Trying to decide when to plunge into the real estate market can be quite intimidating—especially when prices are high, choices are limited, and history urges restraint.
Locally we’ve seen two or three years of what could be considered unprecedented levels of price appreciation, as well as an inventory shortage that resulted in a record-low number of homes for sale across Western Washington.
If there’s one thing most early forecasters agree on, it’s that home prices will continue to rise. Where they differ however, is how much they will rise.
The median price of a home across the Seattle metro area has now soared 80 percent since bottoming out five years ago, and its up 20 percent over the old pre-bubble peak a decade ago.
As Seattle marks a full year as America’s hottest housing market, with no end in sight, recent predictions from housing analysts suggest that the Seattle real estate market could continue to outpace the nation well into 2018, in terms of home price appreciation.
So here are a few reasons why 2018 SHOULD be the year you take the plunge.
After years of record-low interest rates (hello, 3%!), the Fed is finally making some noticeable increases: The rate for a 30-year fixed mortgage broke the 4% mark last year. And
with economic growth continuing to carry momentum, experts predict we’ll see at least two to four more rate increases throughout 2018. Rates are anticipated to hit 5% by the end of the year.
The big story there is that those increases will further constrict affordability. The more buyers wait, the more expensive it will get to buy—not just because of home prices, but because of inflationary pressure.... In other words, if you want in on the American dream, now might be the time!
Prices are climbing, AND they are not slowing down!
Home prices have soared over the past few years, pricing otherwise well-positioned buyers out of high-cost areas and leading some experts to cry “bubble”. But local indicators in the greater Seattle area show that we are still poised for record growth, and with record job opening and the majority of Buyers putting down 20% or more there are no fears on the dreaded word "Bubble".
Veros Real Estate Solutions, a property valuation company, recently predicted double-digit price gains for the Seattle area. They predicted that house values would rise by 10.7% during the 12 months from March 2017 to March 2018.
So what does that mean? Basically, home prices will continue a sharp upward climb. Waiting 1 year on a $700,000 home with a mortgage rate at 4.25% today could look more like $775,000 and 5% in just a year. (Based on putting 20% down on each loan that is a payment difference of $573 per month or nearly $7,000 MORE per year in mortgage payment!)
Inventory levels will begin to increase, but not fast enough to keep up with demand:
The Seattle region is experiencing quite a unique set of circumstances — old and new — that are creating unattainable prices for many.
- Topographical: There’s not much land to go around with lakes and Puget Sound in the way. There are also growth management boundaries. This makes what land is available for housing more expensive.
- Development: Builders aren’t building enough to meet the housing demand because land is expensive. Labor costs are also up and that adds to the price.
- Mass transit: Infrastructure, or lack thereof, makes it difficult to get around. So living in a convenient location is more expensive. Time is valuable, and commutes are growing. Buyers are moving farther out from Seattle along the freeways to find housing they can afford. More mass transit is coming to bring the region together, but that is decades away.
- More people: More and more newcomers are moving into the area as Seattle’s economy booms. This places even more demand on the already tight market. Currently the greater Seattle area is adding an additional 73,000+ new homes.
- SEE: Seattle Area Needs 73,135 New Single Family Housing Starts to Keep Pace With Growing Population
Millennials are another concern. They are the up-and-coming market. But builders are not constructing housing in their price point (which goes back to the previous issue that building is currently very expensive).
Despite the escalating home prices and increasing mortgage rates buying a home remains the more attractive option in the long term—that remains the American dream. In many markets where renting seems like the only entry point it's important not to take a shortsighted option. As people get more savings in their pocket, buying becomes the better option in the long run and can lead to far greater financial freedom and rewards as they approach retirement.