What happens to a real estate market that has been facing intense demand from would-be home buyers when there just aren’t many homes for sale?
Certainly, the prices go up. The median closing price of a home in Skagit County rose to $490,000 in May — a roughly 23% jump in one year — according to Northwest Multiple Listing Service (MLS) statistics.
But other things happen, as well.
First-time home buyers are losing out because they just don’t have enough money. Many interested in buying are giving up trying. And potential sellers are wary of putting their homes on the market because they know they’ll have trouble finding somewhere else to go.
Those are a few of the thoughts shared by local Realtors and experts in the real estate industry.
James Young, director of the Washington Center for Real Estate Research at the University of Washington, said Skagit County was already a desirable a place for urbanites to move to prior to the COVID-19 pandemic.
“What COVID-19 did was speed all of this up,” he said. “Buyers said we can live anywhere and it’s cheaper than Seattle.”
Young said many local buyers are losing out to Seattle-area buyers who are “trading down” — swapping a large, expensive property for a smaller, more inexpensive one.
He said the same is happening across the Pacific Northwest, with people leaving more dense, urban areas and moving to more rural and scenic communities such as those in Skagit County.
While low mortgage interest rates continue to entice first-time homebuyers, affording a home is becoming increasingly difficult for many, Young said.
“It becomes more difficult for them to afford to live where they work, which creates transportation and environmental issues,” he said.
Young said a healthy market has at least two to three months of inventory — the number of months it takes for existing homes on the market to sell if no new listings are added.
Markets with under two months of supply are considered tight, he said.
Skagit County had .75 months (about 23 days) of housing inventory in May, according to the MLS report.
“The fact that there is less than one month’s supply of inventory on hand makes it very scary for a lot of people to sell and try to buy something new,” said Erik Pedersen, A Realtor at Keller Williams Western Realty, Erik Pedersen Group in Mount Vernon.
Meanwhile, new home construction has not kept pace with demand, he said.
Wilma Louia, owner and designated broker at RE/MAX Territory NW in Burlington, said many sellers are holding onto their houses because they cannot afford to relocate.
In addition, she said some sellers are waiting to put their homes on the market in hopes of prices climbing even higher.
Louia agreed that local buyers are facing stiff competition from out-of-town buyers.
“They’re the ones who are coming in with cash and outbidding locals,” she said.
Louia said many first-time buyers “are pretty disappointed and pretty disillusioned,” and existing homeowners are giving up on the idea of moving.
“I think it’s hurting everybody,” she said. “... Empty nesters and families starting up, and a lot of young people wanting starter homes. They’re getting priced out of the market right now.”