This is a very exciting time in the market right now with the extremes we have been experiencing in home appreciation, job growth, and relocating techies driving the market with their buying power. We are expected to experience an economic slowdown according to local and national economists. However, we are not expected to see a housing crash like before; and here's why:
As recently as May 2018 our market has seen a sharp right hand turn, and all of a sudden we are now the fastest decelerating market in the U.S. according to Case-Shiller Home Price Indices; and this after experience the #1 spot leading the nation last spring.
Seattle's booming tech industry drove the housing market into an unsustainable upward spike in home value appreciation according to many local economists. However, concerns regarding rising rates and our shocking home appreciation rate have stirred much speculation as to where our market is headed after the surge last May.
According to an interview with Geekwire.com and Zillow's director of economic research and outreach, Skylar Olsen, "As early as May 2018 the Seattle metro home values were appreciating in double digits. Market appreciation has halved in a little over seven months." Our housing market is still settling into a re-balanced state after experiencing a recent course correction that many are saying was inevitable.
Nonetheless, Seattle has been left off the Zillow list of the hottest 10 markets for 2019. This after Zillow measured current home values, apartment rentals, job openings, population growth, income, and unemployment rates. An economic slowdown always follows an exhilarating spike as we have in home appreciation.
Seattle's deceleration from an abnormal to normal real estate market will be driven by this natural course correction as buyers and sellers acclimate to a more grounded expectation of home values. For some home buyers this could be a window of opportunity they may have missed during the days of multiple offers, cash buyers, and getting $100k over asking price. Let's face it, those days of appreciating at roughly 12-18% are very much behind us.
All that goes up must come down, but are prices truly going down? What we are seeing is a median increase in appreciation of roughly 5.2%; which is much more modest and sustainable for longer term. Therefore, year over year home appreciation is still up, and not going backwards. At least not yet. Therefore, a slowdown or deceleration in appreciation is simply our homes not appreciating at unsustainable rates. Hence, the balancing of equal playing ground for buyers and sellers alike.
Although Amazon's new headquarters caused a lot of noise, we now know this is an addition to the current location and should not have a huge impact on our current market. Other factors to consider are millennials home buying power in 2019, re-sell homes, and new construction expected to cause an influx in supply in 2019; keeping in mind the influx in cash buyers in 2018. So are we going to experience a housing crisis? Not so much, as the most recent recession was driven by questionable lending practices that have mostly been corrected.
Mainly sellers are experiencing a correction to their home value appreciation expectations. Seattle is becoming more grounded and we are expected to hold this more steadily at least for Spring of 2019.
As for the number of millennials reaching new heights in home ownership, here's what OB Jacobi, President of Windermere Real Estate had to say, "Although many of them will face significant obstacles to buying due to student debt, lack of down payments, and Seattle's high priced housing, this group is likely to buy more homes in 2019 than any other demographic".
So if you are a homeowner with plans to sell and buy, an important factor to your decision will be how long one plans to invest in the next home. Are you planning on living in your next home for 5-10 years? If so, this is still a great time to buy while rates are still relatively low at 4.125% and up. However, if you are looking for a short-term investment this may be a good time to wait considering the days of double digit appreciation are gone; and most likely will not gain $100K appreciation or more.
More good news: buyers are out as we have been experiencing a strong traffic flow at open houses! With the New Market conditions we can also expect to have negotiations coming back as the days of waiving inspections, and going over asking price are over. January through April we are projected to experience a strong market for sellers within the New Market experience. May through September we will see a stronger market for buyers where sellers can expect days on market of 60-90 days which is typical of a normal market, and seems to be where we are headed with our New Market. After September, we may experience prices going down slightly as we maneuver the course correction.
Here is an interactive Days on Market graph of Snoqualmie & North Bend for Residential & Condo info:
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