Seattle Real Estate & Housing Market Prediction 2019
In this video, I share my Seattle real estate and housing market predictions for 2019. Special thanks to Dan Keller at Guild Mortgage for his contribution!
[Video Transcript]
Zach McDonald: Hey you all, Zach McDonald, your real estate agent with Real Property Associates. Hope you guys had a great holiday season and happy new year. Heading into 2019 here, and want to just put out some predictions for the 2019 Seattle real estate market as well as talk about some of those fearful questions, like are we in a real estate bubble? Is the market going to crash? But before we jump into all that, I want to talk about some highlights from 2018 and then we’ll progress as we go through the video to some of those questions and also my predictions for the Seattle real estate market.
Zach McDonald: So I’ll start with some highlights from 2018. Home prices are up slightly, but not as much as we thought. We saw quite a bit of a jump in prices from January all the way up to May. Almost mediocre if you want to call it that. The market was on a tear. We were leading the nation for over 20 months as the fastest growing large city. Prices were climbing just crazy off the charts. And then all of a sudden in May, after May we saw quite a substantial drop in prices. What we would call a correction in the market, and prices have now more flattened out from where they were earlier in the year.
Zach McDonald: So year over year, from last November to this November, we’re up about 1.7 percent on the median sales price in Seattle for residential sales. That’s according to Northwest MLS data. If you look at a 12-month average, we’re about 8.6 percent up and that’s a 12 point average of those median sales prices. The prediction that I made earlier or I made last year was in that 10 to 12 percent range, which we were seeing at the beginning of the year and then we saw those prices drop off quite a bit and erase most of that gain from the year.
Zach McDonald: I think some of the factors here were the Amazon fear. And the fear was Amazon was coming up with a headquarter too and now we’re finding out they’ve split that into two different locations in Virginia and also in, here we go, sorry Washington DC area. And then also the New York spot, brains getting a little fuzzy on that one. But I did do a video on that. So, if you want to go check out that info. I’d love for you to go check it out, get a little more info. We’ll link it up here in the video.
Zach McDonald: Also, there was a little bit I think of just buyer fatigue in the market. And part of that was due to losing out on multiple offers, the pace of the market. And then the stock market as well was on a crazy tear as well. And so I think there was some fear associated with that. But for whatever reason, we saw more homes come on the market, fewer buyers buying and paying those multiple offer prices and it was pretty sudden. But the last … after that all happened in a few months. And I talk about his more in my December 2018 market update. But after that point, come August we’ve seen prices remain relatively stable and I think we’re preparing to see them go up again and more on that to come as the video progresses.
Zach McDonald: Some other factors that we’ll talk about it, interest rates. Interest rates are up about a half percent, a little more from the same time last year on Freddie Mac’s website as of December 28 in 2017. We were looking at about 3.99 percent interest rates. December 27 this year, 2018, we’re seeing 4.55 percent rates. So in a year snapshot, little over a half percent growth. In early-mid November though, we were seeing almost five percent rates. We were at 4.94, so the last month and a half, two months we’ve seen rates start to go down again. Which has what we’ve seen is there’s been a little bit more activity with those buyers again, hoping to get and lock in lower rates than they were being quoted previously.
Zach McDonald: The biggest thing here has been the affordability in Seattle. Affordability as the prices rose really quick. The rates are also going to up, buyers are getting priced out of the market. There have been people that have moved. I know friends that have moved out of the area and have had friends that have moved maybe to suburbs that are outside the city or even farther outside of where they were currently living because they couldn’t afford the prices there. I don’t think we’re going to see a massive relief in that. But what I do think we’ll see is a little bit of a slow down on that growth in 2019, which I’ll talk about a little bit more here as we go.
Zach McDonald: The last thing I want to touch on in this highlights piece is just the rental market. So there were a lot more housing units coming on. There were, in general, I think supply finally caught up with the demand in the rental market and there was a bit of a freeze or a slow down on the prices there in the rental market as well in the Seattle area. Now it’ll be interesting to watch for the next year, but I do think we’ll see that freeze start to thaw. And I think the interest rates and affordability will also impact the rental market. Stay tuned on that.
