While 2002 posted record gains for the tri-country region (King, Pierce and Snohomish counties), an increase of some 4.5% over the previous year, much of those gains were to absorb the inventory built up from the sluggish market that occurred over the two plus years following the stock market correction. Although the market produced record sales volume, the supply of homes and condos available for sale outweighed buyer demand. Too many listings create too many choices. Because of the over-supplied market, prospective purchasers were able to take a conservative approach to their buying decisions, creating a buyer’s market environment.

Continued low Interest rates below 6% helped to facilitate active markets in 2003. Low cost housing in most all neighborhoods was beginning to see the modest price increases. However, the mid-range and upper-end markets continued to experience an over-supply of inventory holding values stable.

While inventory in King and Snohomish counties increased from some 14,000 units in January 2003 to a record high of just over 17,000 units in July, the housing market was setting records for the number of negotiated offers during the same period. Pending offers in the two-county area exceeded 4,500 units per month for eight straight months between March and October, hitting a high of 5,585 units in July, some 25% above any previous monthly statistic.

By December both listing inventory and pending offers had slowed, a typical seasonal trend. Listing volume had reached a three year low with 11,717 units available for sale. However, the reduction in pending offers was not nearly as significant. Not since the fourth quarter of 1999 had the housing market been as strong. During the fourth quarter 2003, agents began to comment on the limited availability of quality, well-priced housing.

Many real estate companies and their agents have indicated that they have had the best year ever and rightfully so. The Northwest Multiple Listing Service reported 83,867 closed sales of single family and condo units in the tri-county area, a 21% increase over 2002.

At the end of the year, most communities under $500,000 had less than two months inventory. Low interest rates, limited supply and the typical demand during the spring are indicators that could create a seller’s market.

Only in the $1,000,000+ price range is there a continued over-supply of inventory. Although there appears to be an over-supply, this price range had seven straight months of record setting sales of 66 to 79 units per month between May and November. The previous highs were recorded at 61 units per month in March and September in 2002.

The housing industry was in transition in 2003 moving from a buyers market to stability in most neighborhoods. With the changing market during 2003 and record setting statistics over the year, did the market experience marked appreciation in home values? In some areas yes, in others, no.

The median price for King County increased to $275,250, up 8.9% over 2002. That statistic alone should lead to a positive conclusion. But, the median price of housing may not be relevant to a specific neighborhood or home within a community. What motivates a buyer in a low-end neighborhood in Maple Valley or Marysville may not motivate a buyer in west Bellevue or downtown Seattle. Resale homes selling under $300,000 have little effect on housing in the $750,000+ range.

The market is stronger today than it has been over the past three years, inventory is low in most markets and the mood of those in the market is looking upbeat.

In 2003, most buyers continued to take a conservative approach to their buying decision unwilling to overpay. They had taken a wait-and-see approach anticipating that at some point a seller would offer the perfect home to meet their needs marketing at a price that they had grown accustomed to. In general, the educated seller would list at a price slightly above market, make one price reduction and negotiate a purchase within 45 days removing any contingencies within 60 days of the initial list date.

Buyers may need to change their approach if they plan to make a buying decision in 2004. A cautious approach will find many on the outside looking in.

In a market of limited demand, low offers may not be acceptable and it may require the prospective buyer to move on to the next home, a property that may not be as well priced or fit their needs. They will need to educate themselves on where the market is going, making a prudent offer that will place them in their dream home without the agony of several offers and eventually paying more than they could have if they would have stepped up to the plate at the first opportunity.

On the other hand, a prospective seller may price themselves out of the market if they ask in excess of the trend. Many do not heed the advice of the professional they ask to help them through the process of selling their real estate adding 10% to their realtor’s opinion in hopes that they will find the perfect buyer. However, this approach could create an extended marketing period, taking their marketing time into a period of stronger competition.

If priced too high, the seller will find that their home will sell the competition.

In my 15 years of keeping statistics, listing inventory increases over the first seven to eight months of the year. We should anticipate that 2004 will continue this trend. Economists predict that interest rates will rise as well. As the year moves from spring to summer, competition will grow and competition will reduce the seller’s ability to achieve a pinnacle sale price.

For those with homes that meet a prerequisite for a broad number of purchasers (location, design, function and condition), pricing toward the upper end of the range may be fruitful. For homes with physical, functional or locational problems that deter buyers, competitive pricing will allow the seller to move forward with their life without the headache of a long marketing period.