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
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.
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.