Housing market inventory at 20-year low for Puget Sound region

In August, the number of residential listings was way down in King (38%), Snohomish (56%), and Pierce (51%) counties, as home values continued to rise.

Matthew Gardner, chief economist at Windermere Real Estate, says it goes back to Economics 101.

“[When] you have net new demand and you limit supply, what happens to prices? They rise. And that’s very much the case,” Gardner told KIRO Radio’s Dave Ross. “When we look at active listings and inventory in the region right now — I went back as far as my numbers go, which is back to around 1999 — over 20 years, I have yet to find a month with this low a level of inventory in the marketplace, it is quite extraordinary.”

“Yet at the same time, buyers are clearly out in force,” he added.

Part of the reason for that, Gardner says, is because 30-year fixed rates are down, staying near 2.8%, and 15-year rates are at an historic low of 2.4%.

“So I think buyers are out there trying to take advantage of remarkably, historically low mortgage rates, but also understanding the fact that there is very little choice — more demand, less supply, clearly that’s showing the price growth and, as you mentioned for King County, year over year price changes are back up in the double digits again at almost 11%, over 13% in Snohomish, and almost 16% in Pierce County.”

Many are still willing to take on a mortgage during the COVID-19 crisis, primarily because the homeowner class has not been hurt as badly as renters.

“When we shut down, essentially, the economy, the industry sectors that are affected far greater than others tended to be lower incomes,” Gardner explained. “Think about this way, it hit retail very hard, … leisure and hospitality, hotels, bars, restaurants. Most of these people are renters and not owners.”

“And because of that, the negative impacts are being felt, in terms of housing, on the rental market significantly more than they are on the ownership housing market,” he added. “So as we go forward, as we recover from the recession, which we quite frankly have had, we’re looking at the middle, upper middle classes are doing just fine. The wealthy people are doing really well, and lower income households are absolutely not. They are hurting more than anyone else, [and] they do tend to be renters and they do tend to not own their homes.”

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There has been a break for renters in some cases though, and Gardner expects a greater contraction to come. The state and the city of Seattle also both have eviction moratoriums in place.

“Even though the state has basically said, you can’t evict anyone to the end of the year, inside the city of Seattle, you could not pay rent until the start of April 2021,” he said. “So it’s hitting the apartment market. And because of that lower demand, a lot of people are actually moving in with each other, some are moving back home. That is depressing rents, no doubt about it.”

In regards the landlords suing over the moratorium, Gardner thinks it will be thrown out, similar to a case in the southern district of New York.

So what happens to landlords who can’t make their mortgage payments?

“I think we’re already hearing in Congress, in D.C., that we need to try and figure out how we can help renters out and certainly landlords out,” Gardner said. “The kind of numbers I’ve been hearing, and this is a temporary fix, anything up to $100 billion in bailouts for landlords, which are basically payments to landlords via their tenants. But it’s going to be a direct payment.”

“Will that happen? I’m certainly not holding my breath in that respect,” he added. “But these are the kind of figures … that we’re talking about.”

Gardner says to pay closer attention to the apartment market than the ownership market as the pandemic continues.

“It is the one that’s being impacted infinitely more so than ownership housing, and that’s likely to continue for some time,” he said.

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