For the first 3 quarters of 2015 home sales are well ahead of 2014 (12% higher volume) and median prices are up 14% (King County). This is the result of 4 factors contributing to the current market.
- Good Local Economy: All Real Estate is local and the Seattle Economy has booming employment (3% unemployment rate) and a growing local economy.
- Low Interest Rates: The Fed decided not to increase interest rates again, they are at historic lows brought on by the Great Recession. For the last 7 years they have been using low or 0 % rates to recover and grow the economy. Enjoy it while it lasts!
- Local Technology Boom: For several years now the recovery has brought growth to Silicon Valley and their overflow has spilled into Seattle with hiring at our tech giants Microsoft and Amazon, but now we have satellite offices of Google, Yahoo, Facebook, Alibaba and more; each having a 1000 to 4000 people here. When you add those numbers to a medium sized place like Seattle, it has a big impact with new hires and transferees buying houses in all price points.
- Asian Buyers: For several years the Boom that came to Vancouver BC has spilled over to Seattle. That buyer pool has broadened with buyers coming in from all price points not just the high end. This buying spree is not just focused on Seattle, it goes as far as Chicago, New York and Miami. The great news is some buyers overpay, but most don’t, more on that later.
Predictions and What to Watch for: Nothing ever goes up forever it just seems like it will. The good local economy is being driven by low interest rates, good employment and business being done in the market. The housing price increases create optimistic owners who spend money on their homes and other discretionary items. This is all good. The risks of the market hinges on the lateness/age of the 9 year recovery/expansion.
Low Rates but Increasing: They can’t be low forever. The longer interest rates are held artificially low the more imbalances there will be and just plain hair brained schemes that will come to light once rates increase; just like last time. There are things happening in the economy, probably financial in nature (had you heard of SubPrime before 2008?) that won’t show up until the rates increase. When these “things” show up who knows how they will affect both the local and national economy.
Tech Boom Blow Off: Well it may be running out of steam. Venture Capital is closing its checkbooks for now and the stock market is easing down; watch out for the moment that those rates increase. It won’t be pretty in the stock market and it will affect consumer confidence.
Asian Buyer Boom: The Asian Yuan has slipped against the dollar less than 4% but it is enough to roll their stock market off its way inflated highs, with big drops (Alibaba?). The downside here is the buyers keep coming but will be buying with depreciated currency so will be looking to get better deals out of us. That could be painful because their buying supported and then pushed up our prices. Don’t count on that going forward.
Conclusions: The market is going to continue to be strong for sellers for the short term foreseeable future. Prices may continue to increase on strong demand and low inventories, but may not sustain the current pace. Interest rate increases will also throw a curve to prices going up in the future.
If you would like a private consultation for your specific situation, please contact us!
Patti & Brad Chalker