Could Now Be the Perfect Time to Buy?
Summer Sales Slowdown & Increasing Inventory Creates Favorable Conditions for Buyers in Seattle
Summertime is traditionally slower in our region’s real estate market, as Seattleites pause and take time to enjoy the warm weather, families spend more time together with kids out of school, and residents leave for summer vacay and other fun activities. However, this summer “the total number of single-family homes on the market jumped an eye-popping 43 percent in June from a year ago across King County, the biggest increase since the housing bubble and burst a decade ago,” according to the Seattle Times.
While inventory is going up and pending sales going down by almost 11% year-over-year, there is evidence that the market may be shifting.
When we dive into why there is an increase of inventory and why homes are sitting on the market longer than the previous year, a few things come to mind. Buyers could be fatigued from losing out on bidding wars where it has become common place for a listing to receive multiple offers, leaving hopeful buyers tired and discouraged. The process of finding a viable home, making the time and effort with as much due diligence upfront to compose the best offer, paired with a tremendous emotional investment has left buyers ending their search. In the last few years, being a competitive buyer in this market required waiving most, if not all contingencies, exposing buyers to maximum risk, putting large non-refundable earnest money deposits, closing in 21 days or less, writing “love letters,” and practically all things shy of giving up your first born just to purchase a home.
We have seen trends of homes going 15, 20 even 30% over asking price due to the influx of new home buyers with limited supply of homes. As a result, overzealous sellers now anticipate these escalations and price their homes as such, perhaps too high, which has also contributed to the extended number of days on market and therefore showing increased inventory.
With the typical seasonal slow-down combined with fatigued buyers and high expectations from sellers, homes are staying on the market for longer periods of time. Potential sellers who have watched the market for some time may also finally be ready to sell, thinking the market may be at its high before a correction.
Is this a cause for concern? Is this the start of a housing slowdown?
With an unemployment rate hovering just below 4%, the lowest it has been in the last two decades, and a steady rise in interest rates, the economy is in a “good place” and any asset or housing bubbles don’t seem likely according to Federal Reserve Chairman Jerome Powell.
While the region reported overall gains in June 2018, NWMLS says “buyers may be cheered by one notable figure: The median sales price of a single-family home (excluding condos) in King County fell from May, at $726,725, to June, at $715,000, for a drop of nearly 1.6 percent.” Looking to the Seattle metro region, home price growth seemed to have tapered off a bit outside the downtown core, with North and West Seattle reporting increases of less than 5 percent and many other areas hovering around 11%.
Despite more inventory and softening conditions for buyers, it is still a decidedly seller’s market and far from the balanced market we’d like to see, with as many sellers as there are buyers. The total inventory of homes listed for sale has now grown for three straight months on a year-over-year basis, suggesting a new trend. But the region has a long way to go to make up for a decade of declining numbers of homes for sale: even with the recent rise, inventory is just over half its long-term average.
As the Times notes, “the market is still no picnic for buyers,” as the median sales price reached $812,500 in Seattle as of June 2018, an 8.3 percent increase from the previous year. Prices on the Eastside grew at an even faster rate, settling at $978,000, a 10.5 percent year-over-year jump. According to the latest S&P Case-Shiller home price index, the Seattle-area has experienced the quickest growing home prices for a staggering 20 consecutive months, showing no signs of slowing down.
Though the comparison of June 2017 vs. 2018 stats show some relief for buyers, whether trends continue in this way or the market hardens up again in the fall season remains to be seen. In the meantime, buyers: now might be your chance to secure the home you’ve been dreaming of while capturing reasonable interest rates before they increase again