Seattle Real Estate Market Update | October 2018

I began recording these Seattle market update videos two-and-a-half years ago. At the time, I was documenting the Seattle Real Estate Market’s proverbial jump to lightspeed and 21-month run as the hottest real estate market in the country. The housing market has since shifted. More homes are for sale and bidding wars are less frequent.

Here my most recent thoughts on the Seattle area housing market.

 

[Video transcript of October 2018 Seattle Real Estate Market Update]

Hey, I’m Zach McDonald, your real estate agent with Real Property Associates, and this is my Seattle real estate market update for the month of October 2018.

Now, I’ve been doing these updates for about two and a half years now. You can actually go back and look at them all on my YouTube channel, but I’ve done one of these every month, and one thing that I can say with a lot of confidence is the Seattle real estate market is different now than it was when I started doing these back in two thousand and … Wow, I guess 2016.

So the biggest thing I’ve seen is just the conversations I’m having with people, in general as I’m … At the athletic club this morning working out, the guy next to me that I know was like, “Oh, how’s business, how are things?” And I’m like, “Oh, you know, business is actually great.” And he’s like, “Man, the market’s certainly changed, hasn’t it?” And at an open house this weekend, one of the neighbors came over and was saying similar things, “The market’s different.”

People know. At this point it’s not a secret, the market’s a little different than it was the last few years, and quite frankly we’ve lived through a pretty epic … 20-ish months, but really last four or five years where the Seattle real estate market has just skyrocketed from where it was back in 2012 at the lows.

That said, we’ll talk a little bit more about where we are in the market now, but I wanna share my story that I always share at the beginning of these market updates, and the story for this month is a story actually some friends.

So Ryan and Christine are some friends, their house is closing today, I just haven’t got the final notification yet. I’m looking at my watch, what is this. They came to me probably four months ago, we were just starting talking about the process, they were hoping maybe to move closer to family, and decided pretty quickly to pull the trigger.

We listed their house in August, and as you know, if you’ve been watching my updates, the market was a little bit slower in August. We’d seen another house similar to theirs, been on the market for 20 days, hadn’t sold yet. So we came on the market with that knowledge, and actually ended up selling in 19 days. So we were on the market for 19 days.

A lot slower, though, activity than I’d seen on some of my other listings, and mainly attributed to the market, I would say, and the fact that Labor Day was part of that. But 19 days, just under asking price, and they’re gonna be walking away with a good amount of money to actually put down on another house purchase when they decide to make that next move.

So, excited for them, they’re already a long way away, so if you’re watching this update, which I think you probably are, hi, good to see you, hope you guys are doing well.

Now, let’s talk about the market a little bit more. The median sales price in Seattle up about 5.6% from last year, same time last year, which is a little bit more in line with the traditional Seattle real estate growth. This area has always been a decent area to be, but it’s never been in the past just crazy growth like we’ve seen.

Some of the suburbs, like Edmonds and Shoreline, are actually a little bit down from last year, Lynnwood being up a little bit, and the … The general feel here is, even from the spring, we’re substantially … We’re down, we’re lower than we were in the springtime, which is normal for this time of year, definitely. We call it the seasonal slowdown. But definitely a little bit more dramatic than we’ve seen in these last few years. Maybe what’s more of a normal for Seattle, but not maybe a normal for what we’ve been accustomed to seeing.

And really we haven’t been in the normal real estate market in a really long time, if you think about it. It’s been at least 10+ years since we’ve had a more normal real estate market, but even before the last downturn crash we had it wasn’t really a normal real estate market either. So we’re talking about 15, 18 years of kind of a crazy growth, crazy down, crazy growth, even more than we had before. But just trying to … Is it possible for us to have a more normal real estate market for a little while? Is it possible?

Now, I find it fascinating, in doing these videos, finally starting to get some feedback and engagement on these videos, which I love. But last month I noticed a lot of negative feedback, or at least more enthusiastic feedback. And what I find interesting is that, now that it’s a little bit … In 2016 everybody’s like, “Thumbs up, Zach, you’re right on,” it’s pretty easy to talk about a market that’s clearly going up.

But right now we’re in kind of a crossroads. The market has changed, definitely, we have a little bit more inventory, still favoring sellers though, and we have less … We have some buyers that are seriously like, “Well, let’s see what’s gonna happen here.” So it’s a little bit more difficult to talk about than just, “Oh, up another 12%, year over year.” That’s a pretty easy report to give, rather than, “Oh, we’re only up 5%,” it’s a little different.

Now, I think there are a few things that are going on right now, and we’re just gonna talk about the local market. Seattle, we had more new listings come on, we had about 100 more listings, roughly, than we did last year at the same time, up about 22 1/2%, pending sales were also down a little bit. So we had some more listings, we’re down about 13% pending sales, so we had less homes that were essentially in the process of being sold.

So what we have is actually an increase in the amount of homes for sale, which is the word we call inventory. We have about 1400 homes for sale, whereas last year we had about 800 homes for sale. Quite a big difference, a lot more supply, and we’re seeing similar trends in the suburbs, if not even a little bit more amplified.

The other interesting thing is, now that we have more homes for sale, we don’t have as many of the bidding wars, so we have more homes that are staying on the market, and we’re talking about somewhere between, in Seattle, 12 days, and I’m looking here at my notes … Shoreline was 17 days, Edmonds nine days, and Lynnwood 18 days for the median days on market. Those are all up from eight, nine as the days on market, so definitely up, right? Little bit longer time to sell.

