Think of the Seattle real estate market like a big college party:
At first, there are a couple guests who show up right on time for a party. Maybe even a little early. Then, after an hour or two, things really get going.
If it’s a really hot party, more and more people stream in. Maybe even a bunch who weren’t invited. Everyone wants to be at the hot party, right? Maybe you weren’t even thinking about going out, until your friend tells you there’s a party that you just have to get to. It’s going to be EPIC, they say.
No one wants to be the one who comes late to the party, but a few just can’t get there in time so they roll in late. And then, just like that, sometime late in the night or in the wee hours of the next morning, the party is over. The first few bail, then like a tidal wave, everyone else follows until all that are left are a few stragglers passed out on the couch–and a lot of cleaning up.
That’s the Real Estate Market
For the last 5+ years in the greater Seattle/King County market and in many other “hot” areas of the country, all we’ve been hearing about is the intense seller’s market. Check out this post for example.
How difficult and brutally frustrating it is to be a buyer (or a buyer’s agent!). All the contingencies you have to waive, the hundreds of thousands of dollars needed for a down payment, and the crazy bidding wars. Losing out on 5, 6, 7, or more homes until you finally land one that’s…meh. And then you’re supposed to be happy just to have a place!
Of course, sellers have been smiling for a while now. Anyone who sold most likely did pretty well. It was true–for the most part–that sellers could pretty much get away with anything. When you have a strong upper hand, it’s easy to get buyers to jump through all kinds of hoops. It’s also much easier to set the price high because “there’s nothing else out there.”
It was the hottest party around. Until now.
Summer is Cooling
It is true July and August tend to be slow months. People are on vacation. It’s hot, and with our short Seattle summers, we all want to be outside! But the last few years, the market was still so hot we didn’t really notice much of a dip in intensity. Late summer 2018 feels different, though. Part of it is there are more sellers coming to the party. (They heard it was HOT!) These are the late-comers.
Inventory is starting to tick up, while more buyers have left the party. Listings are more commonly sitting on the market for longer than a week. (GASP!) There are several factors, but interest rate increases have left buyers with fewer affordable options. The Chinese cash buyers have slowed, taking some of the competition out. And many buyers just got plain worn-out from months or years of trying to compete.
Of course, we won’t know for sure if this is a “normal” summer slump or a real correction in the market until summer is over. But we can feel it in the air. The dynamic seems to be shifting, the party is mellowing.
For all the weary buyers who have been shut out of the party, your time is here. Knock on the door.
So, Does This Mean Home Prices Will Drop?
Well, sort of. Maybe. But “drop” isn’t really the right word. Try “mellow.” You may have heard many sellers are dropping the price on listings that have languished over the summer, which is true. But a good number of those were listings that were overpriced to begin with. Remember how I said sellers thought they could get away with just about anything because “there’s nothing else out there?” Well, now there’s more inventory to choose from, and those weary buyers are not keen to overpay, especially if they’ve had to waive all their contingencies several times already.
The true price of a property is ALWAYS going to be the price a buyer is willing to pay at that moment in time. There’s no board of directors or government agency establishing what the “price of real estate” is. If fewer people are willing or able to pay $1,000,000 for an average house in Bellevue because now interest rates have pushed that price out of range, those buyers will move on to lower-priced homes.
Does that mean the $1,000,000 home will drop in price? Maybe. Or maybe it will just sit on the market a little longer that we’ve been experiencing for the last 5 years and sell eventually for that $1,000,000 asking price. Like, maybe a more normal 30-45 days. That’s the factor that is starting to provide a little relief for many buyers, but it’s not exactly a bottom-dropping-out kind of thing like in 2009.
Dinner Party Time?
OK, I may be dating myself a little here. But it seems that now we’re moving into a more realistic moment. Like, when instead of all-night ragers fueled by cheap beer and Monarch vodka, the party is mellower. Wine and dinner with a more intimate crowd vs. a house full of people you’ve never met. I suppose both types of party have a place in our lives, but personally, I feel like it’s time to move past the crazy, wild party and on to something a bit more chill.
How about you?