RECAP AND OUTLOOK: Q2 2014
By Mike Gain, President and CEO Berkshire Hathaway HomeServices
Seattle is the fastest growing big city in the U.S. We’ve come a long way from the, Will the last person leaving Seattle—Turn out the lights, of the early 70’s. Last year Seattle grew faster than any other major American city according to estimates just released by the Census Bureau. Seattle grew by 2.8%—the highest rate among the 50 most populous U.S. Cities. Seattle added nearly 18,000 residents in a one year period, bringing our population to 652,000. So what’s the reason for Seattle’s population boom? The Census Bureau offers no explanation, but surely the city’s healthy economy is responsible for attracting new residents. According to Seattle’s Office of Economic Development, the city added nearly 15,000 new jobs between 2012 and 2013. The new census data also shows the Seattle-Tacoma-Bellevue metropolitan area added 57,000 people and remains the nation’s 15th largest metro area, with 3.61 million residents. The State of Washington’s population grew by 76,000 and is now estimated at 6.97 million.
A growing economy, pent up demand, competitive mortgage rates and affordable home prices will keep housing on an upward trajectory. Consumer confidence is back to pre-recession levels and they are becoming increasingly positive over their perception of the real estate market. RISMedia’s recent survey shows 77% of respondents had a favorable view of the housing market, a 12 point increase compared to a year earlier. Millennials were the most optimistic group, with 85% feeling confident about buying real estate. This is a particularly good sign as it shows first-time buyers and younger buyers and sellers are thinking about moving this summer. Results of the survey also showed a 6% increase of people becoming more committed towards buying or selling property now. The real estate market is improving every day. It’s time for buyers and sellers to get off the sidelines.
Locally, our home prices continue their upward climb and the trend is expected to persist. The only actual problem we are experiencing in real estate in the greater Seattle marketplace is lack of inventory. We just don’t have enough supply of homes for sale in the desirable neighborhoods to satisfy the demand. We desperately need good quality inventory. Although our number of active listings increased in May, it is just not the right inventory, at the right prices and locations, to satisfy our purchasers’ wants and needs. We have a less than a two-month supply of housing. A normal or healthy supply locally is a five to six month supply. We are experiencing more multiple offer situations than I have experienced in all of my 37 years of practicing real estate in this marketplace. For every purchaser that gets a home, we have many that lose out. This is a very difficult market for purchasers, our agents, and our brokers, to work in. If we had enough inventory to handle the demand, our pending and sold numbers would be greatly increased. We can only sell what is available and it must satisfy our purchasers’ desires.
There are many reasons potential sellers should consider selling now. Locally the summer selling season can be the busiest time of the year. This year, with the lack of inventory, it is probably the best market sellers will ever experience. There is less competition now so sellers should not wait to put their homes on the market. Interest rates are still very low and will continue to rise. Now is a great time for move-up sellers/buyers who can sell their home quickly today and secure another home at today’s prices and at today’s low interest rates.
The majority of homeowners have experienced significant gains in their equity over the past two years. They should now consider putting them on the market. Sellers who took their homes off the market in the down-turn can now get the prices they were wanting when they made their decisions to rent out rather than sell. The prices are back.
Renters should buy now. Locally, homeownership remains cheaper than renting in most situations. Typically the mortgage payment will be less than the rent payment on similar properties. Homeownership is a self-imposed savings plan, which through time, leads to greater wealth accumulation as compared to similar renters. It creates extra wealth mainly through its ability to force owners to save and the appreciation that is usually experienced. In short, buying a home just makes sense. Looking at the financial advantages of homeownership from every angle reveals that it is a much better investment than renting.