Where is Seattle Residential Real Estate headed?
Wednesday, April 23rd, 2008Clients and friends keep asking me: what do you think of the Seattle housing market?
From personal observations and experience I know that Seattle area homes are selling if they are:
- competitively priced,
- well prepared for sale
- offered by a motivated seller, and
- marketed aggressively
I’ve listed and sold two Seattle properties in March which met these four criteria. During the same time I’ve also helped two buyers purchase homes.
Buyers have plenty of choice and will buy when the above criteria are met. Obviously, buyers are up against tougher lending standards. Still, first-time buyers with good credit, steady income and savings for a sizable down payment have the pick of the litter - if they can afford it.
The problem with Seattle residential real estate is affordability.
Currently, the average Seattle area home price is $414,518, just about double the national average of $207,272.
Why’s that?
- More people are moving to Seattle than are leaving.
- Seattle companies are still hiring and opening offices here, such as Google.
- The local government curtails land use.
- The local geography fosters exclusivity.
Take a look at a Seattle area map and what you see are bodies of water dissecting the land. What you get is an abundance of highly desirable waterfront properties. Add the undulating hills that rise from these waters and you get desirable view properties. Waterfront and views sell for a premium.
The solution for many first-time buyers is to “go condo” or to buy further out and settle for a longer commute. In the meantime, prices on some Seattle area homes are coming down. One example is Kirkland condos, especially those at the higher end. The highest foreclosure rates are south and north in cities like Burien and Monroe. These foreclosures came about through the combination of easy credit, lofty expectations of appreciation, and perhaps optimistic assessment of increased personal income.
What the Experts say about the Seattle housing market.
PMI Corporation, the company that provides private mortgage insurance, looked at the risk of home prices declining over the next two years (pdf file). Seattle ranks in the least risky group. Speaking to the status quo, The Wall Street Journal shows the Seattle area in 197th place out of 200 when it comes to mortgage payment delinquencies (by value) of 30 days or more.
Another measure of the same table is the current price level when compared to the peak of the US housing market which the WSJ determined to be the fourth quarter of 2005. Compared to that peak (being 100%) the national average price level is now at 91.9 percent - a drop of 8.1 percent. Seattle home prices, however, have still risen further since then to 117 percent.
This would suggest that it’s about time for Seattle home prices to cool down further. Foreclosures excluded, what I see is a stand-off between sellers and buyers. Seattle home sellers can’t believe prices are coming down, buyers are wondering by how much.
