June 2018 Market Snapshot | NWMLS.com
KIRKLAND, Washington (July 5, 2018) – Home buyers around many parts of Washington state had more choices and less competition during June, prompting some industry leaders to comment on “a feeling of change in the market.”
“Inventory is up and demand has dropped,” reported Robert Wasser, an officer with the board of directors at Northwest Multiple Listing Service. That combination is “a pretty simple economic recipe for a softening market,” he added in commenting on the latest MLS statistics.
Figures for June show a 5.2 percent improvement in the number of active listings system-wide, coupled with drops in the volume of pending sales (down 8.4 percent) and closed sales (down .07 percent) compared with a year ago. Despite the shift of some indicators favoring buyers, prices area-wide continued to rise, increasing more than 10 percent from twelve months ago.
“There was a feeling of change in the market this June and the numbers supported that feeling,” remarked John Deely, principal managing broker at Coldwell Banker Bain. He noted many brokers also reported an increase in properties going past their offer review date, more price reductions, and an increase in reverse prospecting (a tool that allows the listing broker to view a list of brokers with potential buyers for that listing). “We’re also experiencing a decrease in multiple offers and the number of buyers participating in multiple offers,” added Deely.
Northwest MLS brokers added 13,153 new listings to inventory during June, a drop from both a year ago when they added 13,658, and from May when 14,524 new listings were added. With new listings outgaining sales, total inventory as measured by active listings and months of supply improved.
At month end, Northwest MLS reported 15,234 active listings and 1.5 months of supply. Inventory of single family homes and condos reached its highest level since October. The supply of active listings in King County surged 47 percent from a year ago, boosting the months of supply to just under 1.3 months — the highest level since September 2016 when there was 1.37 months of supply.
“Although still a quick response market, with more new listings coming on the market during the summer months, we experienced dispersed buyer energy due to the greater availability and selection,” stated J. Lennox Scott, chairman and CEO of John L. Scott Real Estate. He estimates sales activity is off 15-to-20 percent for each new listing’s first 30 days on the market. “Now through October will be the best time of year for homebuyers,” he remarked.
“Sellers are becoming more active in the market as they sense buyers pulling back,” suggested George Moorhead, designated broker and owner at Bentley Properties. Improving supply, a marked increase in expired or cancelled listings, and market times almost doubling are factors he mentioned when describing the market as “more than just lackluster” with summer showing no sign of improvement.
Windermere president OB Jacobi also saw the second straight month with a “pretty significant rise in the number of homes for sale across the Western Washington region” as encouraging. “This is great news for home buyers because not only does it mean more selection, but also less competition.”
Commenting on the steady improvement of supply with more choices for buyers, Mike Grady emphasized “We still remain far below a balanced market of 3-to-5 months of inventory.” The imbalance is reflected by rising prices, up more than 10 percent in King County and nearly 15.5 percent in Snohomish County, he noted. “As long as we are creating 100,000-plus net new jobs annually in the Pacific Northwest and building fewer than 30,000 new single family homes, these trends will continue,” suggested Grady, the president and COO of Coldwell Banker Bain.
Frank Wilson, Kitsap regional manager and branch managing broker at John L. Scott Real Estate in Poulsbo said the market there has slowed “but not to the degree that Seattle has. There are fewer listings coming on the market, to a large degree because potential sellers cannot find a home to buy.”
MLS figures show inventory in Kitsap County is down more than 20 percent from a year ago and pending sales declined 5 percent. Wilson said some potential sellers are opting to stay in their current house and remodel citing rising prices and limited selection as reasons for their decision.
“This market is reaching westward to Jefferson and Clallam counties,” Wilson reported, noting Port Ludlow, Port Townsend and Port Angeles are all feeling a bump in value and shrinking inventory. Jefferson County inventory dropped 32.2 percent year-over-year while prices surged 29.8 percent. The supply in Clallam County shrunk nearly 30 percent, with prices jumping 10.4 percent.
Twenty of the 23 counties covered by the Northwest MLS report had double-digit increases in median sales prices. Grant, Kitsap, and Skagit counties were the exceptions, each with gains under 6 percent.
