Slowing Seattle home sales only disguise a bigger inventory crunch

This article was originally published on MarketWatch:

The Seattle real estate market saw an intriguing shift this past month. Home sales dropped when compared to the previous month. Total closed sales in the Northwest MLS for October were at their lowest level since April.

With the historic and extended inventory drought that the Seattle real estate market has been under for the past two years, these signs seem to point to a slowdown. Exhausted buyers who have been competing fiercely for a home in one of the nation’s hottest markets might see some relief on the horizon.

Curb your enthusiasm, Seattle home buyers. A deeper reading of the numbers, especially current pending sales, says something quite different.

While overall home sales have dropped in recent weeks, there are a few signs that point to the Seattle market’s competitiveness growing. An obvious factor is the natural seasonal nature of real estate. October is the harbinger of sales volume decreases. It happens every year, like clockwork, on a relative scale. Fall and winter home sales will decrease, no matter the market.

Seattle real estate prices are also showing little sign of slowing down. The median residential sale price in October was $485,300. That was up just slightly from September, and significantly from one year ago when the median was $446,800. That 8.6% clip of appreciation doesn’t lend itself well to the narrative of a slowing Seattle market.

The story is similar for the condominium market in Seattle. The median condo price in King County sits at $297,500, up from $247,500 just last year. 20.2% year-over year appreciation is clearly unsustainable for the long-term, but the market dynamics show no letup. Condo construction in Seattle is far behind demand and it won’t catch up any time soon.

Within the city itself, median condo prices have fluctuated between $295,000 and $422,000 this year, with one new large luxury condo building skewing the month-to-month statistics. Compared to 2014’s range which capped out at $318,000, though, it’s clear that new pricing levels are being set in Seattle and they’re on a significant rise.

Pending home sales in the Seattle region are an even bigger reason to distrust the story line of a slowing real estate market. In 19 of the 23 counties covered by the regional MLS system, pending sales surpassed the new listings added in the past month. Though it seems implausible based on our current lack of inventory, the rate at which buyers are devouring new listings is greater than the rate with which sellers can deliver new listings. Local inventory is still shrinking.

Annually, home sales were up 7% from one year ago. 2014 was a phenomenally hot sellers’ market. That’s a significant year-over-year gain in home sales during a period when the market has added zero inventory. The streak of available homes for sale sitting at around one month is now going on two years. For homes sales to increase during that time and keep inventory rates steady, it’s clear that buyer appetite is keeping up just fine.

Like most statistics, the rate of home sales can be manipulated to look many different ways. It may be a popular trend to view the current slowdown in Seattle of closed sales as a slowdown in the market. That would be a significant mistake. The faux slowdown is just disguising an even greater upcoming inventory crunch.

Sam DeBord is managing broker of Seattle Homes Group with Coldwell Banker Danforth and 2016 president-elect of Seattle King County Realtors. You can find his team at SeattleHome.com and SeattleCondo.com