On November 27, 2018, The Seattle Times published an article titled “Metro Seattle home prices falling at fastest rate in U.S.” Many homeowners and hopeful sellers started to panic after reading the alarming headline, and understandably so. But as usual, we have another perspective to throw into the mix.
This article brings up several concerns about Seattle’s current real estate market, but we’re not feeling that same trepidation. We’ve been monitoring the market extra closely for the last several months, and things are already getting better.
After reading the article, our team agreed that the picture the author paints is not reflective of what we’re feeling as real estate agents. True—we don’t feel great, but it’s definitely not the end of the world as we know it! It feels like we’re going through 2001 again—nothing like 2008. But from reading some of the articles out there right now, you wouldn’t know it.
Here are a few of our big observations:
The data presented in The Seattle Times article ends in September 2018, which is an important thing to note. October’s numbers are available now, and they demonstrate improvement. Seattle’s home index from September to October has already increased 1% in one month. Soon we will have November’s numbers and I have it on good authority another increase will be evident.
I searched for homes in Seattle that sold twice in the past 12 to 15 months. The sold prices are a mixed bag. Two homes sold for less than they did last year, while the other three sold for just slightly more. One of the listings that sold twice was our client’s home in Capitol Hill. Our unit sold for nearly 10% more the second time.
From these homes, two sold for less than the owners bought them for, and one of these condos looks like it was not an ideal purchase decision in the first place. (Oh, and some fresh paint would have done WONDERS for the final sold price, too!) So we’re not surprised that this home sold for less once the buyer pool shrunk. The median home price of twice sold homes from this year is $700,000 vs last year’s $702,000. Lower, yes, but not worrisome. Also, even when the market was hot in 2017, one of these condos still took 40 days to sell so theres no surprise it didn’t dramatically increase in value in one year. Remember, it is winter and approaching the holidays, and this is never a good time of year to be hoping for massive increases in value. Plus, the data pool is too small right now.
Here is a fact I think few people are aware of: at the beginning of this year, median home prices rose faster than we’ve ever seen. This worried us at the time; it was hard to believe. Median home prices shot up to $815,000 from $755,000 in February. But then interest rates ticked up, the Amazon HQ2 news was worrisome, and of course, Trump’s trade wars and immigration policy filled the news with yet more negativity. Is it any wonder that markets around the nation began to look skittish? The mystical part of any market is the people that drive it. Buyer sentiment is a real and large factor in our housing markets, and if the state of our country feels iffy, people don’t want to buy houses.
This fact remains: Seattle’s median home prices are up 8.8% year-over-year. That is 3.3% better than the national average. We’ve also noted during our research that inventory is being gobbled up and it would appear that prices are slowly on the rise again. Keep in mind that The Seattle Times article is only looking at data from August to September 2018. If you were to look at October on the Case Schiller index site, you would have seen a 1% increase over September. This is one more data point (coupled with many others we watch) that suggests our market is slowly turning around and this small market correction may have already run its course.
Here are a few big things that Seattle’s market has going for it right now:
Large employers are still expanding like crazy. Not just Amazon.
The Fed JUST announced that they are not going to be increasing the interest rates much further next year. This is GREAT news for settling market nervousness.
Amazon’s HQ2 is clearly much smaller than Seattle’s HQ and will be located in an expensive market with higher tax rates. (This means that people won’t likely flood over to Northern Virginia from Seattle.)
Affordability (based on median incomes) is on par with average income. I know I’ll get hate mail for this, but based on the numbers, it is true. More people make over $200,000 a year in Seattle than those who make under $50,000. (That is NOT to say that real estate is affordable for all income levels in Seattle, or that we don’t need a drastic increase in affordable housing.)
Things should look better in February of 2019. Winter is slow every year, and median prices typically stagnate. We will be watching February closely, as that is when we typically notice how the market is going to shape up. We will update everyone when we “read the tea leaves”!
The market was overheated before, plain and simple—especially at the start of this year. Interest rates, immigration worries (H1B work visas), and HQ2 concerns caused our market to go into a correction.
We don’t have a crystal ball, but our guess (which is the same as many of the other agents and real estate professionals we’ve talked to) is that we will see a different picture and improvements by February 2019.
Take it for what you will, we still believe in Seattle. There is too much good news to hold Seattle back!