“How’s the Market?” is a question I am asked all the time. It is a common segue in casual conversation over the neighbor’s fence, at a cocktail party or family gathering. Now more than ever, the answer to this question is critical, yet fascinating. You see, our market is experiencing a long-awaited correction, a tempering of price appreciation. This is providing great opportunities for both buyers and sellers.
For so long, inventory has been so limited that prices have had nowhere else to go but up, and up fast! In May, we saw the largest jump in new listings in a decade, which created a slowdown in month-over-month price appreciation. This was especially exacerbated due to the scarcity of inventory in the first quarter of the year when many jobs were being filled by big companies in the area, skyrocketing demand. The graphs above illustrate the price growth in both King and Snohomish Counties. If you average out the last 12 months and compare to the previous 12 months, prices are up 14% in King County and 13% in Snohomish County. Due to a large increase in inventory and other factors, we have seen prices start to balance out since May.
Additional factors that play into this healthy adjustment on the run-up of prices are interest rates, affordability, and Seattle summertime. First, interest rates have been dancing. They have climbed over a half a point from a year ago, which has been coupled with double-digit price growth, forcing many buyers to take a step back. Bear in mind that interest rates are still under 5% and well below the 30-year average of 6.61%. This must be taken to heart!
Affordability has been a huge factor that played into the reduction of absorption rate once the increase in new listings hit this Spring. This was especially true in King County. Prices peaked so far this year at $725,000 in April, whereas they peaked in Snohomish County at $510,000 in June. This is simple supply and demand, as buyers have had more selection. Further, many buyers turned their heads north to find a more affordable option while still sustaining a manageable commute.
The bottom line is that it just got too expensive for some to make King County their home, even Snohomish County for that matter. Combine that with an influx of selection, and you find the top of the market so far in 2018. This is not a bad thing! We must keep the double-digit, year-over-year price appreciation in perspective, and trust that the market factors which led to prices balancing out are healthy. A typical appreciation rate is 3-5%. Matthew Gardner, Windermere’s Chief Economist, predicts that we will finish out 2018 with 7-8% appreciation over 2017, which is well above the norm of 3-5%. Sustainable growth is important to the overall health of our economy and culture; this provides opportunity.
Buyers take heed. As we come out of the Seattle summertime seasonal slowdown, we anticipate a little run on new listings in September and October. Note on the graph above that we seasonally see prices peak in the late spring and early summer, due to many folks taking time to enjoy the summer months traveling and relaxing a bit. If you have been a sidelined buyer or have been thinking about making a move, the remainder of 2018 may be your time to enjoy more selection, still-low interest rates, and the chance to secure the best home for your lifestyle.
Interest rates are still attractive (historically attractive) and are predicted to rise. Plus, selection has increased, making negotiations not as intense. Multiple offers are not always the norm these days, which provides some breathing room for luxuries like inspections and relying on the bank’s appraisal to confirm value. Also, if you are a buyer that needs to sell a home first in order to purchase, this environment is much more forgiving. Believe it or not, we have even started to see contingent offers make a comeback.
This was one reason why we saw such a limit on inventory, because folks were not able to make fluid moves, so they just uncomfortably stayed put. It was the many baby boomers who came to market this spring and summer who relocated out of the area that loosened this up, paving the way for the local first-time, move-up, or move-down buyer to have some opportunity to transition.
So what does all this mean for potential sellers? Well, a lot! The word of the day is perspective. You must keep a close connection to the double-digit, year-over-year price appreciation we have seen over the last three years, and come to terms with today’s balancing out. Great equity gains are behind every homeowner who has owned their home since 2012. If that equity has been cared for, there are large profits to turn, even though you might not get multiple offers. All it takes is one good buyer for a successful sale!
It is all about what is motivating you. If a move seems interesting or imminent, chances are you can take that equity and turn it into something that better matches your current lifestyle. This is where a detailed assessment of the features of your home, along with an analysis of market conditions can be developed into a winning strategy. This does not come easy and requires in-depth research, close attention to condition and comparable homes, and outstanding marketing and merchandising.
Where I have seen the most opportunity is when sellers partner up and listen to the professional assessment of all of these factors. It often leads to satisfying results with one buyer, or believe it or not, the occasional multiple offer. Our market is exciting, but it takes skill to set level expectations, which leads to positive results.
If you or someone you know is curious about “How’s the Market?”, please reach out. Education and explanation are key to awareness, which leads to clarity. I love what I do and look forward to the opportunity to serve during this changing time. It is my goal to help keep my clients informed and empower strong decisions.