The Seattle housing market is experiencing a severe inventory shortage. Seattle itself has .9 months’ supply, whereas our neighbors to the north and south, Snohomish and Pierce Counties, have .4 months’ supply. In our professional opinion: That’s crazy!!!
In last month’s post about home remodeling, we revealed that the Seattle housing market is experiencing the 2nd highest rate increase in the nation. This year, Seattle-Tacoma-Bellevue is projected to increase by 9.7%!
Basically, if your home is in the Seattle-Tacoma-Bellevue area and worth $500,000 in 2020, the average expected increase to $548,500 in 2021. Obviously, this is just an estimated average and the real increase will vary based on thousands of factors. Currently, the only market in the nation that is beating up in price increases is San Jose-Sunnyvale-Santa Clara, California. Their increase is projected to be 10.8%!
So, why is the market so unabashedly pro-seller? Let’s talk about it:
Low Inventory = High Competition
The biggest reason for our seller’s market lie in economics 101: supply and demand. In March 2021:
It’s no secret that the pandemic has made us grow tired of staring at the same four walls. With a dramatic increase of people working from home, people are desiring larger spaces. Owners of condos and townhomes are looking for additional bedrooms to use as home offices. Private outdoor spaces are as popular as a Zedd concert (aw, remember concerts?), and mental and physical home-health is now a top priority.
In addition to needing a change, interest rates are incredibly low right now. As of this posting, Bankrate’s current rates in Washington are 3.28% fo a 30-year fixed, 2.51% for a 15-year fixed, and 3.23 for a 5/1 adjustable-rate mortgage (ARM).
How much of an impact do these interest rates have on your mortgage payments? Let’s put is this way:
If your interest rate was just 2% higher, you would end up paying an additional $351/mo for a 30-year mortgage at $300,000, and $295/mo extra for a 15-year mortgage also at $300,000. That’s a difference of $4,212/yr and $3,540/yr, respectively. That’s some people's vacationing budget!
Benefits for Selling and Buying
Even though the Seattle housing market is extremely one-sided, there are benefits for both sellers and buyers.
The benefits for sellers are obvious. Bidding wars are commonplace, allowing for many sellers to get way above their asking price. Currently, 76% of homes are selling within a month.
While buyers are having difficulty in this competitive landscape, for those who are successfully closing, interest rates are incredibly low. Even if they bought above asking, some buyers may end up saving money in the long term because of how low the rates are.
If you’re a perspective buyer and Seattle resident that is putting a home purchase on hold, now is a good time to do so. Seattle's rents have dropped more than 20% since the start of the pandemic, down nearly 4% month over month. 2021 may be a great time to wait out the market, save a little extra, and then buy later on when things return to normal. If you’re saving 20% on rent every month, you’ll have a little more for your down payment when the time comes.
Speaking of returning to normal:
The Seattle Exodus...
...Is starting to slow down. Now that we are in Phase 3 we are seeing more signs that things are going back to normal - possibly as soon as mid-summer.
President Biden accomplished his goal of 100 million doses in 100 days 42 days early. His amended goal is 200 million doses, which we’re currently projected to achieve within that timeframe.
In short, now that people are beginning to see the benefits of living in a city again, there will be a reignited desire to live in one.
Another reason for the slowing exodus involves the lag in condominium sales. People are looking to live in larger spaces as opposed to one bedrooms. Such is evident by the average number of days that a condo remains on the market: 60 days, compared to 27 days for a house.
Our Seattle Housing Market Advice
Sellers - sell! If you’re looking to sell and then buy a new place, you might want to consider moving a little out of the city of Seattle itself so that you have more options. Otherwise, take the money you get from the sale and squirrel it away somewhere for a year or so and let it accumulate interest. During that year, enjoy 20% cheaper rent, and then reenter the market when real estate balances out again.
Buyers - don’t stop looking. There are still some amazing properties out there, and you never know when you’re going to luck out. The market might not be in your favor right now, but every real estate transaction is unique in its own sense. If nothing else, you’ll gain some experience in the market - especially if you’re a first-time home buyer. If you’re unable to find the right home now, you’ll have a much better idea of what you’ll want when the market balances out, and hopefully a little more saved up as well!