2017 Seattle Real Estate Recap & 2018 Market Predictions

This is my recap of the Seattle real estate market in 2017 and my predictions for 2018 and beyond.

 

[Video Transcript: 2018 Seattle Real Estate Market Predictions]

Hey y’all, Zach McDonald, your real estate agent at Real Property Associates. This is my 2017 Seattle real estate recap, and then also my 2018 predictions. I’ll take the first part of the video to address the market in Seattle overall in 2017, and then we’ll focus on my predictions and general feelings for the 2018 market and beyond.

So, happy new year, if you haven’t heard that from me already. We’re already underway in 2018. I’m shooting this video on the same spot as last year, so, just feel like it’s a good place to maybe keep that rhythm up.

2017 real estate market, Seattle’s high was 735 back in June, and what we saw is in February we set a new median sales price record in the City of Seattle at 662.50. And bear with me, I’ve got notes so I don’t miss anything. And then every month after that, so February, March, April, May, and then June, we set a new high all the way up to that 735 mark.

And what we saw after that in the summer and then into the fall, we saw just kind of a slight tapering off and then more of a flattening out, not much of a … I wouldn’t say a cooling off, but we saw prices dip slightly from that high and then just kind of remain in the sevens.

Quarter four’s median sales price was 716, so not too much lower than that spring-summer number, which was around 721. We’ll talk about that in a sec, but didn’t see too much of a taper off.

I would say that, and I’m going to continue to say this, I think right now is the key … is a great time to buy in Seattle, and I’ll talk about that more later on, but I think we’ve still got a few more months. Usually quarter one is a little bit slower and the wheels are starting to turn. We are … Maybe we’re going to set new price records like we did last year, but those are significantly lower than where they ended up for the year in 2017.

Overall for the year, 13.7% over 2016 average, pretty substantial. I think I predicted … and, well, and I don’t think I did, I know I did, I predicted 10 to 12% growth, and I’ll talk about my predictions later for 2018.

Listings, the new listings, we had May, and June, and September were all kind of the biggest months for new listings, which is normal, and then we had pretty good numbers in the spring and summer months. But something that I’ve talked about, and we’ll keep talking about, is we really don’t have enough inventory. There are a lot more buyers than there are homes for sale. And so, that’s something that we’ll just be continuing to keep an eye on in Seattle. It could get even tighter, which I suspect it will, and that will continue to drive the real estate market. And that’s one of those things I’ll mention again later on here.

Average days on market were right at that seven to nine days on the market for the year, right in there, and the summer months being the quickest turnover. And I’ve mentioned this in previous videos, and I want to highlight that here in my … this in my 2017 recap, is that these days on market are really artificially inflated.

What I mean by that is I think that one to three days on the market would be the average in Seattle if there wasn’t an offer review date. And that offer review date, sellers take a … typically it’s seven to 10 day period, usually seven, that they will allow buyers to come see the property, do inspections as necessary, essentially do their due diligence up front before making their offer, and then go ahead and make a competitive offer. And the idea for the sellers is they’re hoping to incite multiple offers, hopefully drive that price up, tighten up the contracts, and get more favorable terms for themselves.

And for the buyers, as much as that’s a bummer, I think it’s more charitable because it’s not a first come, first serve, or the first one in the door gets the house, but everybody has an equal … at least an equal opportunity to make an offer. And so, on the buyers’ side, it is a bummer when there’s lots of people trying to buy the house you want to buy, but it is nice that you even have a chance, and I don’t think you would have a chance otherwise.

I think … Well, and here’s another trend I saw, and this worked for a few of my clients, making an offer early. And so, sometimes, if you make what’s called an exceptional offer. And that really depends on who the seller is for what they consider exceptional, but you’re generally talking about above the asking price, no contingencies. Sometimes they’ll take that offer before reviewing offers.

So, that’s one of those strategies that we use, and I have seen, also, on the listing side as well that other buyers’ agents were implementing. It’s always kind of fun to see both sides of the coin there.

As far as supply, supply, I’ve been talking about this all year, extremely low. Extremely low. We’ve been … And in 2017, we actually averaged under a month supply for the whole year. For the whole year. We, in the summertime, had over a month. So, from June until October we had over a month supply. So, there were more listings coming on, and typically the end of the summer, early fall, there’s a little less buyer pressure, so that kind of gives the supply a chance to catch up.

