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 25, 2016

Q1 2016 Market Review for Western Washington

Enjoy this report from Windermere's Chief Economist, Matthew Gardner, on economic and real estate changes. If you don't see the hyper link, hover on "this report" above to go to full report.

The main takeaways to me are that our dramatic decline in available homes for sale in the King & Snohomish areas are finally showing declines in sales. Not surprisingly, this is putting more upward pressure on prices with King County up 13.6% from Q1 2015 and 10.7% in Snohomish County. In some neigbhorhoods and price ranges prices are up almost this much from Q4 2015. 

Continued job growth and inbound migration are the major driving forces for the demand on housing; something that will continue with more renters coming back into the buying market. Rental rates are seeing a slow diwb in increases but are still on the upswing, especially for 2+ bedroom options and closer-in areas. Near record low interest rates are also driving demand as buyers try to capture the 3.5-3.75% rates avaiable for 30 year mortgages and even less for 15 Year or adjustable rate programs. 

Bottom line: home sellers are doing very well on selling their homes but should obtain advice on selecting the best offers to close successfully. Buyers are needing better guidance on how to structure and present their offers but also need to plan for patience and frustratsion as multiple offer situations are the norm and with 12-25+ offers for any home for sale, even very good offers are struggling to succeed in the current market.  

In The News March 6, 2015

Market pace continues to rise

Most of the local real estae market continues to thrive with price recovery in almost all areas strengthening to near or even above our economic recession data. February saw an increase in listings but that was matched with an increase in sales. While the statistics say we have higher inventory than last February, that's not matched with real life experience in the field, as any active buyer in the urban marketplace can attest. Prices are rising as multiple offers are once again the norm.

If 2015 follows the activity pattern of 2013 and 2014, which is my prediction, we will see the market calm in the summer months as buyer fatigue sets in and vacation times begin. Today's stock market decline was led by fears of the Fed raising interest rates as our national economy continues to rebound. This could lead to more upward pressure on home loan rates, already up about 3/8% so far this year, and that will likely lead to increased buyer/buying pressure by people trying to lock in what may be the last of our long-term rates in the 3% range. Recognize that a long term rate in the 4's is hardly a bad thing but, as always, people want to save money when and where they can, so jumping now is likely a stronger impulse for many buyers.

My caution would be that to buy something that doesn't really work for you as a home so you can save money on your loan is not the right step as selling this new home in a few years and buying what you really wanted or will need/want at that time and then having a likely higher interest rate will cost you more than exercising caution today and finding the right home at a still very remarkable rate and payment. 

Lastly, for those of you who think buying or selling without an agent will save you money, please recognize that it's very difficult to maximize the price for your home without full marekt exposure and even more difficult to win the home you're trying to buy in a multiple offer situation without the guidance of a knowledgeable agent to help you. You are most likely to make more money, save more money and lots of frustration with the assistance of a good agent on your team.