Of the 29 map areas the MLS tracks within King County, six areas, including Queen Anne/Magnolia and most sub-areas of the Eastside, reported median prices topping $1 million for sales of single family homes and condos that closed during June.
Despite the overall gains, buyers might be cheered by one notable figure: The median sales price of a single family home (excluding condos) in King County fell from May, at $726,275, to June, a $715,000, for a drop of nearly 1.6 percent. That May-to-June decline hasn’t happened since pre-recession, noted MLS director Wasser, owner/broker at Prospera Real Estate in Seattle.
“While home prices are still trending above average rates, the pace is moderately slowing as the housing market becomes less frenetic,” Jacobi stated, adding, “We have a ways to go before we approach anything close to a balanced market, but we’re certainly trending in the right direction.”
The softening was evident in the four-county Puget Sound region where pending sales (mutually accepted offers) were down nearly 11 percent from a year ago. Last month’s 8,052 mutually accepted offers in King, Kitsap, Pierce and Snohomish counties was the lowest total for June since 2014.
Wasser agreed. “It’s still a seller’s market out there, but I’m seeing signs of a more balanced market on the horizon,” he stated.
While year-over-year prices rose in all counties, compared to May they were flat in some areas, including King County where the median price of $650,000 was unchanged. The overall median of $425,000 for June’s closed sales was only $5,000 higher than the previous month.
Buyers who want to live in King County still face hefty prices for existing inventory. Deely said his analysis of active listings of single family homes revealed more than a third of the choices for single family homes has asking prices of more than $1 million. And, he added, there are fewer than 80 listings (only about 2 percent) are priced below the US national median sales price of $313,000.
Escalating prices and depleted inventory in desired neighborhoods are top concerns Moorhead hears from buyers, but “they have another challenge on the list: rising interest rates.” The hikes — with more expected — are pushing buyers into a lower price point, or forcing them to come up with a larger down payment, he added.
Grady also commented on rising mortgage rates, resulting in some buyers being priced out of mortgage qualification. He also suggested the slowdown in pending sales has an international angle. “There have been slightly fewer sales to international buyers as China continues to make taking cash out of China more difficult,” he stated.
Home builders continue to be challenged. Wilson noted builders are “struggling to ramp up production to meet demand” with local regulations and processes being inhibitors.
Northwest Multiple Listing Service, owned by its member real estate firms, is the largest full-service MLS in the Northwest. Its membership of more than 2,200 member offices includes more than 29,000 real estate professionals. The organization, based in Kirkland, Wash., currently serves 23 counties in the state.
Statistical Summary By Counties
Market Activity Summary and 4-County Puget Sound Region Pending Sales (PDF)
You can give away up to $5,120,000 for the rest of this year without paying gift tax. If this higher federal gift tax exemption is not used, and the exemption falls back to $1 million in 2013, then this important opportunity will have been lost.
Making a gift this year is particularly attractive to Washingtonians, because while there is no gift tax in Washington, there is an estate tax on assets over $2 million. Accordingly, anything that is given away prior to death avoids the Washington estate tax. The current combined federal and Washington estate tax rate is 47.35 percent. Next year, the federal estate tax rate is scheduled to increase to 55 percent.
For Washingtonians whose estate may be subject to federal or Washington state estate tax, the tough question is, what do I give away? As Americans are living longer, it may be difficult to give away cash and other investment assets that could be needed down the road.
But what if you could give something away, yet retain the right to use the asset for as long as you specify? While this is not generally permitted by tax law, an exception is a gift of a home to a Qualified Personal Residence Trust (QPRT).
The tax regulations are somewhat complex, but the basic idea of a QPRT is straightforward. An individual or couple may give away a primary or secondary residence to a QPRT, and retain the right to live in the residence for the term of the trust, which is a specified number of years.
When the term ends, the beneficiaries (such as children or a trust for children) receive the home without any further gift tax, and the value of the home is excluded from the donor’s taxable estate. Even better, for federal gift tax purposes, the value of the gift is reduced by the value of the right to continue to live in the residence.
The mechanics of a QPRT may be illustrated by the following example: If an individual who is age 70 gives a $10 million home to a QPRT and retains a right to live in the residence until age 85, the gift tax value is only about $3.8 million, well within the federal gift tax exemption.