But now we’re back down to .5 months of supply, as of the end of December. That’s the lowest number we’ve seen in a long time. Actually, it’s the lowest number that I can find on record.

So, extremely low supply, and this is one of those things that’s really driving the real estate market in Seattle. And we’ll talk about jobs, and job growth, and, you know, the amount of demand, but really, if there was a whole bunch of supply, all of that doesn’t push the prices up, but the fact that we don’t have a lot of supply, that’s really what is pushing our market forward.

And what we’re finding is instead of selling their house, a lot of people are holding onto their house, and maybe rather than buying that next purchase, and purchasing up, they’re just holding onto their house, and settling, and adjusting to maybe having a … Let’s say they have another kid, they’re just kind of staying in that house rather than buying something else. Or maybe their job got relocated, but instead of selling they’re just staying put and having a little bit long commute.

So, I think … And I want to put this out there, I think we’ll see, and should see, and if you’re a buyer or you’re a homeowner listen to this, I think that this is still the prime time to, if you can, buy something else and then sell your house. I still think we’ve got a few more years to really capitalize on the growth.

And so, if you’re thinking about making a move up purchase, this would be the time to be able to sell and still potentially have equity down the line in your new house. So, something to keep in mind.

As far as percentage of list price for the year, and this is a good indicator of the amount of competition, generally, in a specific timeframe, and what we saw is from March to August were the most competitive timeframes in the City of Seattle. With May and June we got … In May, we’re at 8% over the asking price, and in June 7.6% over the asking price. Well, I guess April was even up there, 7.8% over the asking price.

So, April, May, June were kind of the most competitive timeframe, and I mentioned that’s kind of when the most listings are on, and sellers are thinking about selling, buyers are buying. But we had, on average … I mean, the lowest on here is actually January 2017 at 2.2% over the asking price, and this is just an average.

And so, what I want you to know as a seller is this doesn’t mean every house is selling for 5 to 10% over the asking price, which is what I would ballpark for most people, it means that some are selling for generally, you know, eight to 10%, to 12%, 15, and then some are just selling for the asking price or slightly below. So, it’s not every house that’s getting multiple offers and prices are bidding up, but it is a majority of them.

For buyers, same thing said for you, if it’s competitive and there’s three, four, five people, even if there’s one, you’re probably not looking at 4%, or 2.3%, you’re probably looking at significantly more over the asking, maybe five to 10%, right? It’s not a rule, it’s just kind of a … it’s a median, right? It’s a median, so some are higher, some are lower.

As far as quarterly, quarter two, which is that April, May, June, was the highest of the year at 721 median sales price, and then we just saw a slight trickle down in September. So, that was quarter three, 718, and Q4 716, I just mentioned that. And as far as supply for the quarterly section of this … actually, quarter three was the highest supply at 1.1 months on average.

And then, let’s see, days on market, like I was saying, we’re at that seven to nine month … seven to nine days on the market for the whole quarter. And quarter two took the house on the highest percentage over asking price at 7.8% for the quarter in the city of Seattle.

And I think I’ve stressed this enough, but I’ll touch on it again, quarter two, so that April, May, June, is going to be the most competitive time of year, you’re going to see the most buyers in the pool, but you also see more listings. So, it’s kind of that sweet spot for both buyers to be able to have opportunities, but then, for a seller, if you’re thinking about selling, when people ask what’s the best time to sell, well, it’s that March, April, May, June timeframe.

Annual stats, this is fun. So, this is the year over year from 2016, and I even went back to 2015 for fun. So, 2016 we saw 12.7% growth in the median sales price, and then last year we saw 13.7% increase. So, if you were to do a two year average, we’ve seen … If you were to have bought in 2015 you’re looking at 28.2% growth according to the MLF stats in the City of Seattle.

As far as listings, there were fewer listings this year than last year, and I was just saying that inventory’s even tighter than it was, if you could imagine that even being the case. Closings, there were actually more homes that sold. So, there were fewer homes for sale and then more homes that sold, so that’s why we’re seeing that tightening of the median … or the … sorry, excuse me, the supply.

And then a month’s supply, we’ll just keep harping on supply, we saw in 2015 one month, on average, which is super low. This has been a trend for a few years now. 2016 we saw one month, and then last year we saw an average of .9 month’s supply, and we’re even lower right now.

