans (like in San Francisco), are what convert housing from being an expense to an investment. We just take it for granted that these mechanics can be sustained and we whistle past the 2008 graveyard. Houses are more of an investment proxy than a roof to live under, and that is by design. The Savings and Loans Bubble begat the Dot-Com bubble, where tech companies that had no product were bought and sold like Beanie Babies. This begat the first real estate bubble, which begat the bond, student loan, sub-prime auto, stock market, real estate bubble we are in today. There is a pantheon of bubbles right now. If anything, people who are eager to buy a house today, but are unable to, will be the real winners as houses undergo a massive price finding exercise. Seattle housing will not survive the pending business cycle, let alone a recession. Seattle (and Austin) were relatively less affected by the 2008 collapse, because there was less mal-investment leading into the collapse, but today Seattle (and Austin) lead the nation in housing inflation so reason would have it that we’ll be MOST affected this time around. Even outside of a business cycle, much of that construction downtown is mal-investment (see Barclays Skyscraper Index). While Macy’s and Toys R Us are scaling down leading into this recession, Amazon is taking on market share, so much so that Amazon has not made any profits in more than a decade as expansion assumes all profit. Sears and Amazon have very little in common, as Sears leads the market in appliance sales, and still Sears stores are closing. Sears is scaling down and will better survive the recession. Fedex, UPS, and the postal service will not be able to maintain Amazon’s sweetheart shipping deals, and Walmart will win the price wars for low-end goods (and will win food price wars against Amazon’s budding grocery market, especially as oil prices and consumable prices ratchet up this year). Wages have stagnated, and still home prices skyrocket. Amazon employees have considerable stock options and the NYSE is hyper-inflated, a point most traders admit to and are exuberant of. Amazon employees are buying homes, spending most of their disposable income on housing investment, while factoring their portfolio as sure-income. Most of their paycheck is invested, not saved – and there’s a huge difference between investing and saving. Not only is the average Amazon employee over-invested, they are invested in housing and stocks which are volatile and will chase each other to the bottom. If the average Amazon employee experiences a negative equity situation, they will move. Many don’t have kids or family in the area, and will pull the parachute if both their stocks are looking inequitable and their house is worth less than they paid for it. After the recession, Amazon will use their new headquarters for huge tax breaks to stay solvent. Seattle will be left with empty apartments and offices as, not only is market capture reversed, but actual cuts are made during the recession (every business has to cut during a recession, don’t fool yourself that “Amazon is different” or “Seattle is different” – the more I hear that the more I know you’re wrong because that’s what most are banking on). The city that wins the new HQ will feel a lot like any given city that hosts the Olympics; exuberant at first, but then as though they were taken for a ride and left holding the bag. Don’t buy a house right now. The market is sending you a huge signal, do not ignore it. Don’t buy bitcoins. Don’t buy a car. Don’t get a student loan. Don’t buy bonds (seems like that bubble is already deflated). Buy gold, buy foreign stocks, buy the US stock market but watch it every day, cash out your 401k. Paul Volcker raised the federal funds rate to over 20%. Greenspan and Bernanke are writing books right now trying frame recessions on their watch as interest rates being too low for too long. We’ve had less than 2% on federal funds since 2008. All the tools the fed had to kick the can down the road in 2008 are rusted and unusable and the bubble at hand is worse than we’ve ever seen. QE4 will try to stop some of the real estate collapse (even as houses are still maturing on the balance sheet from QE1), but further QE will signal to foreign government that US bonds are junk and we will not be able to sell/service our debt. Bank failures this time around will bankrupt FDIC (which was TARP in 2008). Keep your money in one of the three big banks as they will be the most likely to be saved while what few local credit unions that are left will be insolvent. When will it all pop? Hard to say, but there will less warning than ever. There are some indexes that predict business cycles, but all of the fundamentals are broke as short-term, long-term bonds, stock market indexes, and real estate prices are used as co-factored indicators. While bonds depressed, stocks and housing have compensated, meaning that the the fundamental measurements can only tell when we’re in a business cycle, not when one will occur. The business cycle predictive indexes are basically broken as market fundamentals are broken. Rest assured, this is the 2nd longest bull and expansion in US history and the pent-up energy in these bubbles is at levels is unprecedented. https://imarketsignals.com/ims-business-cycle-index/

