In The News January 19, 2023

Confusion Is The State of The Market

We have data, headlines, whispers and fears running in all directions at this time. It is beyond me, and from what I’ve read, seen or heard, it seems beyond anyone to say they “know” what the market is or will do. Some of our region has prices still up from last year while other parts of our market are off 3-6% from this time last year. But is comparing to last year really of value? We had peak pricing last April to May that was 15-30% over today’s prices, so does it sound genuine to say our prices are in line, slightly above or slightly below last year? Not likely for most home sellers and home buyers know these statistics aren’t reflecting the actual market conditions or temperament.

So, if not last year at this time, then when or what do we compare to? First, I think you have to recognize that 2021 and early 2022 were such abnormal times in our market that they don’t make a great basis for comparison to start with. When a market is accelerating at such a strong rate, any slow down is going to look extreme. When our weekly or monthly inventory levels were so low, comparing available homes to those times makes any “normal” inventory level look out of balance, especially if you use percentages for comparison. I think a better perspective is to look at the general market sense. We have seen price appreciation settle back down to a 4.5% range for annual appreciation over the past 2 years in Seattle and about 7% per year on the Eastside. By any historical standard, this is a very good rate for homeowners and provides sound reasons for home buyers to want to own their home.

We saw interest rates rise from 3% to 7% between March to September. This again was unprecedented. We’re now seeing rates moderate and drop to the 6.125% range, lower if you’re borrowing in the $1M+ range, closer to 5.5%. Rates are likely to see some bumps and gyrations this spring but the expected trend is for modest declines. There are also some reduced fees for some first time borrowers, to help ease the funds needed to secure a loan. The moderations in rates, even though still well above last winter’s rates, is good for home buyers and sellers. Payments and affordability are improving.

My perspective is this: there is always a market. People want to own their own home–it’s a wise investment and a great stabilizing force in controlling our lives. If you have fears of a recession, you have control over your housing costs, likely lower than rental rates. If you have fears of inflation, you again have control over your housing costs and an appreciating asset. If you have the desire to buy or change your home, the market is looking for good homes and there are solutions to help you afford your new home.

Home buyers are not overwhelmed with home choices in almost any area or price range. The headlines of a glut of inventory are nowhere near accurate. Yes, there’s some inventory, but most of us active in the market know we still have a scarcity of good homes to choose from. This is great news for home sellers. We currently have a stalemate in the thinking of some buyers and sellers in the market. The Sellers want last spring’s prices and the Buyers feel that if they hold out on making offers, home sellers will have to lower their prices. Both parties have too biased of perspectives.

Last spring, buyers were paying 20-40+% over asking prices. As I stated before, we’ve seen those sale prices decline by 15-30% depending on location and price range of the home. Today’s home sellers are generally accepting offers 2-3% under their asking prices. Buyers may be hoping to get 20-40% below asking prices but that’s not realistic and it won’t be going forward, either. Some home sellers still want last year’s values but that too isn’t going to happen. Instead, look at 5-7+% gains of the last few years and accept that’s very strong for annual real estate appreciation. Since most home sellers have owned their homes for 5+ years, your effective gain in value is still phenomenal. Recognize that buyers are still paying a higher price, in terms of monthly payments, than they were last year, so accept your good fortune for the value of your home and sell it, if that is your need, desire or intention.

Many people are fearing a recession this year and we’re now hearing more local employers will be laying off employees versus the hiring freezes we saw last year. Some may feel like they shouldn’t be risking a home purchase during these uncertain times. That’s a very wise consideration. It is never wise to buy a home if you think you will need to sell it in less than 3-5 years. Patience, not fear, can be your friend. I would still offer some perspective to also consider. We’re at near record low unemployment levels. If you were to lose your current job, how likely is it you would find another one, locally, in the near future? For most of our local employees, the answer is usually very good odds for finding a comparably paying job in a fairly short time frame. Still, no one wants to lose their job, without their control. The  solution may well be to sit still and ride out the first half of this year and see how your job and company are performing. Interest rates are expected to soften going into the second half of the year and inventory will likely  increase to offer you more good choices. Late summer and fall often present better market conditions for home buyers.

