The general rule of thumb is that a balanced market is somewhere between 4 and 6 months of inventory. However, we all know every city is different, and I’m beginning to think that this is just one more way Seattle (and King County) differ from the norm. First, let’s check out the data from the NWMLS for King County since January 2018:
Obviously King County’s “Balanced Market” is not somewhere between 4 and 6 months. As we can see in the chart above, the median price in King County fell from $650,000 in June of 2018, to $565,000 in January of 2019. The average months of inventory during that time period was 2.0475 months, with the highest month of inventory in September of 2018, at 2.83 months. Thus, at just an average of 2 months of inventory, it was very much a buyer’s market based on the drastic median price decline.

The median price in King County rose from $571,250 in January of 2018 to $650,000 in June of 2018. The average months of inventory during that time period was .9966 months, with the highest month of inventory in June, 2018 at 1.29 months. This is a 13.79% rise in median price at inventory levels of .9966 months.

The median price in King County rose from $565,000 in January 2019 to $645,000 in May of 2019. The average months of inventory during that time period was 1.938 months, with the highest month of inventory in January 2019 at 2.34 months. This is a 14.16% rise in median price at inventory levels of 1.938 months.

We have a dataset above that shows drastically declining AND increasing median prices when inventory is right around 2 months. Further, we have a dataset above that shows a higher percentage increase in median price with inventory at 1.938 months in the first half of 2019, than when inventory was at .9966 months during the first half of 2018. Are you confused, because I’m confused.

What does this mean?

Months of Inventory is not the stat to reference when discussing what Puget Sound’s balanced market is. We can definitely see a correlation between Months of Inventory and prices in the chart above. However there’s another more important factor affecting the Puget Sound Housing Market that overrides Months of Inventory, and that’s buyer activity. Buyer activity is measured by Absorption Rate, which is why we implemented the section below into our updates. I don’t have a large enough dataset to chart out Median Price: Absorption Rates just yet, but in the short time I have been calculating this, it’s looking like Puget Sound’s actual Balanced market is somewhere around a 33.5% absorption rate for SFR, and 25% absorption rate for Condos. I’ll keep you posted though as more and more data comes in.

Alex Black Absorption Rates per NWMLS Real-Time Data:

SFR Pending Sales in Seattle: 695
- - SFR Active Listings in Seattle: 1,505 homes
    Absorption Rate for SFR in Seattle: 31.59%
    Absorption rate on July 12^th was 32.85%
    Absorption rate on July 3^rd was 34.11%
    Buyer activity is slightly declining in relation to seller activity = deteriorating median house prices likely
Condo Pending Sales in Seattle: 255
Condo Active Listings in Seattle: 720
Absorption Rate for Condos in Seattle: 26.15%
Absorption rate on July 12^th was 25.70%
Absorption rate on July 3^rd was 25.85%
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Thus, buyer and seller activity have essentially remained constant = likely stable median condo prices
Alex Black Absorption Rate is calculated as: (Pending Sales) / (Active + Pending Sales)

Interest Rates

Per Bankrate.com, the 30 Year Mortgage interest rate rose to 4.05%, with .31 in discount and origination points. Rates are still near 31-month lows.
Mortgage rates this week
The benchmark 30-year fixed-rate mortgage rose this week to 4.05 percent from 3.97 percent, according to Bankrate’s weekly survey of large lenders.
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A year ago, it was 4.68 percent. Four weeks ago, the rate was 3.99 percent. The 30-year fixed-rate average for this week is 1.05 percentage points below the 52-week high of 5.10 percent, and is 0.11 percentage points greater than the 52-week low of 3.94 percent.
The 30-year fixed mortgages in this week’s survey had an average total of 0.31 discount and origination points.
Over the past 52 weeks, the 30-year fixed has averaged 4.57 percent. This week’s rate is 0.52 percentage points lower than the 52-week average.
• The 15-year fixed-rate mortgage rose to 3.34 percent from 3.30 percent.
• The 5/1 adjustable-rate mortgage fell to 3.89 percent from 3.90 percent.
• The 30-year fixed-rate jumbo mortgage rose to 3.90 percent from 3.85 percent.
• At the current 30-year fixed rate, you’ll pay $480.30 each month for every $100,000 you borrow, up from $475.69 last week.
• At the current 15-year fixed rate, you’ll pay $707.05 each month for every $100,000 you borrow, up from $705.10 last week.
• At the current 5/1 ARM rate, you’ll pay $471.10 each month for every $100,000 you borrow, down from $471.67 last week.
Results of Bankrate.com’s weekly national survey of large lenders conducted July 17, 2019 and the effect on monthly payments for a $165,000 loan:
The “Bankrate.com National Average,” or “national survey of large lenders,” is conducted weekly. The results of this survey are quoted in our weekly articles and national media outlets. To conduct the National Average survey, Bankrate obtains rate information from the 10 largest banks and thrifts in 10 large U.S. markets. In the Bankrate.com national survey, our Market Analysis team gathers rates and/or yields on banking deposits, loans and mortgages. We’ve conducted this survey in the same manner for more than 30 years, and because it’s consistently done the way it is, it gives an accurate national apples-to-apples comparison. https://www.bankrate.com/mortgages/analysis/
City of Seattle Stats for Single Family Residences – Updated 7.18.19

These charts are Seattle Specific, but the Puget Sound Real Estate Market mirrors the Seattle market.

Scott Sheridan is a Loan Officer with Primary Residential Mortgage, Inc. Being in the mortgage industry for three years, Scott brings a fresh millennial flair to the industry. He is well-versed in the most modern, efficient, and convenient ways to get things done. Scott combines these skills with a genuine love of his work and recent experience in what is it like to be a first and second-time home buyer. You can follow Scott’s weekly market updates on his PRMI