Wherever you turn lately, you’ll hear there’s a shortage of inventory in the Seattle housing market. Is it true? Absolutely!
Approval letter from lender – take the time to get pre-approved before you make an offer so the seller will be more comfortable in your ability to obtain a loan.
Pre-inspection– find out if you can do a pre-inspection (an inspection which occurs before an offer is made). This will enable you make an offer that does not have an inspection contingency. However, this can be a gamble as the inspection will cost money and this is not a guarantee that your offer will be accepted.
Money down – when competing against other offers, consider increasing your down payment. This settles most seller concerns about your financial viability.
Earnest money – putting as much of your down payment into your earnest money deposit makes a very strong impression. Sellers like high earnest money amounts because they feel that this ensures you won’t break the contract because you will be worried about losing this money.
Reports/disclosure – have your agent find out everything they can about the property and get copies of all reports and the seller disclosure up front. Approve these reports and simplify the offer.
Personal letter – if you really want the home, write the seller a letter indicating why their particular home is a good fit for your needs. You would be surprised at how many multiple offer situations are decided based on the letters that buyers have presented to sellers.
Last month I posted my predictions for 2014 real estate. The data for 2013 is now in, and here’s a summary of how the Seattle housing market did last year. I’m happy to provide you with a neighborhood or other city report if you’d like; just send me an email and what are you’d like market data for.
2013 was a very successful year for real estate in Seattle. Inventory of homes, while still low, improved significantly, resulting in a 16% increase in closed sales on single family homes and 15% on condos. A balanced housing market would have 5 to 6 months of inventory of homes, and Seattle is still lagging far behind that, at 1.6 months in December. January is a fabulous month to bring a home on the market, before the typical spring increase, as buyer demand is high. With high demand and low inventory, it is definitely a sellers’ market. Just two weeks into January, anecdotal reports are huge numbers of people attending open houses (even during Seahawks games). Single family home prices citywide were up 13%. While condos didn’t see as much appreciation, they are selling significantly faster, down from an average of 98 days on the market to 65. Lastly, foreclosures and short sales are disappearing, only 9% of single family home sales and 18% of condo sales. This decrease is due to homeowners’ increased equity, and is expected to continue through 2014.
Tied for the most expensive home sold in Seattle in 2013 at $6,500,000 were two homes, one in Denny Blaine and the other in Laurelhurst. On the other hand, the lowest priced sold home in Seattle was $65,000, a bank-owned property in the Rainier Valley. A penthouse condo in Escala downtown was the highest priced condo sold, at $6,200,000. A studio co-op had the lowest sold price for a condo, at $55,000.
Seattle Single Family Homes (including townhomes), 2012-2013
|Average Sales Price||$520,829||$460,667||+ 13%|
|Median Sales Price||$444,950||$399,500||+11%|
|Homes Sold||7,753||6,656||+ 16%|
|Average Days on Market||36||61||– 41%|
|Selling to List Price Ratio||100.9%||99.1%||+ 1.8%|
|Foreclosures & Short Sales – Number||704||1217||– 73%|
|% of all sales||9%||18%||– 50%|
|Months of Inventory||1.6||2.3||– 30%|
Average price per square foot increased 11% in 2013, from $226 in Dec. 2012 to $251 in Dec. 2013.
Seattle Single Family Condominiums, 2012-2013
|Average Sales Price||$340,924||$333,504||+ 2%|
|Median Sales Price||$280,000||$247,000||+ 13%|
|Homes Sold||2,535||2,203||+ 15%|
|Average Days on Market||65||98||– 34%|
|Selling to List Price Ratio||99.3%||97.9%||+ 1.4%|
|Foreclosures & Short Sales – Number||462||611||+ 24%|
|% of all sales||18%||28%||– 36%|
|Months of Inventory||2.3||3.5||– 34.2%|
Average price per square foot increased 4% in 2013, from $340 in Dec. 2012 to $353 in Dec. 2013.
As always, please feel free to contact me at anytime with questions or for more detailed statistics. I am here to help you and your friends/family in purchasing or selling their real estate. I appreciate all your referrals, thank you!