If the donor outlives the term of the trust, then the entire $10 million home, plus 15 years’ worth of appreciation, will pass to the beneficiaries without estate tax. Assuming the tax laws change as planned, the estate tax savings is $7.7 million, not including estate tax saved on the appreciation. Even if the exemption remains at today’s higher level, at least $2.9 million of estate tax would be saved.
There is a catch. The tax benefit is lost if the donor dies during the term of the trust. In that case, the home is included in the donor’s taxable estate, just as if the QPRT had never been established. On the other hand, the donor is no worse off.
This means that the term of the trust should be as long as possible, but shorter than the donor’s life expectancy. A married couple can actually choose two different terms. For example, one spouse could choose a 10-year term and the other could choose a 15-year term, which would make sense if differences in age or family history suggest each had a different life expectancy. If one spouse survives the respective term, but the other does not, then the couple receives about half of the tax benefit.
It is important to remember that at the end of the term, the beneficiaries will own the residence, which may be another reason the term should be as long as possible. If there is no agreement at the time the QPRT is established, the donors can rent the residence back from the beneficiaries at the end of the term. This not only gives the beneficiaries a source of funds to pay property taxes and insurance, but each rental payment serves as yet another avenue to transfer wealth to the next generation.
While a QPRT may provide a significant estate tax benefit, as with all gifts made during life, the beneficiaries receive the donor’s tax basis in the residence. If the QPRT had not been established, and the donors died owning the residence, then the residence would receive a stepped-up tax basis at death, allowing the beneficiaries to then sell the property without capital gains tax.
However, for those who may be subject to federal estate tax, the tax savings of using a QPRT are likely to outweigh the lost income tax benefit, even if the capital gains rate increases.
If you are considering a QPRT, an attorney can help you navigate the other issues, which include the options that are available if the donors sell their home during the term (including the purchase of a replacement residence in the QPRT), and how best to establish a QPRT if the home has a mortgage.
A QPRT is an attractive option for anyone who owns their own home and would like to make a gift in 2012 while the gift tax exemption remains at a historically high level.
While there are some tradeoffs and important considerations, a QPRT is a relatively low-risk way to achieve the tax benefits of giving away your home, while retaining the right to live in it for many years.
WALTER IMPERT is a partner in Dorsey & Whitney’s Tax, Trusts and Estates Practice Group in Seattle, where he can be reached at 206.903.2439. JAY RIFFKIN is an associate in Dorsey & Whitney’s Tax, Trusts and Estates Practice Group in Seattle, and can be reached at 206.903.8706.
Windermere West Seattle would like to invite you and your four-legged friends to our office on:
Saturday, December 8, 2012
From 10:00 am to 2:00 pm
A professional photographer will be taking pictures of your pets with Santa. We will also have holiday treats for you and the little ones. Please come by and have some fun!
If you have any questions, please call our office at 206-935-7200.
With a median average income of $56,835, Washington state ranks No. 13 nationally, trailing U.S. leader Maryland at $70,004.
Washington state had 249,382 households, or 9.47 percent of all households that made $150,000 or more last year, which ranked the state 15th nationally. The District of Columbia, which is considered a state for statistical purposes, led the country with nearly one-fifth of the households in the district (18.0 percent) with 2011 incomes of $150,000 or more.
The six states with the strongest concentrations of top-end incomes are arrayed along the Atlantic from Massachusetts to Virginia, according to research by On Numbers, the research division of American City Business Journals.
A total of 10.02 million U.S. households crossed the $150,000 threshold in 2011, accounting for 8.7 percent of the nation’s 114.99 million households.
The city of Seattle is set to name a general contractor Friday to oversee the replacement of Seattle’s crumbling downtown seawall, a project that can now move forward without the cloud of uncertainty that hung over the plans before Tuesday’s election.
That’s because voters in Seattleoverwhelmingly approved a $290 million bond measure to fund the project.