So that’s why I think we’re at these prices, the biggest factor driving the price up is the competition, the supply and demand, and when you have less supply and you have the steady demand then you’re gonna see multiple offers on houses, which is really what drives those prices up. We’re seeing anywhere from, in this time of the year, two to four percent over asking price kind of as an average, but some of the good homes were getting 10-15% over the asking price. Rarely was a house going below the asking price.

And now we’re seeing that median house, the median sales price is about the asking price, just underneath in some cases. The average is actually even a little bit lower than the asking price in all of Seattle and the suburbs that are surrounding it. So we’re seeing … It still favors the seller, it’s not like you’re getting a 10% discount on your house purchase, but the market’s a little bit more equitable for buyers and sellers.

With that said, applications. The biggest thing I think that’s really driving this is the increase in inventory, which I just mentioned, and then the interest rates. Interest rates are up substantially from where they were, but they’re still relatively low, so we’re still seeing … They’re not crazy high interest rates. We’re talking about high fours generally speaking, but that’s higher than what my interest rate was a few years ago, and that also affects affordability.

So when you have more inventory and you have less affordability, you’re gonna see a little less craziness in a housing market, and that’s what we’ve seen.

Buyers, I’ll speak to you first … I do really think that the next … In the springtime, we’re gonna see prices climb again. I do think that, as the winter hits, we’re gonna see inventory go down a little bit, supply’s gonna go down, and then going into the spring we’re not gonna have two and a half to three months of supply like we’re seeing. So I think we’re going to see less supply again, and prices go up a little bit. I don’t think we’re gonna see a 13% increase over last year, it’d be great to get back to where we were, even a little bit higher. But that’s really what I do expect.

I don’t think, though, if you’re a home buyer, that now is the time to … What’s the word, I don’t think now is the time to make a purchase, expecting to sell it in two years and make a profit. You’ve got that kinda two-year tax, live in the house for two years and then you can sell it without paying the capital gains if it’s your owner-occupied house. I don’t think that, right now, it’s reasonable to expect that you’re gonna be able to turn a profit in two years.

Now, with 12% growth every year it’s a little bit easier to see that, but if we’re talking about 4-5%, or maybe even we’ll see a 2% thrown in there, it’s gonna be hard to make a profit, especially with closing costs, all the upfront fees that you have. Really, that break-even horizon’s gonna be a lot more like four to five years, which is realistically where it’s at now.

I don’t think, as a buyer, if you’re thinking, “Hey, I’m gonna come here, buy a house, and then in two years I’m gonna sell it and make 150 grand,” that might have been the case in 2012 and 2013, but I don’t think you’re gonna see that in the next few years. So if you’re a buyer and that’s your thought, I would say it’s not time for you to buy.

Now, if you’re a buyer and you’re thinking, “You know, I’m gonna be here for the next seven to 10 years, that’s my plan, I’m gonna hold onto this after I buy it, it’s gonna be a rental,” you’re kinda starting your real estate portfolio, so to speak, I think you’re fine. I think this is a fine time to buy, specifically right now with prices coming down a little bit from their high in the spring.

You’ve got some uncertainty in the market, and interest rates are still relatively low. So as a buyer it’s really hard to time a market. It’s really easy in hindsight to look back and go, “Oh, it’s so obvious, 2012 was the best time to buy a house,” and if you’re buying a house right … Maybe you can look back and say, “Man, you paid more,” but in 2007 people that bought a house then, their house is worth, at least in Seattle, a lot more than it was worth then. You can look back in hindsight and say, “Well, okay, well I guess that was a good decision.” And I think that would be the case for you as well now.

Even looking into the future, I do think the next year-ish, year and a half, we’re still gonna see prices go up more modestly at least, and I’ve shared this in my past videos, but I wouldn’t say now’s the time to buy and try to time the market and make a quick buck, I don’t think that’s where you’re gonna be. But the longterm investment is still, I think, a good idea.

Now, if you’re a seller, and you’re thinking of downsizing maybe, or even maybe buying a new house and selling your other one, this might be a good time, the next year or so, the spring is probably the ideal time, but now, the next month or so before the holidays hit. Because I think we are in a time where it’s more uncertain, and I’m no prophet, so I can’t make predictions with accuracy. I can give my opinion based on what I see and what I experience as a real estate agent, but I can’t predict the future.

But if I was to guess, I would say now, in the next eight months, is gonna be a better time to sell than waiting for two and a half years. But I could be wrong. But, as a seller, if you really do need to make a move in the near future, this might be the time to start thinking about it and having those conversations.

I hope this is valuable for you, I think I was a little more long-winded here than I was expecting to be, but I think it’s all information, and it’s valuable for you. So I’ll have another one of these for you next month, I think next month will an interesting to be able to look back and see, “Okay, are we continuing on this trend, or is inventory just continuing to flood?” That’ll be a big indicator for us.

Please, I’d love for you to engage with this video, comment below, give it a like. If you are finding my content valuable, please subscribe to my channel as I’ll be posting one of these at least every month, but I post videos almost every day as well that I think you might find helpful.

So, thanks again, and we’ll talk to you here soon.