As far as the percentage over list price for the whole year, 2015 was 3.3% over the asking price, in 2016 we saw 3.9% over the asking price, and then the average percentage over list in 2017 was 5.2%. So, as we’ve seen a tightening of inventory and an increase in demand, we’ve also seen an increase in the price competition, and we’ve seen what we’ve just seen here, 13.7% increase year over year, on average, from the year before.

So what does that mean? What does that mean for 2018? 2017 was a crazy year, and I think a lot of people were skeptical about it. They were skeptical that 2017 was going to be like 2016, and like 2015, but it was. And those same factors that were driving, and have been driving the market, I think, are going to be driving the market here in 2018.

And so, people ask me, can this keep going? Before I get into my predictions I want to talk about this, can this keep going? And the answer is yes, this can keep going. We’ve seen … And if you look at other markets, like San Francisco, or you look at New York, or you look at Vancouver, BC, and heck, if you even look across the water to Bellevue, the prices are even higher. We’re over a million dollars median sales price in Bellevue. So, there’s definitely room for growth in Seattle’s market.

And I think, just in general, Seattle is a changed city, and I mentioned this last year, and I’m going to keep harping on this, Seattle is changing and changed. I don’t think we’re ever going to be the sleepy little city that we were before. And this is from PricewaterhouseCoopers, they do a … or, PricewaterhouseCoopers, they do an emerging trends report every year, and this is straight from their mouth, and they interview investors and economists, and they put together a very robust report that investors, real estate investors specifically, rely on. And their quote is we are in a long cycle, not in a boom or bust.

And so people asking me about are we in a bubble? Are we in a bubble? And I would say no, and I could get into a long explanation for why, but they agree. They think this is a different type of cycle than what we’ve seen where everything goes up and then it crashes. And in this report, they talk a lot more about a … like a plane landing, it’s more of a gradual descent, and kind of leveling out over time.

And their prediction is that Seattle’s not going to be doing that shortly, but that it’s going to be a more sustained run than we’ve seen in the past. That’s what we’ve already seen, and I agree that we will keep seeing this.

And some of the things they cite, so, they rate Seattle as the number one real estate market to watch. They rate Seattle as, and this is out of all major cities in the US, Seattle number in economic health at a 4.29 out of five on their economic scale, and this is taking into account different factors. Number one, local economy, they are at 4.69 out of five. That’s the highest score out of any of the local economies. And they … Seattle is also rated number one for investor demand at 4.65 out of five. So, essentially, all those together made Seattle their number one real estate market to watch, and real estate market in health in general.

And this is kind of fascinating, too. So they, of their experts, and economists, and people they paneled, 61% say buy right now in Seattle. Yeah, right? Buy. It’s the most expensive that it’s ever been. Buy, that’s what they say. 28% say hold, and then only 11% say this is the time to get out and sell.

I would be in that category of buy. If you already own, and you’re not in the means to buy, I would say hold. But if you are in a position to buy, and have an opportunity to buy, I would say you’re still in a good place to buy. I would agree with those people as well.

And some of the things they cite here, and these are things I talk about as well, we’ve got the jobs, the talent density, and this is jobs … People used to move somewhere for jobs, and we still … we are having people moving here for jobs, that’s one of the big reasons we have so much population growth, and are the fastest growing large city in the US according to the US Census Bureau.

But what’s interesting is we also have a lot of companies moving to Seattle because there is a lot of talent here. So you have people moving here, but you also have companies moving here, which is a different phenomenon we’ve only seen more recently. You have the low … low cost is what they say, low cost.

Well, compared to some places, people consider this cheap. So, clients that I’ve had from Vancouver, or from the Bay Area, New York, they come here and they go man, it’s so cheap to live here. And some of you might not be feeling that, so please bear with me if you’re feeling the … let’s see, the pinch of living here. It’s not as cheap if you’ve grown up here, but for people coming in and getting here, it’s relatively affordable.

Transit, which is getting better, they quote quality of life, it’s a great place to live. No state income tax, sustainable development, land opportunities, list goes on.

But to get to the bubble conversation, I really think that this is different. And all the people that I trust, and follow, and listen to, and take advice from would agree that this is not like the bubble that burst in the previous economy. We have people that are qualified to purchase homes purchasing homes, they can afford their hose, they have a lot more strict guidelines and qualification. You have a healthy economy that’s backing all this.