While we’re talking about inventory increases, let’s address another unrealistic hope or fear. Home inventories will continue to balloon, foreclosures will rise, home prices will drop substantially and you’ll be able to get that 20% low offer accepted by any or every home seller. Do you recall me talking about the above normal appreciation our local homeowners have been experiencing? This now equates to the average local homeowner having 40+% equity in their home. If they were in real need of their home’s equity, they would sell it, even at today’s prices or lower—if we follow the pessimist’s logic, but certainly not lose it to foreclosure. Additionally, we had 70+% of homeowners, with a mortgage, refinance their home between 2020 and the early spring of 2022. These folks aren’t likely planning to sell their home any time soon. They have as low of a house payment as they can get–lower in most cases than they could rent any type of home for–so they won’t be selling now or in the near future. This will keep overall inventory levels in check. The rationale that panicked home sellers will be flooding the market with inventory isn’t a reality; certainly not in our local market. Pessimistic buyers in this market are looking for “a deal” more than a home. If that’s your perspective, you likely won’t find the deal you want and you’ll miss good opportunities to own a home and asset that will perform very well for you. But they, hopefully not you, were only looking for a deal.

The reality is simple and usually constant for real estate. There is always a market. If you have a need or desire to buy or sell, opportunities are and will be available in this market. We have a more balanced market–supply of homes matching demand by buyers–than we’ve had in the past 4-5 years. We have an overall strong local economy with good, stable employment–even with the headline fears–and we have improving interest rates. We still have increasing household formations as our millennial population grows and a pretty steady supply of the baby boomer population retiring and likely ready to capture their equity and change their housing situation. It’s not frenetic, like the last 2 years, but it’s a market that works for buyers and sellers, if you’re realistic and want to be in the market.

Give me a call to discuss your interests, needs and concerns. We can create a strategy to help you win in these confusing times. I’m happy to talk when you are. Thank you for your time.

 

Post Photos by Uday Mittal on Unsplash and Brett Jordan on Unsplash

In The News September 23, 2020

Market Update Amid Uncertain Times

Pardon my absence, the market has been running extremely hot for the past several months and I thought I’d offer some insights on the activity levels and sentiments. Contrary to many predictions early in the year, the market took a 4-6 week breath in mid-March but has taken off in a full stroke sprint since then. Almost all price ranges, property types and locations have had amazingly strong activity. Prices have been on a steady climb, up 4-8% since March, more in some pockets of the market and multiple offers have been more common than not. We’ve seen 40+% of the homes selling above asking prices; most in 6 days or less time and prices averaging 4% over asking prices in the broader market.

Interesting side note, initial pricing is still keenly critical. If a home should be priced at $675K, it needs to be priced there. Even if it may get bid up to $720 or more, pricing at $685-690 likely means the seller ultimately sells for less, in longer time and with more concessions. This does vary a bit by specific location but overall, the market is still amazingly price sensitive, even in our so-called Seller’s market with rising prices. This price sensitivity is even more critical in condominiums which are lagging the market pace but still strong overall. Downtown Seattle condos have some unique headwinds for sure.

A second point worth noting is that our weekly sales volumes have been 12-50% higher per week than 2019 levels since the end of May. Combine this with the fact that our inventory of available homes for sale is down 40-55%, it shows we have a true, organic and sustainable demand for homes to buy. We have lots of people looking for a home to buy and not enough supply to fill the demand.

So where is all this demand coming from? Mostly from local buyers, secure in their jobs and incomes and motivated by record low interest rates. The decline in interest rates is counter-balancing the rise in prices so people can pay a higher price and still lower their monthly payments. Affordability is rising.

Many first-time buyers are trying to jump into the market. Other current homeowners are making lifestyle adjustments to their home desires and moving up, down, in or out of cities and suburbs. The reasons are varied but the result is the same; they’re looking for a change, now.

