Act fast: In many Seattle neighborhoods, few homes are for sale

For more than a year, local real-estate pros have lamented the lack of affordably priced homes for sale. But what does that really mean to Seattle buyers?

Joe and Sarah Maxwell certainly found out when they started house hunting recently.

What the couple, both medical researchers, experienced explains why so many buyers find the search incredibly frustrating and what role that's playing in driving up prices.

In January, the Maxwells began the process by zeroing in on North Seattle's Ballard, Green Lake and Greenwood neighborhoods. They hoped to pay about $250,000 for one of the estimated 20,000 houses in that area.

"That seemed reasonable," said Joe Maxwell, a first-time buyer newly transplanted from Connecticut. "We weren't looking for something too big or too fancy."

On Jan. 1, the couple found just 32 "used" for-sale properties in their price range in those neighborhoods, and some were condominiums. By the end of the month, 22 had sold. That's a 69 percent sales rate — well above the 25 percent that real-estate professionals consider a healthy, balanced market.

On Feb. 1, a scant 23 available houses and condos were listed in the Maxwells' area and price range; three-quarters were gone by month's end. Others, Maxwell said, were in such sad shape that they were unlivable.

Then a tsunami of buyers arrived.

As of March 1, 29 properties were available. Three more were added during the month. All 32 sold, resulting in a sales rate of 110 percent based on first-of-the-month inventory. That's the way the real-estate industry calculates market activity.

And so it continues to go in close-in Seattle and Eastside neighborhoods, as scores of well-qualified buyers like the Maxwells outnumber properties for sale, particularly those priced under $500,000.

This is forcing buyers into lightning-fast decisions and bidding wars that reward sellers with thousands of dollars over their asking price, real-estate agents report.

It's also keeping King County prices climbing, putting to rest any notion that ours is a "bubble market" where prices will stall or even fall. That's happening in cities such as Miami, where rising inventory of for-sale properties is giving buyers room to negotiate.

In King County, however, the number of homes for sale fell 6 percent last month compared with March 2005, according to the Northwest Multiple Listing Service.

This helped push the median price of King County's detached homes up almost 12 percent, to $405,000 last month, compared with March 2005. Countywide condo prices were up 21 percent to a median $249,950.

April statistics, including the number of homes for sale, are to be released Friday by the Multiple Listing Service.

In a balanced market favoring neither buyers or sellers, about 25 percent of homes would sell during any given month, meaning there would be about four months' supply available to buyers.

But that's nowhere near the case in King County, said Lennox Scott, chairman and CEO of John L. Scott Real Estate, which provided the home availability and sales statistics presented here. New homes are not included.

By Scott's calculations, King County last month had a 1.5-month supply overall — even less for affordably priced properties in close-in Seattle and Bellevue neighborhoods. Once prices top $750,000, the strain eases.

"We're facing a remake of 2005," Scott said. "It's a quick-action market."

That's also true in parts of Snohomish County; last month it had a 1.7-month supply of homes for sale.

Pierce and Kitsap counties, however, were a different story. Both had about a three-month supply last month.

By comparison, the U.S. has a 5.5-month supply, according to the National Association of Realtors. That's the highest inventory since 1998.

Scott ticks off the reasons there are too few homes for sale to meet buyers' needs:

• Homeowners are afraid to put their homes on the market for fear they won't be able to find replacements;

• Not enough housing is being built to fulfill demand;

• King County's economy is adding thousands of jobs, and those workers' housing demands outstrip supply.

Indeed, Washington employers have added 94,000 jobs in the past year, mostly in the Puget Sound area, says the state Employment Security Department. That helps explain why last month's jobless rate was the lowest in six years.

As for increasing the number of homes, consultant Suzanne Britsch said land price and availability seriously restrict new-home supply, particularly in Seattle.

"There are a lot of people who think Seattle isn't built out," said Britsch, senior analyst for Mill Creek-based New Home Trends, a consulting and information firm. "They say, 'Look at all this green space; look at all these lots.'

"But they're not lots. It's greenbelt space or it can be somebody's backyard, and they don't want to subdivide it. It's their garden."

Additionally, available land often isn't buildable.

"There's something wrong with it," Britsch said. "It has wetlands or steep slopes."

The infill Seattle lots available generally cost $250,000 to $300,000, and that's without a view, Britsch said.

"You're not going to get very many single-family detached houses in Seattle anymore," she said. "The land is too expensive, and the demand is for lower-priced houses."

For those reasons, Britsch expects in-city building to be mostly condominiums and town houses.

Meantime, intense buyer demand is making for brutal house hunting.

Just north of downtown Seattle, where the competition is the fiercest, buyers find that anything in livable condition priced fairly and under $500,000 is selling almost instantly, said Jon Hunter, a John L. Scott agent who works that area.

"Every home under $450,000 is getting multiple offers," Hunter said. "It's pretty insane."

To sweeten their offers, buyers are adding escalator-price clauses in case there's a bidding war, and they're bypassing an inspection contingency by paying $300 or so to have the property inspected before they even submit an offer. If they don't get the house, they're simply out that money.

"Buyers tend to go through making an offer on four or five homes, losing out on money or terms, until they get frustrated," Hunter said. "Then they say, 'I'm sick and tired of the game. I'm going to overbid because I just need to get into a home.' "

And they do.

After months of hunting, the Maxwells abandoned their dream of buying a single-family house. They also gave up on their $250,000 price range and increased it about $100,000.

"We were naive and optimistic," Joe Maxwell said. "We didn't expect it to be easy, but we really had our heart set on a house. After seeing a few, we realized we had to alter our wishes."

That's when they found their first home: a new town house a dozen blocks north of Green Lake. They snapped it up when it was little more than rough walls and a roof.

"If we'd waited for it to be done, we probably wouldn't have gotten it," Joe Maxwell said.

Elizabeth Rhodes: erhodes@seattletimes.com