Every week, often daily, I’m asked, “Paul, can you believe how much ……, home prices are rising, over asking price bids are climbing too, quantity of people came thru an open house, submitted offers on a home……. On and on it goes. The simple and short answer is “No, I cant believe it.” I can rationalize it, but in many cases I can’t support the rises. They are just too crazy to believe. But is it real and can “it” continue—it appears so.
Pricing is always a matter of supply and demand and we are in a time of exceptional demand. Rents are continuing to rise and we are seeing 1,000+ people a week moving in to the central Puget Sound area of Seattle and the Eastside. With interest rates still in the excellent range of just over 4%, it’s easy to see why people want to buy vs. rent. People who have been renting want to buy. People who lost their homes in the recession want to buy. Seniors aren’t leaving the area like they did 10 & 20 years ago when they retired, so they want to sell and buy. Millennials are buying and all kinds of “lateral” buyers want to sell and buy–changing locations, shortening commutes, increasing or decreasing their home sizes in their current areas, etc. These are all huge buyer groups and they all want to buy. We aren’t even talking about the investor buyers, who, as most agents and active buyers in the market see, are out shopping and buying in huge quantities.
So when will we find homes for all these people? It is doubtful to be any time soon. Builders are building as fast as they can but often not in areas where more buyers want to be. Those that are willing to accept longer commutes can find options but in the overall, still at very low overall availability. Prices on new construction homes in the major urban areas can be found but not commonly under the $1M mark. We are rapidly pricing many buyers out of the market and this may lead to some exodus or reduction in the quantity of people moving here. Still with our region being home to Amazon, Microsoft, Google, Boeing, Costco, Expedia and a myriad of technology, medical research and Bio-tech companies, it’s not realistic to think this inward flow will be stalling out too soon.
This means that home prices should continue to rise over the next several years. Will there be a top? Undoubtedly. When and where is only a guess for anyone. Some analysts point to expected business cycle patterns to say 2018 will see a slow down but that’s a relative term, slow down. With our region now topping the highest home value appreciation for 6 straight months, what will a slow down really mean? Rents are among the highest in the world, and still rising at some of the fastest paces; so what does a slow down really mean.
What I see is a major shift in the Seattle area home values that isn’t a bubble, but a giant ballooning expansion. Yes, the expansion will decline at some point; yes we could have some home values be somewhat in a bubble, but the general economic factors for these home values to stay up are much more likely than we’ve ever had in this region. Geo-political events can affect us; certainly; but this gigantic increase in our population seems likely to keep our housing in high demand for the foreseeable future, even if ripples appear that create some breaks in the speed.
What does this mean for you? If you are a home owner, your home has never been worth more than it is today. It will likely continue to rise in value over the coming years. If you are thinking about selling, you are in the strongest possible negotiation position. If selling and leaving the area is in your “near future” plans, you may want to expedite those plans to capture this market. Yes, your home is likely worth more next year, but you may not want to tempt a ripple in the market that may cause a short term stop to your prized position.
If you are a buyer, be diligent and vigilant. Find ways to get any extra monies you can so you can be in the strongest possible position for a buyer in this market. Don’t be timid about stretching on a house–paying $465K for a house listed at $435K may seem nuts but with home prices rising 10, 15, 20% in many cases over the last year and expected to be around 10% this year, getting the home you want, at a price you can afford should be “the” critical factor, not what price you paid vs. what the seller might have been asking. Obviously there are limits but a good agent can help you establish those. The point is your frame of reference and focus needs to be on your ability to find and buy what you want. The rising values will soon reward you for your boldness.