The Seattle-Tacoma-Bellevue market has jumped on the path of an affordability squeeze in the third-quarter for entry level home buyers with new-home closings down, but median sales prices up, according to new data released by Metrostudy.
The Washington CBSA is the newest addition to Metrostudy’s on-the-ground market coverage and will be an interesting one to watch in 2015. In the third-quarter, new-home closings for both single-family and attached residences dropped 17.3 percent year-over-year from 1,934 in 3Q13 to 1,599 in the last quarter. New-home closings also declined with a 6.6 percent decrease from 1,712 new-home closings in the second-quarter. For the first three quarters, a total 4,767 new homes closed in the market down from 5,629 in the first three quarters of 2013 primarily due to Qualitative Mortgage going into effect in the first quarter of 2014 forcing entry level home buyers into the resale market or apartments for affordability reasons. New sales for the 3rd quarter rose roughly 8% year over year so look for closings in the fourth quarter to rebound relatively strong.
With entry level buyers finding it more difficult to qualify for new construction, lower priced inventory that sold in 2013 is sitting on the shelf longer. The new construction homes that’s are selling are those targeted towards the move up buyer and Baby Boomer causing the Median new-home sales price in the Seattle market to increase year-over-year from $370,200 in 3Q13 to $422,400 in the third-quarter of 2014—a 14.1 percent increase and a jump far above the 400k price point. The median price per square foot spiked even more significantly with a year-over-year increase to $281 in the third-quarter from $190 in 3Q13—a 47.9 percent jump.
The Seattle market has been hailed as a top metro for oncoming unmet boomer housing demand.
Despite the climb in price per square foot, the median living square footage for the new-home in the Seattle market experienced slight gains from 2,380 to 2,540 year-over-year in the third-quarter. The market saw a minimal jump quarter-over-quarter in median home size from 2,526 square feet in the second-quarter although the “craftsmanship and amenities offered in the homes has increased” according to Todd Britsch, Regional Director for Metrostudy.
The Seattle market experienced a year-over-year boost in mortgage size in the fall with a 36.1 percent rise in the average to $492,728 in September. Also in September, the percentage of new-home closings that were single-family dropped year-over-year from 85.2 percent to 77.9 percent. Finally, for existing homes in September, REO and foreclosures dropped to 20.4 percent of existing home closings from 24.9 percent the year before, according to Metrostudy’s Dashboard Report.
Next year is predicted to be a big one for the new-home market, which should accelerate sales in metros like Seattle that are millennial magnets for renters. The market will need to hold steady with some affordable options for the first-time buyers, though, which has not been the case this season.