Seattle Real Estate in a Nutshell: The Market is Hot. Is it Time to Make Your Move?
As we move into summer selling season, the Seattle real estate market shows no sign of slowing the rapid growth it has seen over the past few years. We are seeing an influx of new residents to the city, historically low inventory and a strong economy, which are bolstering a highly competitive housing market.
Population & Job Growth
Earlier this month, The Seattle Times reported on Seattle’s population growth, noting that “for the first time, Seattle is adding more people on average each year than during the post-Gold-Rush boom years.” While Seattle added 18,000 new residents in 2013 for a growth rate just above 2%, the city added 21,000 new residents from July 1st 2015 to July 1st 2016, a 3.1% population growth rate that averages about 57 people per day.
As it adds residents, the city is experiencing a “tech effect.” In 2016, Geekwire [1] reported that there “are more than 80 engineering centers in the Seattle area operated by big tech corporations, such as Facebook, Alibaba, eBay and others. These companies have set up shop in the Northwest to mine the region’s pool of tech talent.”
As the number of jobs increases, so have average salaries. In a May 31st report, The Seattle Times discussed salary growth in Seattle, as “the median base pay for workers in Seattle is now $59,246.” Though the article discussed the tech industry’s $109,508 base pay (a 3.4% increase), all attention was on talent recruitment. Companies are clearly investing to attract employees, as recruiters “saw a median bump to $60,711, a 7.2 percent increase.”
Inventory Imbalance
While some have expressed concern regarding a potential “bubble” in Seattle, the theory seems hard to digest given the unprecedented number of jobs being created in Seattle and their accompanied salary increases. In these conditions, the housing market is experiencing an inventory imbalance. And as supply tries to catch up, it is not uncommon to see a listing go live and pending on the same day.
In an analysis of the most recent Case-Shiller home price index, The Seattle Times reported on May 30th that “single-family home prices across the Seattle metro area in March increased 12.3% from a year prior,” a figure indicative of the frenzy buyers feel as imbalance grows. When the number of homes for sale falls, bidding wars increase. In this quickly moving market, “comparables” (comps) have become a seemingly antiquated tool. Traditionally used for appraisers to assess whether a bank will loan a borrower money, comps are now less useful as buyers risk low appraisals with comps unable to reflect market demand.
Buyers Don’t Beware!
While real estate prices in Seattle have skyrocketed in recent years as the median home price has now reached $722K, our market is still a relative bargain when compared to other west coast cities like San Francisco and Vancouver, B.C. As SF Gate recently reported, “in San Francisco, the median price last month [April 2017] was $1,247,500” and homes are spending an average of 20 days on the market. Given these values and Seattle’s prominent position within the tech industry, it is no surprise that many brokers are seeing an influx of Californians looking for greener pastures in the Pacific Northwest.
If you are a buyer looking to wait, stop and think whether you’ve ever found yourself saying “I wish I’d bought a home here x number of years ago. Look what it’s worth now!” If you put aside your dream of snagging a “deal” like in 2009, and buy while interest rates remain low, you probably won't regret the fact that you were able to own a piece of the market. Seattle has grown double digits in the last 3 years and is projected to continue to rise in the coming years. With the overall population growth, people need still need places to live and buying at the right time can secure a good investment.
If you're not ready to compete against other buyers to stay close to the city, there are plenty of pockets that boast affordable housing such as Northgate, Lynnwood, Tacoma, and Renton. The good news about looking further out from the downtown core is that the city has anticipated the need for a better transportation infrastructure. In November 2016, voters approved Sound Transit 3 and its funding package of sales tax, property tax and MVET. The $54-billion schedule of planned projects will ultimately comprise a 116-mile regional network. Though the projects range in completion date from 2020 to the late 2030s, commuters will enjoy easy access from locations far outside the city in places such as as Everett, Lynnwood, Bellevue, and Issaquah by the time it is done. A full timeline is available at SoundTransit.org. Some folks are already strategizing to buy homes near these proposed light rail stations as prices have not yet reflected the completion of these stops.
If you are looking to sell, there’s no better time to ride the wave. Whether you are looking to downsize, upgrade or sell your investment, let the buyer demand bid up your home and use the funds to make the switch. Speculations are only speculations, but it seems that if you can leverage the value of your property and reasonably low (yet rising) interest rates, now might be a great time to make your move.
Conclusion
I recommend that buyers enter each offer process having already defined what “overpaying” means, given the current economic conditions and outlook stated above. The choice between buying a home and renting one is among the biggest financial decisions that you can make. You can use Zillow's handy Buy vs. Rent Calculator to determine what makes sense for you as a quick reference point. However, if you are ready to make an investment in housing equity, it is imperative that buyers align with an agent that understands the nuances of the market and is adept at navigating the cutthroat waters to achieve results in this speedy seller's market. While some may give up hope on affording real estate in Seattle, an experienced and aggressive agent can help you set expectations and achieve desirable results.
On the other hand, if you are a seller, it is key to understand the confluence of factors of how to present your home in the best light to maximize the sale of your home. While many may think it is easy to sell, there are still homes sitting on the market for over 100 days due to a poor overall plan.
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