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Tom Kelly
Tom Kelly
The Real Estate Adviser

December 27, 1996

HOME PRICES WILL SURGE IN 1997

BY TOM KELLY
The Real Estate Advisor

Many home buyers and sellers will look at 1996 and think of lyrics from old Joni Mitchell song: "We don't know what we've got til it's gone."

The housing landscape changed dramatically, yet quietly -- not unlike a quiet cannon. The number of homes sold were up in most of Western Washington, with a gain of nearly 10 percent in King, Pierce and Snohomish and Kitsap counties.

According to statistics provided by Windermere Real Estate here are some in-city average sales prices: Capitol Hill $234,000, Madison Park $325,861, Queen Anne $264,808, Windermere $300,000, West Seattle $150,602, Blue Ridge $180,070, Magnolia $264,000.

What drove Western Washington home sales and prices was basic economics, coupled with the curious "Northwest factor" which has become the envy of other areas of the country.

What absolutely fueled the flames was the surprisingly job market -- spearheaded by The Boeing Company, Microsoft and many smaller firms.

What was curiously attractive in the Puget Sound area this past year was ample inventories linked with excellent interest rates to go along with this area's terrific reputation for "livability."

Typically, when interest rates are relatively low -- there's absolutely nothing for agents to sell. Historically, inventories vanish under single-digit mortgages. However, rates and inventories were in terrific shape the past 12 months -- which probably will not be the case much longer.

According to Hebert Research, a Bellevue-based statistical warehouse of information, the average home in King County will break the $200,000 sales price for the first time in history -- with a lot of room to spare. In-city neighborhoods will continue to be far more expensive than the county average.

"We are definitely going to start feeling the pressure on prices," said Jim Hebert, president of the company that bears his name. "We just don't have the affordable stock on hand to keep up with the demand. Much of the new product is a lot more expensive and the single-family building lots within the county are very scarce.

Just where is affordable? Hebert said he expected Kitsap County to remain very healthy "because it's one of the few areas left where you can find some affordable, well-built homes. I expect there will be about 3,300 or so sales next year in Kitsap and that's a solid number for the area."

There's no doubt about it -- 1997 looks very promising for home appreciation, mainly because of continued job growth. Interest rates may tick up a bit, but with fewer homes on the market, home prices will start moving up faster than we expect.

The state's population is supposed to increase, Boeing is the midst of a hiring boom and the economy is strong.

Areas with healthy economies, good retirement and recreation amenities are moving fastest. Clark County, just across the Columbia River from Portland, is booming because there are so few building lots left in the city of Portland. Clark County has grown at a state high of 27.5 percent since 1990, according to Parks. Jefferson (second) and Mason counties (fifth) also have experienced huge growth spurts due to lakes, forests, salt waterfront and proximity to Seattle.

It seems there were more "for sale" signs on Western Washington streets this past year, but more people also came out to buy. There were about 2,000 more homes listed for sale and sold in King County than a year ago, yet those homes were on the market nearly two weeks fewer this year than a year ago. That's an indication of not only more buyers, but of buyers who know what they want when they see it.

Windermere's Ken Bacon, chairman of the Northwest Multiple Listing Service, said he expects the region to avoid any holiday downturn in sales because of the area's vigorous economy and active relocation market. Acknowledging that some buyers, sellers and agents are shifting attention to the holidays, Bacon said those buyers who remain active at this time of year tend to be very motivated. He also believes homes may be especially appealing now with the combination of beautiful decorations and favorable financing.

According to Hebert, price increases are going to start appearing in King County in the first quarter of 1997. The average home will move up about 6 percent over the 1996 average to approximately $209,000 from $197,761. Modest increases are expected for Snohomish ($163,493 to $170,000) and Pierce counties ($147,179 to $149,000), and things are looking up everywhere.



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