Leading up to Tuesday’s general election tally, there was widespread agreement among business and political leaders in Seattle that the seawall is decrepit and has to be fixed. But city officials and proponents of replacement worried that the seawall measure might fail, partly due to voter fatigue over higher-profile issues such as the presidential race and several statewide issues including gay marriage and marijuana legalization.
But it turns out there was nothing to worry about. An overwhelming majority – 77 percent – voted to approve the measure. The seawall levy vote was closely watched by six companies involved in four bids to play a major role in construction of the new seawall along Seattle’s central waterfront — a several-block section between South Washington and Virginia streets that includes the most deteriorated sections of the seawall. Some parts of the seawall date back to the early 1900s.
The city is continuing interviews with the finalists — all of whom already have a presence in Seattle, The city is slated to pick a general contractor Friday among the finalists:
— Colorado-based Guy F. Atkinson Construction LLC.
— Portland-based Hoffman Construction Co.
— A joint venture of Minneapolis-based Mortenson Construction and Seattle-based Manson Construction Co.
– A joint venture of Canada-based PCL and Alameda, Calif.-based Stacy and Witbeck Inc.
A draft report on the project’s potential environmental impact is due to be released to the public Nov. 13. Construction is set to start next fall.
Seattle was the only city among the top 20 markets tracked in the S&P/Case-Shiller Home Price Indices where home prices dipped in August.
The home-price index for Seattle nudged down 0.1 percent in August, while the average home price in the other cities increased 0.9 percent from the previous month, S&P/Case Shiller reported today.
Even though Seattle home prices slipped in August, prices are still up 3.4 percent compared to last year.
The index is a rolling three-month average, with this report covering the months of June, July and August.
The top performing city tracked by S&P/Case-Shiller was Phoenix, which posted its fourth month of double-digit gains in home prices, up 18.8 percent in August compared to the prior year. Meanwhile Las Vegas posted its first increase in home prices since January 2007, up 0.9 percent in August compared to the August 2011.
Other housing data are also positive. Single family housing starts are up 43 percent nationwide compared to last year, while homes sales continue to increase and the inventory of homes continues to decline, the report said.
JEANNE LANG JONES covers retail and real estate for the Puget Sound Business Journal. Phone: 206-876-5426 | Email: firstname.lastname@example.org Click here to sign up for the PSBJ Daily Update.
Seattle online real estate company Redfin said it’s refined its home search system to allow parents to look for homes within a specific school zone.
According to Redfin, “real estate agents report that most families choose where to buy a home primarily based on what schools their children would attend.”
Redfin said it would issue email updates to its customers when a house become available for sale within a certain school zone.
HomeStreet Inc., parent company of HomeStreet Bank, announced net third-quarter income of $21.3 million, or $2.90 per diluted share, crushing analysts’ expectations of $1.92 per share and well ahead of last year’s earnings of $2.43 per share.
“Our record earnings in the third quarter were driven primarily by strong mortgage banking activity. We are also very pleased to have again made significant progress in improving our credit quality during the quarter and we believe our asset quality is consistent with that of healthy institutions today,” said Mark Mason, president and CEO, in a statement.
Seattle-based HomeStreet (NASDAQ: HMST) said single-family closed loan production totaled $1.37 billion, increasing $890.2 million, or 186 percent, from the third quarter of 2011. The bank said its net gain on mortgage loan origination and sale activities was $64.4 million, an increase of $48.6 million, or 308 percent, from a year earlier.
Online real estate company Zillow.com Inc. said its added information on 1.8 million pre-foreclosure and foreclosed residential properties to its site.
The Seattle company NASDAQ: Z said the homes are not yet listed for sale and cant be found on any Multiple Listing Service MLS and theyre not freely available on other real estate sites.
“Zillow is taking information that was really only available to a select group — in this case, savvy investors — and making it more easily available to interested home buyers,” said Spencer Rascoff, Zillows CEO, in a statement.
According to a new study by Seattle-based Zillow Inc. (NASDAQ: Z), Seattle home values increased 1 percent in the last quarter and have increased 2.8 percent in the past year. But nationally, home values increased 1.3 percent in the past quarter and 3.2 percent over the past year.
Zillow’s study predicts that home values will increase nationally by 1.7 percent in the coming year and they’ll increase 1.8 percent in Seattle.