Zach McDonald: Before we dive into the question of are we heading for real estate crash or has the Seattle real estate market already crashed or is it crashing? Any variety of that, I want to just talk about the Seattle economy really quick. And the real estate market is, there is a global aspect to it. There is a US aspect to it but there is an incredibly high local aspect to the real estate market. Some would disagree with me, but I think they’re wrong. Just like they think I’m wrong. So the couple articles and these are from this spring and summer talking about the economies. We’ve got Business Insider ranking Seattle as the fourth best economy in the US, this large city economy. You’ve got the Wallet Hub, there’s also another article, another study rating them as the third best large city economy with Seattle being the 25th overall best. And Bellevue, which is just across the water, being the 36th best.
Zach McDonald: Overall though, Business Insider rated Seattle as the … let’s see here. They rated them as number two overall. Not Seattle, Washington in general and Wallet Hub actually rated Washington number one overall. So we’ve got Washington as a state as one of the best economies in the whole US and Seattle, Bellevue, Tacoma, kind of metro area as one of the best large city economies as well. So you’ve got the best economy inside of the best economy. So it’s a great situation here in the area. And there’s been multiple articles in the Seattle Times and other places talking about the number of people moving to the area. And recently they discussed again the amount of driver’s license renewals, excuse me applications from outside of the state, outside of the country and they’re remaining consistent with the same numbers we’ve seen over the past few years. Which just continues to support the fact that there are a lot of people moving to the Seattle area and this growth that we’ve seen is not done as far as the population, which just puts a further demand on the rental market and also the purchase market.
Zach McDonald: Now the crash. Is the market crashing? Have we seen a bubble burst? We’ve definitely seen a correction, that’s undeniable. Prices are down from where they were in the spring. And it’s a pretty substantial amount. I think I was talking about eight and a half-ish percent on that median sales price from May until August. And if you want to see more info on that or more commentary on that, please check out some of my old market updates. Either the one from … well, you could go back all the way to May, June and follow it all the way through the year. But I’ve been tracking this and talking about it in quite a bit of detail over the last six-ish months.
Zach McDonald: My overall sentiment is we’ve seen a correction and that the market has normalized, we’ll call it, that overpricedness that people were feeling. Like man, it’s borderline unaffordable. This market’s overpriced. We saw that correction in the stock market, seeing a correction right now. And we saw that in the housing market in the Seattle area a little bit earlier than the stock market seeing it. But there are multiple people that are pretty well respected that are supporting that idea that we’re not going to see a major recession or real estate crash. We’ve seen a correction which that does happen often, but those don’t last the same amount of time that you see like some kind of depression or some kind of a market crash like we saw in 2008.
Zach McDonald: So a couple people that have spoken out on this recently. So you’ve got the chief economist from Windermere one of the largest brokerages in the Washington area. In an article by My Northwest, a local news source, the chief economist there was quoted as saying, “Seattle slow housing market is only a blip.” Which is something that I’ve talked about as well. And he also is quoted as saying that there are some out there projecting a bubble, a major correction in home values and he goes, “I don’t see it.” And that’s another thing that I’ve been talking about. Yes, the market has corrected in a sense and we’ve seen prices come down. But I don’t think it’s a case or a source of fear going forward, at least at this point.
Zach McDonald: Now another real estate investor, financial guru some of you may have heard of, his name’s Dave Ramsey. He has quoted on the air recently and on his YouTube channel, which he now records the show that he does. He was asked about real estate market crash correction and he said, “We’re not going to be crashing. There’s no real estate crash coming up.” Both of these guys, I mean these are just a few voices that have spoken out against this. But I would say that we have seen a correction. Prices have adjusted, but I don’t think that we’re headed for any kind of major downturn, at least in the Seattle area here in the near future.
Zach McDonald: Okay, predictions for 2019. I’ve got three of them. Prices are going to be up somewhere between three and five percent. I don’t think we’re going to see the massive growth that we’ve seen. I’ve been talking about that over the last few months. I do think in 2019 though, that we’re going to see prices go up rather than remain flat or go down a few points here. We’re still in a seller’s market. There is still a demand for housing and there’s still pretty relatively low amounts of supply. We’re still around two months of supply and dropping, once the numbers for December come out. I think it’ll support this even more. Inventory at those levels are still pretty low and sellers still have quite a bit of negotiating power.
