Housing prices are high in Kirkland, and they've been getting higher, according to Northwest Multiple Listing Service figures. But local Realtors insist that doesn't mean the Eastside city is experiencing a housing bubble that's going to burst anytime soon.
It all comes down to supply, which is low, and demand, which is skyrocketing because of job growth in the Puget Sound region, they say. Factor in relatively low interest rates for loans, and potential buyers are facing stiff competition from other buyers in a marketplace where some prices are astronomical.
"The word I'm hearing is prices are high, but sustainable," said NMLS spokeswoman Cheri Brennan. Indeed, a listing of current inventory shows that of the 333 homes and condos available in the middle of August, the largest number (124) were selling for $1 million and more.
The average price of a home was $1,131,913, while the highest was $7,450,000 according to NMLS figures.
Condo prices are generally a better deal, but not always. They averaged $690,278 in August, but the highest figure came in at a whopping $6,550,000.
Sales figures for homes and condos from the previous six months tell a slightly different story. Of 1,109 sales, the largest number (156) sold for $300,000 to $349,999, according to the NMLS. There were 1,097 sales in the same period last year, and of those the highest number (160) cost $250,000 to $299,999.
But asking prices are often not the same as sales prices, according to Brennan, who said bidding wars are not that uncommon. "It's a sellers' market," she said.
"It's not unusual to have multiple offers," agreed Sam Pace, a Realtor and housing specialist from the Seattle King County Association of Realtors. "The market is what it is, which is very hot."
And it's fairly common for homes and condos to sell for more than their asking prices, he said. "There's no guarantee, but nobody should be surprised (if it happens)."
However, some sellers get a little carried away and price their homes and condos higher than they should be, Pace said. That's a mistake on a several different fronts, he added.
Overpricing a residence cuts down the number of potential buyers, it often takes longer to sell it, and the owners could end up selling the place at a lower price than normal, Pace said. "People who are greedy leave money on the table."
It's actually better to go the opposite direction. "Pricing slightly under the real value may excite a bidding war and a feeding frenzy," is how he put it. Pace likens the process to an auction, where the price of something starts out at the low end. The result is that an item often ends up selling for more than it's really worth, he said.
Auction analogies aside, Pace said housing prices in King County have increased 50 percent during the past five years. It could be worse. In California, he said, housing prices shot up a remarkable 150 percent in the same timeperiod.
One of the reasons the market is so hot here is pent-up demand caused by job growth that jumped 44 percent from 1993 to 2000, Pace said. According to provisions in the state's Growth Management Act (GMA), a new house should be built for every 1.77 jobs created, he said.
That didn't happen. In fact, the county came up 60,000 housing units short, Pace said. A recession and the dot-com crash cooled job growth between 2000 and 2004, he added. "But what has happened is employment has picked up (again)."
And it's a trend that's likely to continue. Microsoft, for example, is planning to add 12,000 new jobs to its Redmond campus, Brennan said. However, she added, permits were recently yanked for an 800-home Quadrant Real Estate project in Redmond Ridge because GMA concurrency rules weren't followed that call for road capacity to match expected traffic volumes.
That means potential buyers have to go farther from the workplace to find affordable housing, Brennan said. The saying in the business right now is you "drive till you qualify," she added.
"Unfortunately, that's getting to be true," said Lew Mason, a real estate broker who manages 97 agents at Windermere Real Estate's Kirkland and Yarrow Bay office. The problem is caused by growth restrictions in King County, he said.
With supply down and demand up, some buyers are taking unusual steps to get their dream homes. "West of Market Street, we're seeing million dollar (home) tear-downs on small lots," Mason said. "We're seeing quite a bit of that." Another tactic developers are using is buying two lots together, tearing down the homes and replacing them with three new ones, he said.
Homes are a better value than condos, and homes used to be more popular, he said. That's changing. "People are seeing a Kirkland condo as a viable option now," Mason said. "That didn't happen 10 years ago."
Most condo and home buyers in Kirkland are coming from Washington state, but the city is also popular with buyers from California, Oregon, Texas and Minnesota, he said.
Prices are high in Kirkland compared with other cities in King County, but that doesn't mean the situation is getting out of hand. "There is no bubble here," Mason insisted.
Still, he cautioned, rising interest rates could put a damper on the hot housing market. The jump in rates would have to be significant, though. "Rates would have to go up a point and a half before we see any slowdown," said Mason, adding that rates would have to hit 7 percent before buying patterns changed very much.
Pace agrees, but only to a point. It would only be a problem "if the Fed acts with irrational exuberance in its desire to raise interest rates," he said. If rates get too high, it could spark another recession and that could hurt the housing market, Pace added.
For the time being, though, rising interest rates play only a secondary role in the housing market, he said. Most buyers in Kirkland have jobs or retirement income that make the issue moot, Pace explained.
There is less speculation in the real estate market here than there is in other parts of the country, but Baby Boomers at the peak of their earning power are fueling what speculation there is in Kirkland, he said.
Pace doesn't expect that to change. "You're not likely to see a housing crash unless you have a crash in the economy," he said.
Staff reporter Russ Zabel can be reached at rzabel@nwlink.com or (206)461-1309.[[In-content Ad]]
