[Editor's Note. This post was written by guest blogger Marco Lowe . Lowe joined the Seattle real estate community in June of 2007 and is suspected by many, probably fairly, for its collapse soon after. Evidence is still being collected but already William Justin refers to his unsold floors in 1521 as the, “Lowe Sales Units.” Mr. Lowe is currently hiding in NYC trying to put together the financing to buy the main bridge connecting Manhattan to Brooklyn.]
Like a Metro bus finally making a left turn across a packed arterial during rush hour, some are starting to feel the real estate market start to turn as well. Last week’s Seattle Times story , “King County Home Sales climb to 2-year High” probably sent a few people to digging holes in their front yard to plant a “For Sale” sign, but that might be a bit premature in most cases.
My take of the data is that we are not going to see prices rise with most homes anytime soon in the majority of the Greater Seattle area real estate market. However, the less expensive homes are seeing some sales increase as prices have dropped and might even be seeing possible price stability. Simply prices have dropped low enough and that more people, aided by incentive, are entering the market.
A good analogy is one from my old boss at a Seattle development company. As any financial market breaks down, like the local real estate market, it is like the unwinding of a spool of thread. Every sector of the market is pulled off the spool, in this case all types of real estate have taken a dramatic hit in value.
But eventually, as the market turns, one sector of the market starts to rewind on the spool and it is the indicator that things can, not will, turn around. In this case it is the cheaper homes starting to stabilize and rewind. Also, if this sales bump at the lower end does foretell a rebound, the rest of the market could still be years behind.
So what is going on?
Well, like all markets, no one really knows, but I am going to try to sift through all the numbers and give some recommendations.
First some basic facts:
•Though jerky, average home prices seem to be settling around $385,000 in King County
• Home sales are up 14% over last year in Seattle; the Eastside is up almost 2% but both areas had HEALTHY price drops of almost 14% since last year
•Southwestern King County saw a 54% jump in home sales!, but prices were still down 14.1%
•Seattle condo prices are down less than homes, 10%, but unlike homes, the number of sales are still dropping with 14.5% less sales than last year
•Eastside condo sales volumes are up, 8.7% this year, but are 15% lower in price than last year
You don’t need a PhD in economics to see that if prices drop far enough, sales go up. Supply and demand is playing out in the market.
My Recommendations:
First Time Buyers Looking for Less Than $400K Single Family Homes should consider buying now
Most of the upswing in home sales is from this part of the market. Heck the AVERAGE price is $400,000 in Seattle (who thought they would see that sentence in their lifetime?). There is a lot of financial incentive for new buyers to purchase now with low interest rates and the $8,000 tax credit. These buyers tend to be the same people priced out a couple of years ago and are now returning to the market, and getting a lot more home for their money.
Given the sales growth in this sector, and that the pesky law of supply and demand, there is a chance we have hit bottom, and with more folks coming into to buy, you might even see the cheaper homes rise in price a little in the future.
Look to buy in or near Seattle, or job centers like Bellevue or Redmond, preferably near a mass transit center. If you are looking in the hot areas in SW King County, buy near a Sound Transit’s commuter rail or bus stations to Seattle to protect your purchase against the inevitable increase in gas prices. The jump a year or so ago made the way out, cheaper communities full of commuters look like riskier bets to me.
If you want to live near work, but are outside of these more urban areas, REALLY push for a great price or consider renting. There is NO telling when the outer areas, particularly outside of King County are going to recover. And no, a strip mall and gas station are not urban areas. That said, Kitsap County is showing some price increase, but I do not have number of sales for the county.
Buyers Looking for Single Family Homes Over $600,000 should consider buying for the long-term.
These homes are sitting on the market a long time and their owners are getting anxious and their prices are dropping. You will need a fair amount of cash to get loans this high and the bank is going to look all the way back to your grade school report cards before making any loans. Sixth grade math aside, it is worth it. There are some amazing deals right now on these higher end houses.
They higher you go above $600,000, (not a problem I will have anytime soon) the less the competition, you might even be the only one interested in the home. There could still be some room to fall in this market so I would suggest planning on being in the home some time before planning to sell.
I would stick to the same rules as the under $400,000 homes above, but maybe a bit further out if you live on the Eastside of the lake. These buyers tend to be, sadly, a little less sensitive to gas prices.
What happens with homes between $400-600K?
I would suggest REALLY knowing what you are doing. I guess that applies to all big transactions, but more here than at the other price ranges. Surely there are some good deals in this range, but also a number of homes that will drop if not sold in a few months looking to get under the jumbo loan line of $417,000 and find a larger pool of buyers.
Buyers with a LOT of Cash check out foreclosures.
Shocking, but some people do have a lot of cash still. Golden Parachutes, inheritances, good savers, etc. You can decide what price of home you want, but because of the cash, you are also open to the foreclosure market, which is still growing . Once a bank has taken back a home it will usually be auctioned off at the courthouse. This auction stuff is not nearly as easy or clean as a real estate broker doing the leg work for you in the traditional real estate market, but there can be some AMAZING savings on some great homes. The trick? You have to pay with cash.
Condo Buyers should consider waiting.
Prices dropped 10-15% in the major condo areas of Seattle and Bellevue from last year AND volume of sale is off too. Hence, we are likely still looking for bottom. Therefore, buyers are in control from top to bottom in the price range, though you are likely to find more competition in the lower end.
Don’t be surprised if you buy a condo soon and see the price still drop a bit so negotiate well if you have to buy. Also, the top end of the market seems to be struggling more. This is anecdotal but the fact that pricey condo projects like Olive 8, 1521, and Escala still have units available is shocking, but The Four Seasons and Bellevue Towers cutting prices is almost a sign of the Apocalypse.
So, I would wait a bit yet. But if you really want to buy, bargain hard, have a real estate broker who knows their numbers, and hold on to the property a while. You can find deals in the market with enough leg work and excel crunching.
Personally, if I had to buy I would look to buy condos in Seattle or the heart of downtown Bellevue. There is a history of success and likely condo buyers tend to want a more urban lifestyle so you might see some help on price support…might.
And a little advice for people looking to sell.
If you’re selling a home priced less than $400,000, you are in a good place price-wise with a lot of buyers. Stage your house well and don’t let early lowball offers shake your nerves. Data says you can get your price if you are in a good area.
If you’re selling a home priced more than $400,000, you should wait. The market just is not there yet. If you have to do something, consider renting it out. It is not as hard as it seems; I did it while in grad school 3000 miles from Seattle. You might also be in a position to refinance. Though rising a bit, rates are still very low.
If you’re looking to sell a condo. Wait. Again, bad news, the market is not there. Advice is the same as above in terms of looking to rent your unit, if allowed by the pesky condo board or refinance to get payments down. Sellers at the lower end could do better though.
