Thursday, April 07, 2005, 12:00 a.m. Pacific
Home prices take off in tight market
By Elizabeth Rhodes
Seattle Times staff reporter
An abundance of buyers and significant shortage of sellers had King County home prices shooting up last month, with the median price of houses and condos sold on the Eastside hitting $400,000 for the first time.
People hunting for a house in the county in March had a third fewer properties to choose from, compared with a year earlier. Those lucky enough to buy a home paid 16 percent more than a year ago.
Buyers scrambling for homes before interest rates go higher saw the scarcity of houses putting growing pressure on prices. The median price of houses and condos sold in Seattle in March was $355,000, up 14 percent from March 2004, according to statistics released yesterday by the Northwest Multiple Listing Service.
Regionally, prices were up almost 13 percent from a year ago.
Although good news for sellers, this spring's rapidly rising prices are taking their toll on buyers such as Shannon Layden and his wife, Namiko Layden-Nakamura. The Seattle couple have painfully, in increments, adjusted their price limit from $300,000 to $350,000.
When they made successive offers on two North Seattle houses, they stretched even further and still lost out.
"I've almost given up," said Shannon Layden, 35, a Web-applications developer for King County. Sellers "are getting around $40,000 to $60,000 more than their asking price."
Meanwhile, rising interest rates are cutting into buying power.
"It is hard to be a buyer today," sympathized O.B. Jacobi, a broker in Windermere's Seattle-Wedgwood office.
He said sellers who've waited out the winter usually put their homes on the market about now, easing the strain on buyers. That hasn't happened this year.
Several factors are responsible, Jacobi said. Some move-up buyers are keeping their homes as investments, not selling them. Or they're hesitant to sell now because "they don't want to jump into a market that's difficult," he said.
And many potential sellers have remodeled rather than move.
Meanwhile, the area's strong economy is adding more buyers to the pool. Jim Lee, branch manager of CTX Mortgage in North Seattle, says customers are aware mortgage interest rates are steadily creeping up.
Late last month, a 30-year fixed-rate mortgage topped 6 percent for the first time since July. It now stands at 6.04 percent, according to mortgage-money supplier Freddie Mac.
Adjustable-rate mortgages are half a point or more lower but climbing.
Still, "the majority of folks are having more problems finding a house than they are problems with interest rates," Lee said. "The lack of inventory is driving the urgency to get out there more than rates are at this point."
The pressure is particularly acute in the lower, first-time-buyer price ranges, which vary by area.
Southwest King County, including Burien, Federal Way and SeaTac, has the lowest housing prices. Last month, the median price for homes and condos there was $244,700. (Median means half sold for more, half for less.)
"You have investor buyers, too, and they're also competing for that entry-level property," said Albie Moshcatel, manager of John L. Scott's Renton Highlands branch.
Bidding wars in all price ranges are widespread. Moshcatel said the result is a lot of stress and frustration both for buyers and agents. One of his agents last week drafted three offers, adding escalator clauses to each that sweetened their offers.
Still, "they didn't get any of them," he said. "It's very taxing."
The Laydens went one step further. They had the two homes they wanted professionally inspected before submitting their offers. "I blew 650 bucks just trying to bid," sighed Shannon Layden.
He and his wife are thinking of taking a breather from the market, hoping rising interest rates will result in falling prices.
If that happens, it would mean the region's high housing prices were an artificial bubble, and the bubble had burst.
Lee is among many who think the market will cool as interest rates approach 7 percent. But he doesn't see a bubble on the horizon.
He says the healthy economy and lack of buildable land will keep prices from falling.
Elizabeth Rhodes: firstname.lastname@example.org