Housing Market Slowdown

Housing market slowdown expected, but prices in most areas are still rising
KIRKLAND, Washington (October 5, 2015) – Scarce inventory, new rules for mortgage closings and affordability concerns will likely slow home sales around Western Washington during the remaining months of 2015 and into early 2016, according to spokespersons from Northwest Multiple Listing Service.

The latest statistics from the MLS show a double-digit drop in inventory, a double-digit jump in closed sales, and a near double-digit increase in prices from a year ago, prompting some industry leaders to consider the trends aren’t sustainable.

Despite an expected slowdown, closed sales through the first nine months of this year are running 16.6 percent ahead of the same period a year ago, with median prices up 9.2 percent.

The MLS report for September shows pending sales continue to outnumber new listings, resulting in inventory declines in most of the 23 counties in its service area. That imbalance leads to rising prices.

Northwest MLS members reported 9,574 pending sales (mutually accepted offers) in September for a 7.9 percent increase from the year-ago figure of 8,875.

Compared to the system-wide gain, prices rose at more modest rates in three of the four counties in the Puget Sound region, with Pierce County being the exception. Year-over-year prices there jumped 11 percent. Prices in Kitsap County were up only 4 percent from a year ago; in King County the gain was about 4.8 percent and in Snohomish County it was about 7.5 percent.

Single family homes in King County commanded the highest median price at $490,250, up 6.6 percent from the year-ago figure of $460,000, but down from June’s high of $500,000.

For September, the MLS reported 2.39 months of supply system-wide, about the same as the figure for August. The shortages were most acute in King County, with about 1.4 months of supply, and Snohomish County, with about 1.9 of a balanced market.

What does the future hold for the Seattle housing market, if this pace is not sustainable? Will Sellers be willing to put more inventory on the market as housing prices increase? Will Buyers decide to keep renting for now? What happens to the market as interest rates are expected to rise?

What do you think, dear Readers?

Happy Investing!

Seattle's Innovation District

Russell Investments, Brooks Sports, and Weyerhaeuser have each recently made the decision to relocate corporate headquarters to downtown Seattle, in order to attract top talent. Jones Land LaSalle Inc recently named the Seattle-Bellevue market as number 2 in the country for high-tech growth, behind only the San Francisco area. Seattle is quickly forming a nucleus downtown as an "innovation district," attracting jobs, employment, and economic growth.

The Brookings Institute defines "innovation districts" as 'geographic areas where leading-edge anchor institutions and companies cluster and connect with start-ups, business incubators and accelerators. They are also physically compact, transit-accessible, and technically-wired and offer mixed-use housing, office, and retail."

According to Trulia, Seattle is also one of the 10 Hottest Markets for Millennials:
“Seattle’s got a lot more than just great coffee. It’s a major hub for technology, green industries, art, and culture that many millennials are looking for. It’s also a great place for nature and fitness buffs, with lots of parks, forests and year-round outdoor fun.”

Talent follows economic growth and opportunity, which bodes well for the residential and commercial real estate markets in Seattle. It makes sense for a developer like me to look at market rate residential housing located at a transit stop in the City of Seattle, as Van Gogh Studio Lofts has proposed in Rainier Beach. I may not have a crystal ball, but I certainly like what I am hearing about Seattle as a top market in with to invest your real estate dollars!

Happy Investing!


Photo courtesy of Shivani Patel

Seattle Rent Increases

According to Tom Cain of Apartment Insights Washington, rents are up In the King County metro area by 7.9% over the past year, and now average $1284 per unit or $1.53 per square foot. The highest rental rates are in downtown Seattle at $2.43/sf. Class C properties have the lowest vacancy rate (at 3.7%) and rent for an average of $908.

Vacancy rates are also down on average to 4.17%. Ballard has a relatively high vacancy rate of 8.6%, due to the overbuilding in this submarket. By the time the units under construction there are completed, it will have quadrupled the inventory of 50+ unit complexes in the past six years.

There are currently 16,135 units of new construction in the metro area, up 16.6% from a year ago. 59% of these units are in the City of Seattle.

Rents are still forecast to increase 4.5%-5.5% over the next several years, according to Reis. Cain finds it remarkable that the market continues to strengthen in the face of massive amounts of new units. The underlying strength of the economy is what contributes to this growth. According to the US Census, Seattle grew faster than any other major American city in the past year. Seattle also has the second best rate of small business creation in the country, according to recent data.

Had all of these new units not been built, then Seattle rents would be even higher. The rental market’s performance in the past year has been stellar, thanks to developers and lenders who have provided apartments to help meet the demand.

Please message me at HomeLandInvestment@gmail.com if you are interested in investing in income properties in Seattle.

Happy Investing!

SE Seattle Bus Tour - Reviews

Here are a few more reviews of last week's bus tour of SE Seattle, sponsored by REAPS:

"I believe it was very valuable and well organized. I only wish I had entered this market earlier, but have full intentions of going there now! Thank you so much Wendy!"

 

--Steve Erland, REAPS investor and ferry boat captain

" It was good meeting you. Great job on the event, the tour was well done and worthwhile. I would recommend it to others.

The only thing I might change is to offer more in the way of networking after the event. For example, a lunch opportunity in one of the Columbia City restaurants would have been lovely."

--Ann Sammon, real estate broker

 

"I really liked it. Got to get the story about the area for both general interest and for investing purposes. The presenters were very valuable to have ready to explain and give some historical perspectives and address concerns (eg small guys vs institution), incentives. Not sure if every year would make sense. I would get a bit more from a repeated tour but would want more “new” information.

I would recommend it for folks to learn about the market and the programs/incentives available. Maybe more time afterwards to network and meet with the various presenters afterwards. I would present less upfront – incorporate while on bus and then chat afterwards. We will have seen what presenters are referring to after the tour. The upfront intro lengths were good – not too short but not excessive that gets everyone itching to go. Thanks for bringing refreshments.

The other thought I had was whether this is even appropriate for beginner real estate investors. There is so much to start in RE investing; I’d put development at least a rung or two up the ladder. Not to be exclusive for the sake of exclusivity but to help raise the level of conversation of the group. There were definitely seasoned people but also some very new people to RE. But if they want to  start a business (nonRE), this is very applicable."

--Angel Prentiss, REAPS investor