Are homes sales increasing around the state of Washington and in the Sequim area?  The questions have come up periodically.  Is the real estate recession over?  Has the recovery started?  The news has taken us on a roller coaster of bad news and then good news and then bad news again.  It seems reports come out one week with the talking heads proclaiming we are in recovery, only to have a new report out the following week with another expert telling us that we won’t see a recovery for a long time.

Homes Sales Increasing in Some Counties

Homes Sales Increasing or Not

Enlarge this graphic by clicking on it, and you’ll get a clearer picture of how homes sales this first quarter of 2012 compare with the first quarter of 2011 on a percentage basis.  Clallam County has zero growth, but at least no decline.  Other counties around the state vary dramatically.  For example, Okanogan County homes sales increased by 64%, Whitman County by 48%, Mason County by 37%, and Jefferson County by 25%.  Lewis County homes sales decreased by over 7%.  On the other hand, most other counties saw modest gains, and as you look at this chart, the pattern clearly shows home sales increasing.  Will that pattern be sustained?  That remains to be seen.

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Sequim real estate sales in the first quarter of 2012 are an indication of whether the Sequim real estate market is recovering or still on hold.  The national real estate market is showing some signs of recovery according to the National Association or Realtors Chief Economist, Lawrence Yun.  Since many of our buyers are retirees who must sell their homes in other states, this is relevant.  Here is a chart showing Sequim real estate sales in the first three months of the year from 2005 (our peak year) to 2012.

Sequim Real Estate Sales Graph

Sequim Real Estate v. National Sales

As shown in this graph, the last three years have been pretty even, 81 homes sold in Sequim in 2010, 76 homes in 2011, and this year 72 homes.

Here is the positive news from the NAR Economist.

Existing-home sales were down in March but continue to outpace year-ago levels, while inventory tightened and home prices are showing further signs of stabilizing, according to the National Association of Realtors.  Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, declined 2.6 percent to a seasonally adjusted annual rate of 4.48 million in March from an upwardly revised 4.60 million in February, but are 5.2 percent above the 4.26 million-unit pace in March 2011.

Lawrence Yun said the recovery is in the process of settling into a higher level of home sales.  “The recovery is happening though not at a breakout pace, but we have seen nine consecutive months of year-over-year sales increases,” he said.  “Existing-home sales are moving up and down in a fairly narrow range that is well above the level of activity during the first half of last year.  With job growth, low interest rates, bargain home prices and an improving economy, the pent-up demand is coming to market and we expect housing to be notably better this year.”

Also on a national level, total housing inventory at the end of March declined 1.3 percent to 2.37 million existing homes available for sale, which represents a 6.3-month supply2 at the current sales pace, the same as in February.  Listed inventory is 21.8 percent below a year ago and well below the record of 4.04 million in July 2007.

“We were expecting a seasonal increase in home listings, but a lack of inventory has suddenly become an issue in several markets with not enough homes for sale in relation to buyer interest,” Yun said.  “Home sales could be held back because of supply factors and not by demand – we’re already seeing this in the Western states and in South Florida.”

The national median existing-home price3 for all housing types was $163,800 in March, up 2.5 percent from March 2011.  Distressed homes4 – foreclosures and short sales sold at deep discounts – accounted for 29 percent of March sales (18 percent were foreclosures and 11 percent were short sales), compared with 34 percent in February and 40 percent in March 2011.

Foreclosures typically sold for an average 19 percent below market price in March across the U.S., while short sales were discounted 16 percent.

Sequim Real Estate Sales On Pace

Sequim real estate sales do not track national sales precisely, and I’ve written that the Sequim real estate market is shielded to some extent from the national market, but we’re clearly still impacted.

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How many Sequim homes are under contract now?  That reminds me of a couple of other popular sayings, like, “Are we there yet?” and “Can you hear me now?”  Are Sequim homes selling and how many are selling?  Buyers appreciate the buyer’s market, but sellers are losing sleep over whether the housing market is beginning it’s recovery.  Sellers cannot help but get a little impatient with their listing agents, because for too many sellers nothing seems to be happening.

Sequim Homes Under Contract

Sequim Homes Pending Interpretation

The homes represented in this chart are pending sales, also known as homes under contract, or in our MLS “Active-Under-Contract.”  There are 14 Sequim homes pending in the price range of $100,000 to $200,000, and there are 21 in Port Angeles.  This is the only price category in which P.A. beats Sequim.  More lower priced homes are selling in P.A. than in Sequim.

But above $200,000, clearly buyers prefer Sequim homes.  In fact, right now over 3.6 times as many homes have sold in Sequim compared to P.A. above $200,000.  And above $400,000 the four pending transactions are all Sequim.

Sequim Homes Preferred

Retirees prefer Sequim.  That is clear, and I’ve been writing about that trend for several years.  Retirees want Sequim homes.

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The question, “Do people buy homes in Sequim in the winter months?” came up recently, and with this recent snow, it certainly is a relevant question.  The short answer is yes, but here’s a fuller explanation of who, what, and when on the subject of buying and selling homes in Sequim during the winter with another nice graphic illustration brought to you by the research staff of Chuck Marunde.

Homes in Sequim

Homes in Sequim and Peak Sales Years

A chart like this tells its own story.  Two quick explanations are necessary.  The months are shown in the bars as consecutive months, so for example in the first grouping of bars we have November and December of 2004 plus January of 2005, which keeps the months together.  Also I only include homes that sold for $150,000 or more.  You can’t buy much for less than $200,000 in Sequim, but I included low priced homes, some of which are probably foreclosures.

