by Dorothy Driver
Seattle/King County Real Estate values have rebounded from the Great Corruption/Recession which began in 2008; some analysts are reporting that prices have returned to what they were in the peek market of 2007. Seattle Metropolitan neighborhood values increased sharply last year and the upward trend continues.
So that means what exactly?
I like to begin by looking in the rear view mirror. Statistics are in for 2014. In the Seattle Metropolitan Market, median home values appreciated 7% last year; the most historically popular neighborhoods saw double digit appreciation rates. What do I think 2015 will look like? Let me tell you a little story:
A property in my client’s B-list preferred location-southwest of Columbia City-hits the market and the Seller is waiting 6 days to collect purchase offers. The property is a “flip,” purchased in 2014, remodeled (without permits), re-listed 2015. It is one level plus basement, about 800sqft/floor. The basement is finished, but ceiling height is barely more than 6ft. These Buyers have been outbid in the offering process before. They decide the house will work for them, they are not tall and their guests will be happy to hunch down and/or duck. There are 3 sets of Buyers doing pre-inspections at the same time (paying for and completing their home inspection BEFORE making their offer to the Seller). During this group inspection, water is POURING into the basement level from above due to the kitchen sink faucet being run. At least 5 Buyers decide to move forward with offers, including my clients (after all, since we are 1 of 5 instead of 1 of 12+, we may actually have a chance). My clients offered the top price they qualify for-in excess of $500,000, which is 6% above the asking price-and did not prevail as the winning offer. Did I mention that water was POURING from the basement ceiling during inspection and the remodeling was done without permits?
I predict the 2015 Seattle Market will be as strong or stronger that 2014. This “irrational exuberance” is fueled simply by the fact that there are very few properties for sale and demand is outpacing supply to the extreme. The strength of a local real estate market is measured by how many months of inventory are available. Anything less than 3 months supply of inventory is considered to create conditions favorable to Sellers. In Ballard, there is 1/3 month supply of inventory; the area south of I-90 to the southern city limits has a 1 month supply; unincorporated Lakeridge-Skyway has a 1.5 month supply.
Why is inventory so low?
1. People love living in Seattle. If they cannot afford to move within their favorite neighborhoods, they are staying put. Just try to find a good remodeling contractor that isn’t booked 4-6 months out.
2. New construction starts are way off due to the downturn years of 2008-2011. The current pace of new home construction nationally is dangerously low, about 60% of the norm. New home starts are the root indicator of inventory supply levels. As construction lending continues to become easier, this rate should improve, but figures show it may take at least 7 years to make up the short fall.
3. In the Seattle area, rental rates are at a high level. For the move-up or move-out–of-area property owner, it is attractive and profitable to convert their home into a rental investment property instead of selling it.
So Sellers: Selling off-market to your friend/neighbor may mean selling short. Without market exposure to those competing Buyers, you don’t know what the top price will be. But you still need to choose your list-price carefully. That one month+ supply of available inventory consists of properties that NO ONE MADE AN OFFER ON. Buyers aren’t jumping to make offers on properties that have undesirable features or missed the mark by overpricing.
Buyers: Take heart and eat your Wheaties. If you are Selling and Buying, be prepared to make an interim move while you are looking and competing with other Buyers for your next home. If your preferred or acceptable location is outside the Seattle city limits, you will have an easier time as a Buyer and a more generous property selection to choose from.
Dorothy Driver is a Seattle-born native with deep roots in South Seattle. Managing broker at WRE/Northwest, inc, she has been a real estate expert for 35+ years. She is passionate about promoting all of the tremendous assets and treasures South Seattle has to offer.