You may have heard lately that the market in the Seattle area is hot. Real hot. And it’s true. So, you may wonder, just how hot is it? Is it true, all the bidding wars and low inventory.
The Bad News
It’s really, really hard for buyers right now. You need nerves of steel, deep pockets, and a great strategy. Even then, there are no guarantees.
The GOOD News (Yes, There Is Some)
Interest rates are still low. That means right now, the monthly payment on a $630,00 house would be about $2,200/month (at ~3.5% interest) and with a down payment of 20%. When interest rates rise, a lift of just 1% (to 4.5%) means that monthly payment is now around $2,500/month (or ~$3,600 per year). Not insignificant, right?
Also, great news for sellers if you are moving out of town (to somewhere less hot) or downsizing. It’s been true for years, but never more than now: If you have a lot of equity or your home is paid off, there’s no reason to wait. Prices may still go up a bit, but with the lack of inventory right now, competition among buyers is definitely a boon for sellers.
So, You Want to Move Up?
That’s tougher, definitely. But not impossible. It just takes more planning and a better team than it did a few years ago. You NEED to be sure that your agent is on his or her A game (and that you’ve chosen a great one), and you need a trustworthy, responsive lender in your corner. (I have had a number of deals where ours was the only lender who actually made a phone call to the listing agent. This makes a big impression!). Things move with lightning speed in this market and hesitation or a delayed response can make all the difference. Not in a good way.
“Eh, I’ll Just Wait it Out, Till Things Settle Down”
You know the people who said that last year, or maybe 2-3 years ago? They are still waiting. In the meantime, inventory has gone down, and prices have gone up. Yes, it will stop some day. Real estate is always cyclical. But the question is: How long will it take?? It may be another 3 to 5 years. Or more. The trouble is, no one has a crystal ball.
Ask yourself this: If you wait too long, will you just be kicking yourself saying, “I should have bought back in 2016 when prices and interest rates were lower?”
Unless you are an investor, waiting isn’t going to do you any favors.
“But, This Is a Bubble, Right? Prices Will Crash Again”
I can’t predict the future, but there are some major differences between this market and the highs of 2006-2007. For one thing (and it’s a BIG difference), the prices back then were pushed up by buyers who were otherwise not qualified being provided access to funds that they couldn’t repay. (There are many books and movies about this era, so I will skip a lengthy explanation here).
Today’s market craziness is driven by 1) lots of well-qualified buyers moving into the area and 2) lots of owners who would love to move up but can’t because they bought a house within the last few years or during the bubble. There’s not enough equity to sell AND buy with the market the way it is, so they feel stuck.
So, What Does it All Mean?
People are always moving. Real estate has always and always will be a cyclical business; there are highs and lows. Hopefully, this wild swing back up to the high side will even out again soon. But in the meantime, shoot me a note with any questions about buying OR selling in today’s market. I am always happy to answer, even if you’re not making a move anytime soon.