Each year I take time to review what has happened during the year and to look forward to predicting what is in store for real estate. Below are my predictions for the 2014 real estate market, based on data that was available at the time this was written. Fifteen of these predictions relate to residential real estate; two are specific to non-residential properties; three have to do with interest rates and lending and the final five pertain to the economy.
Here’s what I’m seeing for real estate in 2014:
PREDICTIONS FOR RESIDENTIAL REAL ESTATE
1. Housing Inventory – There are a number of factors affecting housing inventory levels. Low interest rates are attracting investors from hedge funds and private equity firms that are purchasing real estate for rentals. The economy is improving and improved consumer confidence has brought more buyers back into the market. Foreclosures are down and short sales are rapidly going away because they do not exist in an inclining market. New construction is still not where it needs to be so inventory challenges will continue throughout 2014. The increase in investor demand is forcing inventory numbers down to record low levels. These investors include Baby Boomers who are investing in second home properties and rental properties. All of these factors will contribute to a housing inventory shortage in 2014 in many areas and in many price points.
2. Market time –Market time began to decline quite rapidly in the late spring of 2013. Multiple offers returned with a vengeance as short sales and foreclosures began to decline and incoming inventory slowed to a trickle. Market times continued to decrease until the government shutdown. Since then market times have stayed steady. In 2014 market times will decrease because demand remains strong in many price points and in many areas. Lack of new construction inventory, record low interest rates, the return of consumer confidence, household formation purchases and investor buying will cause market times to decrease even greater than they did in the spring of 2013.
3. House prices – House prices will increase dramatically in 2014 in part due to shortages in inventory. Other factors that will add to the increase in house prices include high demand from investors buying single family homes to hold as long term rentals, a decline in foreclosures and short sales and an increase in buyer demand. The median expected house prices should rise over 12% nationally while the State of Washington should rise 12 – 14%. Home prices will see a strong upswing in an overwhelming majority of metropolitan cities. City life is luring Baby Boomers and Gen X’rs, and buyers are rushing to buy properties closer to urban centers, causing an increase in prices and dramatic decline in inventory. Therefore, house prices will increase by over 20% in many markets like Seattle and surrounding areas. Prices will increase as high as 30% in some harder hit areas like Las Vegas, Arizona and Florida.
4. Housing Affordability rate – The affordability index measures the relationship between median home prices, median household incomes, and interest rates. An affordability index of 100 means a household earning the median household income would pay exactly 30% of their monthly income toward the principal and interest of their mortgage. Above 100 is more affordable, while below 100 is less affordable. With home prices rising quickly (up 12% nationally from last year) and mortgage rates inching up (up a full percentage point from spring of 2013) housing affordability has decreased and has now dropped to a five year low. The affordability rate will continue to decline as interest rates increase and home prices rise.
5. House Price Index – According to the Federal Housing Finance Agencies (FHFA) House Price Index (HPI), in the third quarter 2013, nationally house prices rose 2% from the previous quarter and up 8.4% since the third quarter 2012. This is the ninth consecutive quarterly rise. Many housing markets have now stabilized and home builders are beginning to plan upcoming projects. Of the nine census divisions, the Pacific division experienced the strongest increase in the last quarter with a 4.2 percent price increase and a 19.2% increase since last year.
6. Pending home sales – Due to the improving job market, rising rental rates, continued low interest rates and continued housing affordability, pending home sales will increase dramatically in 2014. There will also be an additional increase in pending home sales as investors purchase homes as long term rentals. Lack of inventory in new construction will prevent pending sales from reaching higher levels. Pending home sales would have been higher in the fall of 2013 had it not been for the government shutdown.
7. House price appreciation for high-demand areas and high-demand housing styles – House price appreciation in many high-demand areas and high-demand housing styles will reach over 20% in 2014. Specifically ramblers, urban hubs, smaller properties with high-end finishing, homes for Baby Boomers with aging parents, and homes for Baby Boomers with boomerang children will continue to be in high demand in 2014. Home values will appreciate as high as 20% in some areas with 2014 average appreciation to rise from 7.2% to over 8%. Average annual appreciation from 2014 – 2018 could reach over 8% per year with a cumulative appreciation to 2018 of over 25%.
