We’ve talked alot on RCG about whether we’re in a bust or a bubble real estate market and we in the Pacific NW have been watching the rest of the country and wondering, Why all the gloom? Bankrate.com and today’s Seattle times have some explanation that can provide perspective:
Last week, Bankrate.com unveiled its forecast for the changing real estate market in the U.S. over the next few years – ten markets where housing prices and values will continue to remain strong, ten markets where appreciation will pretty much top out and the ten markets that are most likely to experience a decline. They talked to experts, studied public and private databases, analyzed market trends and examined the analysis of many others.
The ten “bubble blowers,” where appreciation should continue to grow, are:
- Boise (ID);
- El Paso (TX);
- Albuquerque (NM);
- Seattle (WA)/Portland (OR);
- Salt Lake City (UT);
- Raleigh (NC);
- Philadelphia (PA);
- Atlanta (GA);
- Little Rock (AR); and
- Cincinnati (OH)/Birmingham (AL) (they were too close to call).
Just why this is happening in the Pacific NW is the subject of this mornings Seattle Times article by Elizabeth Rhodes. She sheds light on why Seattle is breaking the national trend toward stagnating or dropping home prices. Her article notes that the average home prices have taken a steep hike in the last year and appear to be continuing the rise.
Citing the NWMLS statistics that came out on Thursday, median closed price of King County single-family homes has shot up almost 12 percent in the past year, reaching $405,000 last month (and up from $392,950 in February).
Interestingly, sales are down, but so is inventory. In March 2004, there were 7,156 homes for sale countywide. March 2005’s inventory was 5,244 homes. This March recorded a further drop, to 5,100. This is the pinch that causing the rise in prices.
At the same time, the local economy is growing and employers are adding jobs, bringing more potential buyers to the area. So the competition for available homes is strong and prices are reacting accordingly.
We agents have been experiencing this hot market all spring as we did through most of last year, possibly feeling the market fluctuations first. We’re out there in it, pricing homes to reflect the low inventory and coaching buyers for the best positioning in a multiple offer situation. I just watched the price of an Eastside condo jump $20,000 in a two week period!
I don’t think the numbers were exactly stellar. King county pending sales are down 8% heading into the Spring selling season. Inventory in Pierce, Kitsap, Snonomish, Skagit and Thurston are also all experiencing significant inventory growth and a drop in pending sales. If the suburban counties continue slowing it’s only a matter of time before people look outside King county for good bargains..
Don’t forget, though, that the commute is one of the key factors in buying a home.Buyers continue to try to buy in Monroe or Auburn and many many eventually move closer in because of the 1-1.5 hour commute. It’s always been $100,000’s cheaper in Pierce County and we haven’t seen any major exodus there.
Q ) Why does Seattle real estate keep rising ?
A) 50,000 Seattle owners of MSFT stock have been selling their shares for the past 6 years, and they have been buying nicer and larger houses with the proceeds.
Since the MSFT stock continues to fall or stay flat, these owners cut their losses and shift to the best asset in a time of inflation :
Real estate.
It’s quite simple. Since management at MSFT already has their millions or billions of dollars, they no longer care about the stock.
However, the 50,000 other owners of the stock must recoup their 40-50-60% loss of capital. (depending on when they bought MSFT ).
Note: Even MSFT repurchase of shares does not help, since their liability from stock options is still quite massive.
MSFT capital will continue to flee to Seattle real estate for the next several years, maybe longer. Indeed, this shift from an unstable stock to brick and mortar is changing the nature of wealth in our region :
The message is : Get on the train ( buy a house NOW ) before it leaves the station ! When our average house price hits $800,000 like San Francisco, appreciation will flatten out and capital will move elsewhere.
Q ) Why does Seattle real estate keep rising ?
A) 50,000 Seattle owners of MSFT stock have been selling their shares for the past 6 years, and they have been buying nicer and larger houses with the proceeds.
Since the MSFT stock continues to fall or stay flat, these owners cut their losses and shift to the best asset in a time of inflation :
Real estate.
It’s quite simple. Since management at MSFT already has their millions or billions of dollars, they no longer care about the stock.
However, the 50,000 other owners of the stock must recoup their 40-50-60% loss of capital. (depending on when they bought MSFT ).
Note: Even MSFT repurchase of shares does not help, since their liability from stock options is still quite massive.
MSFT capital will continue to flee to Seattle real estate for the next several years, maybe longer. Indeed, this shift from an unstable stock to brick and mortar is changing the nature of wealth in our region :
The message is : Get on the train ( buy a house NOW ) before it leaves the station ! When our average house price hits $800,000 like San Francisco, appreciation will flatten out and capital will move elsewhere.
I wonder, two years later, if she still thinks the same thing. While Seattle may be late to the party, NWMLS is showing a far different story for March of 2008.
Welcome to the collapsing bubble
Gary,
Hopefully Eileen will stop by, but I thought I should point out that Seattle is NOT “late to the party”. It is a completely DIFFERENT “party”.
We are not experiencing what the rest of the Country experienced for the last couple of years. We never made it to THAT party. The new downcycle is that of subprime woe and lending being tightened. That will create a new down cylce on top of the previous one for the rest of the country, and the first one for us.
What has happened since August of 2007 is not the same as what happened around the country prior to that, and no one…no one, will escape the effect of the mortgage changes, except cash markets.