    • Also in the Business Cycle Index, referenced above, Employment figures are weighted. Don’t believe BLS employment numbers. Besides wages being stagnant, long-term discouraged workers are 10% of the labor force. The employment indexes also fail to take into account the part-time workers, over nominal full-time workers, or those who are working multiple part-time jobs as they are counted as more than one full-time job. Also, it’s bad enough that prisoners aren’t counted as unemployed, but college students aren’t counted as unemployed either (which wasn’t significant at a time when so few people went to college). There is a lot of labor in a holding pattern right now. If you’re optimistic, then you believe that there will be a boon in employment and US production, but adding workers (supply) will further depress wages. I think [long term] there will be a significant standard of living reduction as foreign companies repatriate factory work that initially went overseas. GDP (which is also a number to take with a grain of salt) only increased to parity with CPI (another b.s. index), and assuming the best of these, Real GDP growth hasn’t averaged out the 2008 recession yet. We’re not in a good economy so much as still recovering from the last recession, and the next recession could be eminent. Our standard of living will go down if our debt can’t cover it.

  3. Only in the world of realtors is this still considered “low inventory” https://static.seattletimes.com/wp-content/uploads/2016/12/WEB-apartment-boom-960×640.jpg

    It would take me a minute to recompile it, but I last year I had a spreadsheet which takes Pay Growth, Population Growth, Total Housing Units, the Seattle Case Schiller, all into account. These were co-factored; more population increases house value as more people need houses, more houses decreases value as supply is increased, more salary increases value as there is more disposable money to buy houses, etc, then base lined on 2007. King County housing is 40% more valued today than in 2007, and [arguably] the quality of the new housing units isn’t as good as before 2007. From a strictly supply/demand perspective, if our houses were overvalued in 2007, then they are absolutely melting hot today.

    Don’t be fooled by “low inventory”. It just means people aren’t selling despite the fact that all market indicators (and recent history) is telling them to.

    • I think 2018 will be a bad year, and I can only tell you what I would do personally ***All disclaimer aside. If I could really predict things, I’d be rich and I am not.*** If I were an older person, hoping to retire, I’d sell my house and rent a condo. I’d try to time the market obviously, to avoid any capital gains tax. However, any capital gains tax paid would be a windfall over losing equity after the market crashes [again]. This summer would be a hot time to sell. I’d start a business with the money I made from my house sale, to get cash flow to retire on. I’d buy a breakfast place or a car wash. There are plenty of revenue-positive businesses for sale right now, and [ironically] people would sell their business and buy a house with it – crazy. If I were young, I’d sell my 401k, take the hit, day-trade and get out at the first sign of trouble. I’d buy foreign stocks, gold (not GLD), silver bullion. Pop into Bellevue Coin in Lynnwood. People always say diversify. If you get paid in dollars, if your savings is in dollars, if your stocks are in dollars (even if you own various stocks), you’re not diversified – you’re all-in on dollars. Play the forex game, buy some gold. 30% of whatever you have should be non-dollars.

      • I want to point out that “timing the housing market” is a gambit. Practically everyone who’d consider selling their house would try to wait till the last minute to sell. Under 1031 exchanges you have only a short time to buy a new primary residence after you sell yours before you’d pay capital gains tax. These type of schemes force people to think shorter-term then they would otherwise. If housing prices under-perform this year, everyone will sit on the fence before selling, hoping it is temporary, but also waiting for a sure thing. But like zebra crossing an alligator infested river, once one goes there will be a race for the exit on real estate. Because *home ownership is actually at a historic low (since 1965!!!)* meaning there are more investors than home-owners in today’s market than in 2007, meaning that bearish movement will be less affected by sentimental pause. Anyone young or any real estate investment company will execute Strategic Abandonment. Families that want their kids to grow up and go to a certain school, who put everything into their house, will be the most affected by a race for the exit.