Zach McDonald: And buyers, now that we’ve got the new year coming up. We’ve talked about interest rates being down a little bit. I think we’re going to see a little bit of a resurgence in the real estate market. People have set their goals for 2019. It’s the new year, everybody’s excited. They’ve got their goals dialed in and people are going to start taking action on those. So just keep an eye out, but I think we’re going to start to see the market start to pick up a little bit again. And that the price projections, I hope I’m wrong. I hope it’s actually more, but I really think we’ll see a little bit more modest growth. As I don’t think we’ll as many multiple offers, situations. And I don’t think we’re going to see as dramatically low amounts of supply that we’ve seen over the past few years.
Zach McDonald: Now interest rates. I’m going to defer here to Dan Keller, he’s a mortgage advisor and branch manager with Guild Mortgage. I have interviewed him in the past on different mortgage issues. I think personally that we’re going to see interest rates somewhere in the low to mid fives by the end of the year, next year. But I want to defer to him here really quick and we’ll cut over to him and get his thoughts on interest rates in 2019.
Dan Keller: My name is Dan Keller. I am a branch manager and mortgage professional at Guild Mortgage. My MLO number is 115349. Where do I see interest rates going this next year? They’re going to most likely head north, they’re going to head up. Last year, year over year, they’re up a little over half a percentage point, right around 6/10, 7/10 of a percentage point higher. That’s largely due to a good recovering economy and two, the federal government is pulling out of subsidizing mortgage back securities and they’re going to continue to do so. So as they do that, rates are going to continue to go up.
Zach McDonald: And this is what he thinks about sitting on the sidelines and waiting in 2019.
Dan Keller: If you’re not going to get into the market because of what you’re hearing about the housing market or what you’re hearing about rates, I think that’s a bad strategy. What I like to do with my clients when they come in is sit down and ask them why they want to purchase and what is the alternative. Is it to rent? And then I weigh the pros and cons of renting versus owning and I think that’s solid advice. So I hope this was helpful. If you have any questions, let me know. I hope this helps Zach and reach out to Zach McDonald if you need anything or myself. I’m here to help. Bye for now.
Zach McDonald: All right, Dan thanks for weighing in. As I said, I think that we’re going to see rates somewhere in that low to mid fives. The last few years, there’s been a lot of projections about the interest rates climbing through the roof and we just haven’t seen that. This year was the first year where we really did see rates climb quite a bit. But they have dropped down again and corrected essentially as the year has gone on. So I’m thinking we’re going to see quite a bit of growth again in those rates, just like Dan’s talking about. But I don’t think we’re going to see that six percent as he was thinking, that was a little bit of a crazy number and I think it is too, but time will tell.
Zach McDonald: The other prediction I want to make here is I think rental prices are going to go up in 2019 in the Seattle area. Historically, we’ve seen six to seven percent growth. It’s been even faster than the housing market appreciation as far as price appreciation goes in the area. Seattle has been one of the most expensive places to rent in the last year. Historically Seattle has been more of a mid-level city and I think we’ve seen that the economy has changed here. The housing prices have shot through the roof. The rental prices have shot through the roof and that’s just because the city is changing. And so expect to see Seattle rents continue to climb as more people are continuing to move to the area. And if housing affordability is continued to be affected like we’re thinking with interest rates going up, that’s going to push more people to potentially rent or to at least consider renting in 2019.
Zach McDonald: So my three predictions: prices are going to be going up. You’re going to see interest rates go up, but not as dramatically as you might be hearing in the news. And that rental prices are going to climb as well, but a little bit more modestly than we’ve seen in the past few years.
Zach McDonald: Hey thanks so much for watching my 2019 Seattle real estate market predictions. If you found this content valuable, please consider subscribing to my channel. And as always, if you’re thinking about buying a house in 2019 or even selling a house, I’d love to be a resource for you and connect.