And you have construction, can you think about construction? So, in the city core there was a time-lapse video I stumbled across, I’ve shared it on Facebook and LinkedIn, if you haven’t seen it I’ll actually link it up down here. I think it’s interesting, shows some of the development in the city core.

There are tons of projects that have been completed, a lot that are underway, and there are a ton that are just in permitting stages. And what that means is there are people that are willing to bet long term, this takes years to complete some of these large-scale development projects, people that are that confident in Seattle that they’re going to build these giant buildings. And so, just even that is a good positive indicator that there’s a lot of people that really are betting on Seattle.

And that’s something that I was reading in an article that Forbes did. Forbes talked about … The Author talked about some of the things that PricewaterhouseCoopers talked about as well, and his summary at the end was that betting on Seattle is a smart idea, and I would say I would agree. I would agree with that.

So, 2018 predictions. This is a long-winded video, but I think there’s a lot of value packed in here. So please, if you’re still watching, thank you. You waited for the fun part.

I think Seattle, in 2018, we’re going to see … and I’m going to be a little more aggressive this year, I think we’re going to see 11 to 13% growth. A lot of 2017 has mirrored 2016, which has mirrored 2015, and so just watching all those patterns over the last few years, we’re seeing a lot of the same things. Based on what I just told you, I think this is going to be sustained, and it’s going to keep going.

The factor to consider, I’ve been told, consulting with some lenders, that we’re probably going to see mortgage rates go up a little bit, not substantially, but even a slight uptick into the mid-fours would potentially impact the affordability of housing. So, we might see a little bit, maybe even more, competition in some of the more median price points.

So, something to watch out for. I don’t really think it’s going to impact the overall market growth, but it is something to watch. We do know that the tax plan was already passed, and a lot of the parts that people thought might be negative were taken out and revised prior to the official bill being passed. So, I think we don’t have to … we don’t have to worry about a lot of that here in the upcoming future.

Overall though, man, I’m excited. I’m excited for Seattle real estate. I know … And I want to be sympathetic, I think, that for people that live here and are trying to figure out, how am I ever going to buy a house? So buyers, I guess this is for you, how am I ever going to buy a house? And I would say to you that the tension here is, you know, getting in when you can.

So, if you can buy at 3% down, 5% down, even 1% down, there are some new programs out there, take advantage of that. Take advantage of the down payment assistant programs if you qualify for those. But maybe it is looking at an area where you didn’t necessarily want to end up.

Like, maybe you do look a little bit North, places like Everett still are a little more affordable. Or if you go South you can go to places like Burien, Tukwila, and prices are still a little bit more affordable down there. And it really comes down to where you want to be and what your financial situation is, but if you’re a buyer I would say that this is the time to get in, because I think it’s only going to get more drastic as the next few years go on.

And sellers, man, if you’re a seller and you’re relocating, or it’s an estate, or you need to sell, I mean, this is a great time. If you’re thinking that, man, I’d love to make a move, and I’d like to buy something new, and kind of cashed … essentially take what I’ve made here and put it into a new purchase, I think that would be good … this is still a good opportunity so that …

They call it the move up buyer, somebody that maybe you need a little bit bigger space, or essentially, maybe even if you’re downsizing, this might be that golden window where you can still have … you can take advantage of the market, right? You’re going to take advantage of it on one end, and also be, if you’re a buyer, kind of playing the game on the other side with the competition, but there’s still an opportunity for equity growth in the future.

So, I’m confident in the market over the next few years in Seattle. I’m betting on it myself. I bought a house in 2017 with my family in Edmonds, so I am very confident, personally, in the market, and I want you to be confident in the market. I understand there are lots of fears that can come up associated with the economy, and the real estate market in general, and then the fact that we’re at the highest price points we’ve ever been at, all the change happening in Seattle.

So, I’m happy to have conversations. I’d love to hear from you in the comments below, your thoughts on this video. If you made it all the way to the end I’d love to have conversations. Feel free to reach out to me, I’ve got my phone number and my email listed down below. And feel free to subscribe to my channel if you want to hear some more of the content here I’m putting out in the coming months.

But really, I just want to be your resource, your real estate resource, here in the Seattle area, and I’ll keep coming to you with my market updates every month, and all these other content videos that I’ve been putting out recently. And if you do need anything, please feel free to reach out.

Thanks so much for watching, and we’ll talk to you soon. Bye for now.