Local home sales cool off; why are prices still hot?

The housing market cool-down has arrived.

King County buyers had 52 percent more houses and condominiums to choose from last month compared with the previous May — by far the biggest year-over-year increase this decade, including during the recession of 2001-02.

Part of the reason for the increased inventory was that buyers were dragging their feet. King County's pending sales — deals signed but not yet completed — declined 7.5 percent in May compared with a year ago.

What hasn't dropped off was what buyers paid; prices continued their incongruous climb. The median price of a house in King County reached $469,000 in May. The median, which means half sell for more, half for less, has climbed every year since 1985.

The county's condo prices shot up 17.6 percent to a median $289,950.

Why would prices grow when basic economic logic says when supply outpaces demand, prices will fall?

Glenn Crellin, director of the Center for Real Estate Research at Washington State University, suspects it's because a softening market gives buyers more wiggle room to buy more house. When they do, that makes the median prices paid rise, he said.

Buyer Libby Waldo is satisfied after just making her first home purchase, a condominium in Seattle's Magnolia neighborhood.

Shopping for two months with a budget under $250,000, Waldo found more than two dozen condos to choose from.

"Some of the stuff in my price range wasn't even worth my price range," said Waldo, who works for an online advertising firm. "Some things I kind of liked seemed completely overpriced."

But when she found her one-bedroom, one-bath home, she knew immediately that it fit the bill.

Newly redone, it has bamboo-wood floors, crown moldings and a heated bathroom floor and came with all appliances, including washer and dryer.

"I got lucky; this is what I was hoping for," said Waldo, who moved in three weeks ago. She declined to say how much she paid.

May is traditionally a month when many homes come on the market, as families prepare for summer moves and spring in general just makes everything look better.

But this May, the Seattle metro area led the pack in inventory growth, according to figures compiled by ZipRealty, a national real-estate firm headquartered in California.

The Seattle area had 12 percent more listings in May, compared with April. San Francisco had 11 percent growth and Los Angeles had 10 percent. The average for the 18 metro areas in ZipRealty's nationwide sample was 5.1 percent.

Michael Tenore, Puget Sound-area director and broker for ZipRealty, cautioned that buyers can't expect excess inventory, and thus a deal, everywhere. Those areas located farther from freeways and job concentrations are experiencing the biggest buildup and so offer more opportunity for buyers.

"It's by pockets, by neighborhoods," Tenore said. "When you're working with a client, you have to educate them that depending on where they're looking there will be one area with a lot of inventory, and the buyer may have a little more control. And in another area there is very little to look at, and the seller is more in control."

Thus, "you can't make one gross generalization right now that there are more listings or fewer listings," said Tenore.

Other factors also influence whether homes sell quickly or take more time.

Windermere agent Carole Alexander just had a South Seattle home she listed sell in three days for more than its asking price of $419,000.

Meanwhile, another house Alexander is marketing nearby has been on the market for more than a month; its nearly million-dollar price was reduced $100,000 and it has yet to sell.

Alexander said the first home sold quickly because it was priced at the low end for single-family homes in its area. The second home's décor may be stopping buyers literally at the doorway because of the too-sleek foyer.

WSU's Crellin and the National Association of Realtors expect the Seattle area's home prices to continue to go up this year. The national association is predicting an increase of about 5 percent this year. That modest figure is above what it expects will be the national average but well below Seattle's recent appreciation growth, which hit 16 percent last year.

Here's more on Crellin's explanation for why prices aren't declining:

Sellers, still believing their homes are worth top dollar, price them at that. But buyers know the market is softening so they feel free to shop around. Sales slow and, as even more houses come on the market, inventory increases.

Finally, sellers either cut their listing price or agree to take less.

Buyers, realizing they can get more house than they initially thought, stretch their price range to buy up. That makes prices rise, Crellin explained.

King County's condominium market, which accounts for 28 percent of all home sales, is looking particularly stable.

Last month, pending condo sales were off 1.8 percent, compared with houses, which were off 9.5 percent.

Condo prices also outperformed house prices in King County, rising 17.6 percent, compared with houses' 9.6 percent.

Elsewhere, the median price of single-family homes in Snohomish County was $375,808 last month, up 8.9 percent compared with the previous May. Its median condo price was $239,950, up 18 percent.

Pierce County's median single-family price was $284,950 a 7.5 percent increase. Its condo median was $226,490, up 7.3 percent.

Elizabeth Rhodes: erhodes@seattletimes.com