If you heard recently, Punxsutawney Phil predicted 6 more weeks of winter weather in the U.S. However, that prediction has certainly NOT slowed down the heat of the real estate market! House hunters are still out in droves, even more than last year, snapping up the scraps of inventory. My prediction, based on lots of reading (mostly Puget Sound Business Journal and Seattle Times articles): We are looking at at least 3 to 4 more years of this.
Think it’s all just a bunch of media hype? Let’s take a look at the chart below for Mercer Island and Bellevue (east/west of I-405). Remember, a “healthy” market has around 5-6 months’ supply of homes for sale.
Also, keep in mind the median price in Mercer Island now hovers around $1.3M, similar for West Bellevue, much higher than the $530k King County average. Take a spin through the King County Real Estate Market Update, January 2017 for higher-level view of our local market, and take note of the insanely low .5 months supply of inventory.
Put On Your Crash Helmets and Strap In!
Ouch! Buyers are certainly feeling the pain these days. I’m not going to lie, it’s HARD to be a buyer. Harder than last year for sure. But probably not as bad as it will get before things get better.
Remember, supply and demand. Amazon is still growing. Facebook is here, and growing. So is Google, Pinterest, and other tech companies. Those other buyers aren’t going to just go away. They are moving here in droves, and many thousands more will come before the market shifts again. (Which it always does; it’s just a matter of how long the correction takes).
It Bears Repeating
I’ve said it before and I’ll say it again (and again): if you need to move, move. DO NOT WAIT FOR PRICES TO GO DOWN! This ain’t 2008, and it’s not bubble. So you say, “Well, I’m OK where I’m at. I’ll just ride it out and wait until things are not so competitive.” That’s fine…so long as you keep saving up. Because that house you’re not quite ready to move to yet will keep appreciating, and interest rates will rise. Even when the market cools off, it’s not going to crash and burn like it did nearly a decade a go. You’ll need a bigger pile of cash to move when the time comes.
What Can We Do?
Dear, weary buyers, here are the best things you can do to weather this market:
- Be prepared to lose, and lose bunch. The average buyer these days makes an offer on (and often shells out for a pre-inspection) FIVE homes before landing one. (And yes, I have found that to be true from personal experience).
- Have your money ready to go, then keep adding to the stash of cash. It will take time. Way longer than you thought. So while you’re at it, may as well keep growing that nut. Every little bit you can add to a down payment or earnest money can help in the inevitable multiple-offer situation.
- Get your letters ready. You NEED to have a pre-approval letter ready from a reputable lender. Local is best for many reasons I wont’ get into here, but I know some good ones. Better yet, get a “conditional approval.” Ask your lender for details, but basically this is the next best thing to a cash offer. It may also help to have a letter to the seller handy in some circumstances. If you are looking at similar properties in certain neighborhoods, there is no harm in dusting off a letter from an unsuccessful offer, tweaking a bit, and submitting with your next offer!
- Hang on tight, and adjust your expectations. In a more typical market, most buyers will check out say, 8 to 10 homes. One will be “just right”, or at least right enough. Offer written, some negotiation, offer accepted. These days, it goes more like this: Look at 10, 20, 30+ homes. Pick one you “love.” Lose it. Rinse. Repeat. And then again, several more times. You will love, and you will lose, and it will hurt. But like human relationships, we dust ourselves off and start again, hopefully a little sharper and wiser for the effort.
Any Sellers Out There?
Good! Thanks for reading. Here are some tips for you:
- List your house at a reasonable, competitive price. (Everyone wants a deal!)
- Don’t be a jerk just because it’s an extreme sellers’ market. You don’t have to bend buyers over a barrel. They are already there.
- Cash out, and then…
- Tell ANYONE you know who is thinking of moving out of the Seattle area or is downsizing to sell now. We need the inventory, thanks!!!
It’s a tough time, for sure. But it will end. Someday. Until then, be ready to rock & roll. And contact me if you have questions, want to chat about Seattle area homes for sale, or just want a coffee. I’ll buy. 🙂