  4. Teresa, please consider putting a cap on length of replies. I bet there’s much better sites to have a drone on and on personal blog. As a local twenty year RE broker, I’m sure of it… Hoping your sites continue on strong in 2018!

    • Realtors should be as obsolete as Ice Delivery men. I got my hair cut a couple months ago, said to the barber “my wife wants to buy a house” and I was handed two cards by two realtors who were just sitting there. It was awkward to be pitched to twice and to shake two hands. No one is a realtor because it is hard. Consumers are very informed, there are websites that show us houses, we know what schools to send our kids to, we get the loans. Dunder Mifflin Paper is more useful. I asked my realtor, who last year said its a good time to buy, “How many houses are you buying?” He said he’d buy another one, but he’s “upside down in his first two and can’t convince his wife to get another one.” I don’t know if he really thought it was a good time to buy or not, but that said, he obviously would get paid only if I bought. Realtors are basically failed lawyers these days, but have better lobbyist, so there they all are. There’s even an app for them: https://www.rocketmortgage.com

    • I have two ideas for commenters: First, keep your answers succinct or I will start looking for a way to limit the word count in replies. Second, and this may or may not be related to the first, I may begin charging commenters by the word. As I noted in my earlier Publisher’s column, many regular commenters do NOT support this website financially. That needs to change. Thanks for listening and Happy New Year to all.

      • Several commentators are actually unpaid and censured contributors. Several folks like comments as much as articles. I settled up last year, will be sure to donate today for 2018. MEN is a great forum, and news site. It would be great if a realtor pointed out how I’m wrong, maybe provided some anecdotes of how they predicted to 2008 recession being that all the data is at their fingertips. They’ll sell us a house regardless.

  5. I agree with Charlene. I feel as though I am reading a book when I read some responses. As it is said–Less is more. Please don’t hog the commenting site. Yes, Teresa, you should charge by the word!

    • Don’t read it then. Lol. Close the computer Dorothy. It might have been too complicated for a bumper sticker, so I put it all on the wall. I’ve already gotten emails from people asking more questions. It’s an important topic for average person. For those who haven’t heard a market contrarian before, email mdrich2012@gmail.com with any questions you have, and I can provide some sources and people worth reading. I have a whole bit on the money supply and economic velocity, which is a really sobering index that not a lot of people are cued in on, and it effects your savings, your salary, food prices, etc. MEN is hoping to censure comments? Good luck with that! I do pay for these comments and will continue. I’d even send a MEN a dollar a comment if everyone else would agree to talk about the topic at hand instead of me. There’s some really great articles in our local news to talk about after all.

      • So to be clear, we will continue to monitor all comments to ensure they comply with our policies. And a reminder as we start the new year, be kind to one another. Constructive criticism please. And for anyone who wants to dive deep into a topic, the best place for that is an opinion piece or commentary or letter to the editor, which I am always happy to run.

    • I enjoy ALL the comments, even those of which I do not agree. Please do not limit/censure any commenter. I don’t comment much, but have to speak up here. Thank you very much.

      • Just want to be clear about a few things here. First, I will not censure or delete comments for length only. I did suggest that very lengthy comments might be better suited for an actual editorial/commentary/letter to the editor, as it is sometimes hard to wade through the verbiage in a comment format. That said, I will edit/delete those comments that violate our Code of Conduct policy. You can read all about our Code of Conduct here. Second, I indicated before that many of those who comment do not support us financially. I appreciate those who have recently made a voluntary subscription/donation but there is no connection between that financial support and whether a comment is approved/disapproved or edited. Any edits or decisions in that regard at at my sole discretion and judgment. — Teresa

  6. Personally, I like the comments. I find them interesting – and the ones I don’t, I just don’t read. In full disclosure, I fall in the “free speech” category regardless.