8. Median house prices – The median existing single-family home prices rose in 88 percent of measured markets in the third quarter, 2013, with 144 out of 163 metropolitan statistical areas (MSAs) showing gains. Fifty-four areas had double digit gains and 19 had price declines. The national median home price was $207,300 at the end of the third quarter compared to $184,300 during the third quarter of 2012, which is an increase of 12.5 percent. This represented the strongest year-over-year increase since 2005. In 2014 I am predicting that the median home price will increase in over 150 of these metropolitan areas. I also predict that the national median home price will increase by over 16%.
9. New construction demand – There will continue to be a severe shortage of new homes in 2014. The US needs approximately 1.2 – 1.5 million new homes each year to accommodate a growing population and the demolition of decayed properties. The drastic decline in new construction from 2006 through 2012 created a dramatic shortage in new construction product. New construction in 2013 was not high enough to make any kind of dent in the shortage of supply. It will take years to make up for the lack of new construction we have experienced in the past 6 years. It will take 7 years to make up that deficit if the current rate of building stays the same as it is now. New construction inventory shortages will cause resale house prices to continue to rise in 2014 because of the shortage of new construction inventory. New home demand will also continue to increase in 2014.
10. New Home Sales – New home sales in 2014 will be high relative to the inventory available of new homes. New home sales continue to increase. The lack of inventory is keeping the new home sales numbers down. As new construction increases and available new homes come onto the market, the new home sales number will increase. This number is directly tied to current inventory which is still too low in relation to the demand.
11. Housing Starts – From 1995 to 2003 the average housing starts were 1,256,000 starts. In March of 2009 we hit a 20 year low of 353,000 which is well below what is needed to sustain demand. In August of 2012 we hit 535,000 which is a dramatic 52% increase from the 2009 low. In 2013 those numbers have surpassed 600,000 which is still well below what is needed to sustain our new construction demand. Based on this demand and the expectation that builder lending will loosen in 2014, I expect 2014 starts to increase by over 20%.
12. Remodeling – The demand for traditional remodeling and for lifestyle remodeling will continue to increase in 2014. This is due to the demand for floor plans and homes that can accommodate multi-family living. Due to our aging population, bathroom remodeling will continue to exceed kitchen remodeling in 2014.
13. Household Formation Needs – Household formation is a big part of what drives the real estate market. Household formation refers to the number of homes we need to accommodate the different types of households. This includes married couples, people living with parents or children, single people, divorced individuals etc. For example, divorce drives household formation needs up because instead of living in one home together they live in two homes once separated. Single people as well as those waiting to get married later in life also drives this number up. Bad markets and recessions bring household formation numbers down (as adult children may choose to live with parents instead of on their own or people may wait to get married due to economic uncertainty). Additionally, other factors such as immigration and migration affect household formation. 2014 will see an increase in household formation purchases because as the market improves so does consumer confidence which means more individuals who were living together due to financial issues are now moving out on their own.
14. Second Homes Market – Second home sales will continue to have a strong increase in 2014 due to the passing of wealth from the Silent Generation (those born 1925 – 1945) to Baby Boomers (those born between 1946 and 1964).
15. Seriously Delinquent Mortgages – At the end of November, over 734,000 homes were still in some stage of the foreclosure process which is down almost 25% from a year earlier. Completed foreclosures are down 30% from last year to 470,000. Almost 70 percent of all homes in some stage of foreclosure are on mortgages taken out between 2004 and 2008. This declining number is due to more homeowners being able to pay their mortgage payments because of rising home prices and steady job growth. Foreclosures hit over a million in 2010 and have been declining since. Short sales will disappear in 2014 because short sales do not exist in inclining markets.
PREDICTIONS FOR NON-RESIDENTIAL REAL ESTATE
16. Commercial – This market will only improve slightly in 2014. Positive influences will include job creation, modest economic growth, and the easing of commercial lending standards. There is still concern that the commercial recovery will be unsteady because of increased concern over issues including the healthcare and government issues including the debt ceiling. The commercial market in 2014 will have modest growth.