Homes in Sequim sold during the winter months of November, December, and the following January show us an interesting pattern.  The peak year for the sale (closing) of November homes in Sequim was 2006.  The peak year for the sale of December homes in Sequim was 2005.  The peak year for the sale of January homes in Sequim was 2006.

This is why I consider 2005 the peak year for home sales in Sequim.  Even the peak closings in January of 2006 were the result of deals written in November and December of 2005 since most transactions close 30 to 60 days after mutual acceptance.

Homes in Sequim and January Sales

The homes in Sequim that closed in January confirm a few things for us.  It turns out 2009 was the trough for lowest closings in January.  Only 11 homes sold in January of 2009.  That reflects buyers who were looking at homes in the prior two to three months.  And 2010 wasn’t much better with only 12 homes sold in January.  Interestingly enough 2011 sales jumped way up in January to 22.

Here we are today, the 21st of January, 2012, and so far this month we only have 3 closings.  What can we make of that?  We have 7 closing days left in the month, and closings often happen near the end of the month, so we shall see.  Check back at the end of the month, because I will update the number of closings in January.  One preliminary interpretation I will share.  I would expect January of 2012 to have  low numbers for Sequim, because in the summer and fall of 2011 retirees stepped up their purchases from the prior two years.  They told me that they had put their plans on hold for the past couple of years while they waited for the economy to begin to recover and the status of their retirement funds to stabilize, but after waiting, many have decided it’s time to move on and buy a home in Sequim and retire, regardless of the uncertainty in the economy and in the world.

Now you know about homes in Sequim that are selling in the winter months.

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Homes sales were up in November nationally, but it turns out the NAR (National Association of Realtors) overstated national homes sales by three million from 2007 through 2010.  That means the national real estate market was worse than reported.  NAR revised homes sales downward by 11% for 2007, 16% for 2008, 16% for 2009, and 15% for 2010.  What does this mean?  Not much for the individual home buyer.  The NAR data is used by building industry officials and large builders and associated businesses within the building industry, but for the individual buyer, it only tells us it was worse than the NAR thought.

Home Sales Overstated No Suprise

How could the NAR issue reports with home sales overstated?  The NAR collects its data from multiple listing services around the country.  That sounds simple enough, but the MLSs around the country consist of multiple companies, some are privately owned and some are owned by real estate associations.  They do not all use the same data systems, and the have different ways of assembling and report information from their databases.  In addition, MLSs often overlap geographic areas, so a listing might show up in more than one MLS and would result in multiple sales for one sale.  The NAR also does not collect sales data on all homes.  Not all MLS data is fed to the NAR database, nor are all sales posted in an MLS.  Only about 40% of all home sales are reported to the NAR.  That’s how we ended up with home sales overstated.

Home Sales Projections

I written elsewhere that one should not put much stock into government or association reported statistics.  Too often the statistics are either skewed, wrong, or incomplete.  While home sales are reported to be up last month, and that is encouraging, it doesn’t really mean anything to a retiree buying a home in Sequim, Washington.

Sam Chandon of the Wharton School of Business said that the majority of net new buyers in the coming months and years will be young couples, and the main issue right now for young couples is whether they have jobs that provide sufficient income and whether they feel secure enough in that job to buy a house.  In the Sequim area, we have very few buyers in that category.  The vast majority of buyers for homes and land in Sequim are retirees.   Sequim is fortunate that what happens on a national level has less impact on the Sequim real estate market than 90% of the rest of the country.  We are effected by retirees who cannot sell their homes elsewhere, if they have to sell before they can buy a home in Sequim.  But many retirees are buying homes in Sequim without having to first sell their other home.

Home sales in the Sequim will large be impacted not by young couples, but by retirees who are the majority of qualified buyers in Sequim.

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Home sales and home building have picked up in some areas of the country.  This is good, and it bodes well for the real estate market, but it does not necessarily give us a solid basis on which to predict a recovery.  Any improvement, any increase in market activity is encouraging.  The Sequim real estate market depends heavily on the health of the real estate market around the country, especially south (Oregon, California, Nevada, Arizona, Texas, etc.).

An increase in sales and building activity in a city like Las Vegas can be considered a lead indicator for Sequim, Washington, because many of our buyers come from these other states.  There has been an increase in sales and building in the Las Vegas area, including Henderson, Nevada.  In this photo above a home is building built in a Henderson subdivision.  There are actually about 10 homes being built in this neighborhood right now, and while I was walking the neighborhood, another couple drove up and stood on a lot they we were obviously contemplating buying.

(By the way, I was in Las Vegas this weekend to watch my son, Bristol Marunde, fight and win the mixed martial arts middleweight title.  If you have an interest in MMA, you can read all about Bristol’s fight at The New SCC Middleweight Champion.)

There are still segments of the real estate market that are in disarray and will be for years.  Foreclosures and short sales will plague the market for the foreseeable future.  The mortgage market is fraught with regulatory chaos that causes underwriters nightmares.  But there are healthy segments of the real estate market, and qualified buyers with good paying jobs or good retirement pensions will continue to buy and build homes.

Homes sales are picking up in some key areas around the country, and that was true in Sequim, Washington this summer and fall.

Possibly Related Posts:

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