  7. Ditto. But let’s remember that brevity is the soul of wit. The less one says, the more people tend to listen.

    • MEN was taken over for two months by people debating the ridiculous marsh elections; which were basically a proxy POTUS election hoping to unseat some incumbent men who are objectively doing a great job. Dorthy was actually one of the top 5 more frequent commentators in the last few years, which begs the question. Either you understand the state of the union as I’ve laid it out, our you don’t. A real estate agent will still sell you a house right now. They know better, and it’s a bit like a doctor who’d prescribe you a recalled drug. It’s a textbook moral hazard. Let’s agree to table any discussion about the pending real estate collapse and compare each other’s comments should anything I’ve said turn out to be correct or completely wrong. The topic at hand is WA real estate. Not my brevity. I actually have no brevity. I’m actually the smartest or dumbest person you’ve ever met. Choose one and move on. 🙂

  8. This graph is the real state of the union. https://fred.stlouisfed.org/series/M2V
    There is not a lot of working capital right now. Banks aren’t giving loans for many things, so the main street money supply is severely depressed. Student loans, housing loans and auto loans are the only loans we can get, so that’s were people have been investing, driving those bubbles, but that capital isn’t being circulated so the M2 velocity is severely down (see the graph for definitions). Credit Card debt as a percentage of household debt is closing in on 2008 levels as well. Excess Russian oil production has kept prices for food and consumables very down, which has really saved us all in the short term as money supply and wages have also been down. Russia’s goal in defying OPEC was to hurt Obama’s oil industry infrastructure during the 2008 recovery (pump and dump), but the but Russians will cut production this year and families will see a substantial increase in cost of living as the reversal in supply will directly translate to increase in price, especially here. Should consumables and energy costs go up this year, or should the stock market turn, or should foreign home buyers not buy as much here (Seattle became the #1 US city for Chinese buyers), all is bad for local real estate. The Seattle area was relatively less affected by the 2008 recession because we were relatively less inflated. We lead the nation in housing inflation this time around, and will be the most affected. Think Las Vegas x2.

    • I want to point out that I spent Christmas week in NYC. I’ve lived in 15 states, working aviation contracts and have a good bead on Cost-of-Living in various places. I was floored how much cheaper the food was in NYC over Seattle. My family moved here about 6+ years ago, and Seattle food was cheaper. Food margins are almost always razor thin, as real estate [locations], labor costs, and energy prices are mostly what you pay for when you eat. Oil is low, meaning the others are relatively too high in Seattle.

        • I love Dorothy’s comments. She’s a great contributor. Teresa does a great job and only editorializes as a last resort. I do understand though, and this may not be the case, it’s super uncomfortable for someone to question the real estate market right now.

  9. My family all read the comments section of MEN. We are very fortunate to have Mathew Richardson comment in this forum. Whether you agree with him, or not, you have to admit that his content, sentence structure, and clarity of thought is amazing and that of a professional writer. Please do not limit his content. If you do not want to read or absorb his knowledge/thoughts, just scroll down til you find a “short” thought with which you might agree. MEN, this poster/commenter is a real plus to elevating the level of thought provided by the articles/news that you publish. Normally this level of writing is found in the WSJ or other such forums. Hey, how’s this? I will send in another $100 to MEN just to have the privilege of being able to read his comments, not all of which I agree; you have to admit Teresa, he really can articulate a thought and make you question our long held positions. In other words, he is making us all “think”.

  10. Yes, I confess I often comment, although one of the top 5 gives me more credit than I deserve. Most of my comments have to do with the wild life/bird/photography aspects of MEN, which I love. Thank you, Matthew for your liking my comments. It is a compliment that I graciously accept.


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