Home-buying fever shows no signs of cooling down

By Kristina Shevory
Seattle Times Eastside business reporter

As buyers scramble to snap up homes amid a shrinking supply and climbing prices, many are taking desperate steps to avoid losing out on deals.
They are waiving inspections, using escalator clauses in which they promise to top all other bids and putting together large down payments to bag a home.

"If buyers come in with a bunch of contingencies and a low down payment, they'll be beat out," said Tara Cummins, an associate broker with Coldwell Banker Bain's Capitol Hill office, who works primarily with entry-level home buyers.

Low mortgage rates have attracted large numbers of first-time buyers and made it increasingly difficult to find anything considered affordable in a good neighborhood.

Closed sales in King County jumped 33.2 percent last month, even though buyers had to choose from fewer homes.

Price has little to do with the frenzy.

"We haven't been able to keep sufficient enough inventory for the last six months," said Louis Howard, a John L. Scott broker in the company's Bellevue North office. "No matter how much prices go up, people keep buying."

The number of active listings dropped 18 percent in King County and 12.6 percent in Snohomish County, compared with June 2003.

Within King County, total inventory fell the most in the southeast, where 25.1 percent fewer homes were for sale than a year earlier, according to numbers released yesterday by the Northwest Multiple Listing Service. The Kirkland-based service tracks home sales in 15 counties.

Seattle saw the smallest drop in inventory, down 9.3 percent.

Rising prices and mortgage rates also pushed up pending sales, from 5.2 percent on the Eastside to 34.3 percent north of Seattle. Pending sales — offers that have been accepted but not closed — indicate what closed sales could look like a month or two later.

Prices last month in King County rose 9.4 percent to a median $299,000. In Snohomish County, prices climbed 9.1 percent to a median $242,150.

"The fear of interest rates rising is sparking more sales and urging people to get off the fence and buy," Cummins said.

"In the city, there's a pretty good squeeze on inventory, and it's become tough to find anything under $250,000," she said.

During June, the average rate on a 30-year fixed mortgage slipped from 6.28 to 6.26 percent, the Federal Home Loan Mortgage Corp. reports. Long-term interest rates started moving up in March in anticipation of the Federal Reserve tightening rates last week.

Homes in desirable neighborhoods and priced right — 3 percent or more under market value — have been selling quickly, said Steve Wayne, an associate broker in Windermere's Mount Baker office.

Homes priced 3 to 5 percent over their market value have been languishing on the market, Wayne said.

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