Seattle Homeownership

I had dinner recently with four millennials, none of whom had any immediate plans to buy a house. Seattle's homeownership rate at 55.4% is well below the declining national average of 62.9%.

Absorption rates and demand for rental housing are very strong locally and nationally, supporting the need for more rental supply here in Seattle.

It is a good time to be looking at rental properties in Seattle.

Happy Investing!

Seattle Housing Reality

Inventory of current homes isn’t the only thing lacking in Seattle, Seattle also ranks in the top 15 nationwide for lack of buildable land.  The National Association of Home Builders says the availability of new-home lots is at a historic low.  64% of home builders reported the supply of new-home lots in their areas was “low” or “very low”.  That’s the highest percentage since the NAHB started collecting this data in 1997!

The buildable land shortage is driving up prices on new homes in and around Seattle.  Given the steep increase of new home prices along with the appreciating market for existing homes, many Seattle homeowners are finding it considerably cheaper to renovate their current home than to sell and purchase new.  This trend will only further decrease existing home sales, and pressure overall inventory of homes for sale in Seattle downward. 

To read more, check out the full article here:  http://blog.rismedia.com/2016/new-home-lots/?utm_source=newsletter&utm_medium=email&utm_campaign=eNews

Happy Investing!

Today's blog courtesy of Kyle Bergquist, Guild Mortgage

Seattle Housing Affordability

1)      In 1995, the affordability ratio was 53%

a.       Affordability was calculated by average monthly US mortgage payment in 1995/average monthly income.  Translation:  % of the average monthly income spent on a mortgage payment.

2)      In 2005, the affordability ratio was 70%...meaning homes were much less affordable in 2005 versus 1995.  BUT, thanks to some pretty lenient lending guidelines, more people were owning homes.  ICYMI, things didn’t work out with the super lenient lending guidelines

a.       NOTE:  The LEAST affordable year was 2007, when affordability was 77%!  That means in 2005, 77% of the average US monthly income was spent on a mortgage payment.  That’s CRAZY!

3)      In 2015, affordability has fallen back to 66%. 

So, homes are more affordable in 2015 than they were in 2005, but only by 4%.  So what else is going on?  Well, the largest crop of incoming homeowners are being absolutely crushed by student loans.  That’s what’s up.  Home’s may be more affordable on the metric of payment/income compared to 2005…but what that ratio doesn’t take into account is the average student loan debt.  Check out this graph below.  It doesn’t go all the way to 2015…but I think we get the point. 

In the end, homeownership is falling because the new generation of homebuyers simply can’t afford a home PLUS pay all their other debts…like student loans (car payments, cell phone bill, health insurance, credit card debt…you name it, life is considerably more expensive for the millennials than it was for generations previous). 

   

Stats and Graphs below are for Seattle proper

On to Interest Rates…

Weekly Interest Rate Recap for the week ending 2/12/16

The week started off with rates continuing their fall.  Right now we’re experiencing a very anxious worldwide stock market…the data hasn’t come out yet to support everyone’s worst fears, BUT the data is pointing towards everyone’s worst fears.  As oil prices fall, more and more oil companies are forced into bankruptcy and layoffs; European banks are getting hammered on fears over the ramifications of negative interest rates; Japan’s markets are getting crushed on GDP concerns; and lastly China…Just…China.  Enough said there. 

On Wednesday, Janet Yellen spoke and gave her testimony to the House Committee on Financial Services.  It was a different tone than the last few, but that shouldn’t be a surprise with all that’s going on in the world markets.  Instead of addressing whether or not the Fed would continue to raise interest rates throughout the year, she stated that they are not prepared to lower the rate.  “There is always a risk of a recession…and global financial developments could produce a slowing in the economy…[but] I don’t think it is going to be necessary to cut rates.”

Mortgage interest rates have been steadily falling for the last month+ as a flight to safety has investors selling out of world stock markets and purchasing US Mortgage Bonds.  However, a little bit of good news broke into the market on Friday the 12^th.  Not only were there rumors that OPEC might actually cut world oil production (which would help to raise oil prices); but retail sales for January were slightly above estimates, showing that at least on the home front the US Economy is resilient in the face of world market turmoil.  This news caused the mortgage bond to reverse trend, and it looks like we will end the week with interest rates ticking slightly higher.

Happy Investing!

Seattle Housing Trends

The Sunday Seattle Times had a number of interesting stats on the local and national housing markets. The Times reported that nationally, total home equity has grown by more than $2 trillion in the last year to $9.1 trillion, only 10% below the $10 trillion it hit in 2007.

87% of Seattle homeowners have positive home equity. List prices in Seattle are up nearly 18 percent over last year. Housing inventory is still tight, sellers are getting multiple bid offers on their listings, and interest rates are inching upwards.

And for those buyers who waited until this year to buy? According to the KCM Blog, if you were buying a $200,000 house last year at 3.5% interest, your mortgage principal and interest payments would have been $898.09. That same house today would cost $220,000 to purchase, and at 4.5% interest, your monthly payment would be $1114.71 - 24% higher in monthly payments!

Yet 4.5% mortgage interest is still fairly low by historical standards, and housing prices in many areas are below their historic high values. I believe the Seattle market has tilted to a seller's market, and that now is a good time for homeowners to consider selling their houses.

For a free market analysis on your home, please contact me at HomeLandInvestment@gmail.com or 425.270.7292.

Happy Investing!