Record low interest rates are projected to be with us into 2023 or beyond but if 2020 has taught us anything, it is that tomorrow’s paths aren’t certain. Buyers of all ages and demographics and for a variety of reasons are seeking to secure a home for tomorrow, today, by buying a home now.

I expect this desire for certainty and to capture a lower cost of housing will continue for the balance of this year and into 2021. We have a lot of life uncertainties going on, so being secure in your home is a foundational piece of personal security and comfort that likely continues to drive our local market. Business expansion and movement around the Sound is and will continue to bring more people and more demand into our region. With all of the headlines of uncertainty, this demand seems to be one good fortune we can continue to count on.

 

Photo courtesy of Paule Knete-Unsplash

In The News April 15, 2020

Forbearance Impact on Lending and Home Values

As part of the Corona Virus response from the Federal Government, the Feds have provided an option for homeowners to not make their mortgage payments, with no need to prove a hardship or inability to pay.This is called Forbearance.

There are many moving parts to the mortgage industry, most of which homeowners aren’t aware. I can’t cover all of the behind the scenes details in one post or video, but I wanted to send out this video and basic outline of the potential harm this option can cause.

The bottom line is, if you can make your mortgage payments, please do so. If too many of us don’t, our future lending world and options to borrow for a home loan will get diminished and our home values will decline. Buyers won’t have the ability to meet new lender requirements. Fewer buyers, in any segment of the housing market, impacts all of the housing market–in a negative way.

Let’s limit the impact of the Corona Virus to our health and general economy, not spread it into our housing market. I have lenders able to help you or someone you care about to get financing but we don’t want to lose our options by people unnecessarily avoiding their mortgage payments. I hope you enjoy the video; Live from the Tiki Lounge.

 

In The News September 13, 2018

Market update for August 2018

While the headline stories seem cataclysmic, the reality is still that we are seeing a shift from our escalating home values. We’ve come off the peak numbers by 3-5% but much of this is from buyers bidding over the asking prices. Where list prices were and where they are today are only 1-2% different. Home values have still risen in a year over year comparison. That said, there are definitely opportunities for buyers that we’ve not seen in the last few years. While some see no reason to buy, thinking the market will continue to drop, we still have amazingly strong growth in the general Seattle area for population, jobs and wages. This means any “drop” is more likely driven by mentality than reality factors and can therefore shift back upwards or flatten quickly. This means when you find that new home opportunity, you should make your move on it now. You won’t be selling in 1-2 years, so any fluctuation is somewhat meaningless; just as you don’t sell a stock you bought last week, just because it dropped 2-3% in value this week. Buy your opportunity while others hesitate.

For home sellers, the peak values are likely behind you but we’re still at ascending values when compared to a year ago and well above values of 2,3,5, 8 years ago. Don’t put your life on hold because you wanted 2-3% more for your home. Appreciate the gains and wisdom of your investment and if it’s time to move, then make the move with confidence that you achieved an investment goal you likely hadn’t planned to turn out as well as it has. Next January to March should be a strong market for Sellers, so if moving NOW isn’t the priority but soon is, then make this your time frame target.

Here’s the latest area stats for your review.

In The News March 18, 2016

March 2016 Update

Some interesting statistics on our prices and activity levels so far this spring for the eastside and Snohomish County areas and how they compare over the last 10 years. The low quantity of homes for sale is beginning to be noted in the sales figures but overall the charts point to a very strong market for sales activity and prices.

 

Local Market Update – March 2016

A severe lack of inventory has led home prices to reach an all-time high. With the supply of properties at its lowest level since 2003, the market is in dire need of more homes to meet buyer demand. That is excellent news for those thinking about selling their home. Sellers can expect a quick sale, favorable terms and a historically high sale price. Buyers will need patience and a strategy for competing with multiple offers.

Eastside

Click image to view full report.

 

Click image to view full report.

The Eastside, already the most expensive area in King County, saw home prices set a new record in February. The median price soared 20 percent over last year to $739,975. Inventory here is particularly tight, and the area remains a very strong market for sellers. Homes are selling quickly, even at the higher end. A $3.2 million home in Yarrow Point sold last month in just 14 days.