17. Multi-family – Demand for multi-family housing will continue to increase in 2014. The demand for rental properties has increased dramatically creating a strong demand for multi-family housing. From 1995 to 2003 there was an average of 331,000 multi-family housing starts with that number plummeting to 82,000 in 2009. Multifamily housing starts in 2013 finished around 260,000 units. I anticipate a modest increase in 2014.
PREDICTIONS FOR INTEREST RATES / MORTGAGE LENDING
18. Interest rates – The Federal Reserve intends to keep the funds rate near zero until the economy is stronger. This will ensure that short term rates remain low through 2014. With this rate at a historic low (between 0 and 0.25%) since 2008, the short term Fed funds rate should not raise much before 2015. Longer term rates will rise in 2014 due to increased activity in the housing market and because of a stronger global economy. Treasury rate to rise to 3.1 – 3.3, and 30 year mortgages currently at 4.45% could rise to 5 – 5.5% by the end of 2014.
19. FICO Scores – FICO scores for closed loans had increased substantially from 2007 – 2012. This meant it was harder for a person to get a loan. FICO scores on closed loans will reduce in 2014 due in part to easing up of lending which will result in another surge of buying in 2014. In 2014 FICO scores on closed loans will average below 690.
20. Credit Availability for Builders – With the demand for new homes, lenders will soften their lending requirements for builders in 2014. Builders that previously could not get financing will be able to qualify in 2014 under new builder programs. Bank profitability equals available credit for builders.
PREDICTIONS FOR THE ECONOMY
21. Unemployment Rate – State of Washington – The unemployment rate in Washington State is 7.0%, down from a high of 10.2% at the end of 2009. By the end of 2014, the State of Washington should see unemployment rates as low as 6.4%. National Unemployment Rate – Nationally our unemployment rate is down from the 10% high we hit in October of 2009. We are currently at 7.0% (November, 2013) and by the end of 2014 we could hit as low as 6.8%.
22. Inflation – The annual US inflation rate for 2012 was 2.1% which was lower than 2011’s 3.2% and higher than 2010’s 1.6%. The historical annual US inflation rate is 2.97%. The inflation rate in 2014 should increase as the economy improves and should tick up slightly to an average of 1.8 or 1.9%.
23. Deficit Spending– Deficit spending is the amount of spending that exceeds revenue. A deficit occurs any year that the government takes in less revenue than it spends. The United States gross national debt is currently more than 17 trillion. I do not expect there will be much change to this number in 2014.
24. Consumer Confidence – Consumer confidence, which rolls the facts and feelings about how we are doing as a country into one neat package, hit a high not seen in five years of 82.1 in June. It dipped after June and after the government shutdown issue sank to 70.4. I predict the consumer confidence index will hit 83-85 in 2014.
25. Consumer Spending – Consumer spending is on the rise as consumers begin to feel more confident about the economy. Consumer spending drives over 70% of the economy with the biggest spending done in housing and transportation. If consumer spending drops off, economic growth will slow, prices will decrease, and the economy can go into a recession. Inflation occurs when consumer demand for products and services is greater than the ability to provide the goods and services; this causes prices to go up. The Federal Reserve’s mandate is to ward off inflation. Consumer spending in 2012 and 2013 was up. I predict consumer spending will also increase in 2014.
Questions or comments, give me a call or email.
STAY TUNED . . . in January I’ll bring you a report on how the real estate market did in 2013.
Metal – Metal roofs can last up to 70 years depending on the materials. Debris should be removed on a regular basis and inspected every few years to make sure no repairs are required.
Slate – Depending on where the slate was quarried, a slate roof can last up to 200 years! As the slate naturally flakes, the roof deteriorates. Slate roofs should be inspected every few years or after heavy weather both on the outside as well as the inside for water leakage, and individual slate pieces which have deteriorated should be replaced.
Tile – Tile has been the roofing material of choice for Asia, Europe, and South America for hundreds of years and with regular maintenance, can last several hundred years. Inspect regularly, looking for chipped or cracked tiles and replace. Have a professional wash or brush once a year depending on where you live. Seal the roof every few years as recommended by your roof repair company.
|September Activity for the City of Seattle|
- September’s volume of new listings increased nearly 17 percent compared to a year ago, pushing the total number of active listings slightly ahead of 12 months ago (up 2.1 percent). However, of the 21 counties the MLS serves, 11 reported having fewer listings than a year ago.
- Pending sales (mutually accepted offers) rose 4.6 percent area-wide; 14 counties had double-digit gains, while three counties reported declines.
- Closed sales for September increased 21.2 percent year-over-year, rising from 5,536 to 6,711.
- While selling prices area-wide are up 8.7 percent from a year ago, prices were below year-ago figures in five counties. Conversely, seven counties notched double-digit gains. The area-wide median price for last month’s closed sales was $278,000, up 8.7 percent from the year-ago figure of $255,745, but $5,000 less (down about 1.8 percent) from August.
- Prices on closed sales of single family homes (excluding condos) rose 8.2 percent, while condo prices surged 12.3 percent.
“As is typical at this time of year, September’s pace slows a bit compared to August as families focus on back to school and all the activities that go along with that,” observed Frank Wilson, branch managing broker at John L. Scott in Poulsbo.
|City of Seattle, Median Home Prices|
|Do the curtains stay?|
Whether you are a buyer or seller, there may come a time when you are either touring a home or about to sell one when you look around and wonder if that amenity should come with the house or not. For example, it may seem logical that items such as curtains which were specially made for the room and match the carpet, chandeliers, certain appliances, or even barstools that were custom made should stay with the house. However, it all comes down to what the buyer and seller specify in the purchase and sale agreement.
Listing agents need to point all of the ambiguous items out during the tour with the seller and determine which the seller is willing to part with or include in the listing. If a seller is willing to include all the high-end chandeliers, that can become a strong selling point – if the buyer wants them.
If a buyer doesn’t want certain items that the sellers intended to leave behind (such as outside play equipment, hot tubs, freezers, etc), then it is important to include in the contract that those items are to be removed by the seller – or else the buyer may be surprised at the walk-through if they thought they would travel with the seller.
However, fixtures that are attached, such as fountains that are cemented in, doors, etc are generally thought of as part of the home. But, if you see a stained glass window that is inset to a standard window, it is best to specify whether it is staying or going.
The key is to include everything in the contract – that the seller intends to leave and what the buyer wants. Negotiation can happen from there. Never assume that something is staying…or going.
For those of us who live in Seattle, it’s the first day of school today. My son is now a high school sophomore, but as in years past, I reminisce today about that first day of kindergarten. We had bought our house six months earlier, so that we would be in the area of one of the best schools in the city. The school bus would pick Sam up just a couple blocks from our house – I remember meeting the bus “pros” at the bus stop, parents who had been doing this year after year. I remember the excitement I felt picking him up at school that first day, waiting to hear about all the wonderful things he learned at school and about all his new friends.
Jump forward to 10th grade. Sam drove to school today for the first time. No more school buses or Metro. He left the house 20 minutes earlier than he needed to, he was so excited to get to school, to get his schedule, to see his friends. I’m feeling similar excitement to that kindergarten day, wanting to know about his classes, his teachers, his friends.
Schools are one aspect of neighborhood and community. For those with children, it’s a critical component. As you choose a neighborhood to live in, many people are concerned about the schools. Is it a “good school?” How will my child get there? Are there after school activities or child care?
Today I’d like to answer the question, “is it a good school.” There are many different definitions of a good school. For many, they look at test scores or classroom size. Others look at on-line rankings such as those provided by Great Schools. But there are other factors to consider. Teacher retention rates? Principal longevity? Involved parent group? Welcoming atmosphere whenever you enter the building? Ability to work with students with different learning styles? Necessary support services or after school care?
As I’ve learned over the past years, there is no formula to determine a good school. If I had to pick the most important factor, I’d say community – the parent group, the welcoming atmosphere, the support services. Test scores are numbers, people make up community. Relationships with fellow parents, with teachers, and with administration is critical. Feeling welcome and respected is critical.
From our experience, the school with the best test scores was not the best fit for Sam. The best schools are the ones who create a community.
As my tagline says, “Building Community. One Home at a Time.” Let me help you find that right community.