King County

Click image to view full report.

 

Click image to view full report.

The median price of a single-family home sold in February hit an all-time high of $514,975, a whopping 20 percent increase over the same time last year. The number of homes sold exceeded the number that were listed, depleting inventory at a rate that is unsustainable. For the market to remain healthy, more people need to make the decision to list their homes.

Seattle

Click image to view full report.

 

Click image to view full report.

The continued boom in tech company hiring helped propel home prices to peak levels in Seattle. The median price of a single-family home jumped 24 percent over a year ago to $644,950, a new high. Inventory is at critical levels. In the hot Ballard neighborhood there are currently only 17 homes on the market.

Snohomish County

Click image to view full report.

 

Click image to view full report.

Snohomish County remains a haven of affordability for those sticker-shocked by King County prices. The median price for a single-family home sold in February was $359,000, a moderate increase of 9 percent over the same time last year. However, Snohomish County is struggling with the same historic shortage of homes as King County. With less than a month’s supply, experts expect home prices to continue to increase.

 

In The News March 2, 2016

Bubbles vs. Affordability

There are a lot of worries and speculation being voiced about home values in our area being at bubble levels and worries about when and what will cause the bubble to burst. The graph below may help allay some of those fears as it shows the monthly payments for homes over the past 27 years and how those relate to affordability and home value appreciation.

Home Trend Graph

 

The graph shows the average house payment in our area and home sales activity over this period. What it illustrates is that while our home values have risen, as have overall sales, the decline interest rates has helped to keep our increasing home values and payments affordable. The payment peaks correspond to market value peaks and similarly to declines, whether from the 1990 decline, the Dot.com decline in 2000 or the run up and subsequent fallout from the "Great Recession" of '07-'09. This also shows that our home sales are back at full recovery in quantity and for many homeowners, at or above prior peak values. Yet our payments are well below peak values. This bodes well for continued strength in housing values. 

Historically we see that our payments tend to run just below the appreciation trend line with the few rises preceding our market struggles. We had a much larger peak in the '07 run up, and certainly a much bigger fall. At the far left of the graph you can see that we've just begun to peak above the trend line again; so what does this mean? In the past we've seen 1-3 year durations to these peaks in payment values. However, we are currently in a stable to declining interest rate market and a bit more of a struggle for world economies. Might this affordability prolong our ability to remain above the trend line?

For the core Seattle and Eastside communities the answer is likely yes. Many of the large local employers are continuing to have strong employment and certainly we have more workers coming into our market from other regions of the country and the world. With a more broad-based wage increase and stable to low interest rates, it's likely we have another 2 years of value rises but as many of us might remember from our high school math classes, the theory of Regression to the Mean, will likely catch back up to us and we'll see a combination of rising interest rates and declining values at some point in our relatively near future.

While it's difficult to predict when, it is usually better to be selling into these peaks rather than at or just past them. That said, if there is no reason for you to be moving in the near future, then relax and don't worry about this. However, if you are wanting to sell in the not too distant future, then you may want to make plans to do so sooner, so you can capture the peak value of your home. If you're buying or would buy after you sell, it's still good to know our near record low interest rates are in your favor and will help you make that next home purchase the most affordable we'll likely see in any near term timeframe. Since you will likely be staying put in that new home for 5-7 years, then any intermediate downturn isn't really affecting you. You weren't planning to sell and move, so ride it out, like most of us did during the last downturn and we'll see rebounding values on the other side, just further down the road.  

So does this mean we're going into or are at a bubble in the market? Not in any traditional sense as our home values are based more on job, wage and population growth; our local economy is one of the strongest in the country and the very low interest rates are keeping home affordability more in check than in previous run-up periods. Can values drop? Most assuredly. Are we likely to see something like 2007-2009? Not very likely, barring catastrophic world events. Our home mortgages and home equity positions have all strengthened and this will dramatically reduce any bump in defaults, foreclosures and dramatic drops in home values. So relax, capture your gains or step up to that next home with more confidence in your future.