And this time the crisis is all about one thing: supply
Western Washington and specifically (King County) is in the midst of a housing crisis. But the affordable housing crisis isn't just hitting Seattle. It's spreading to outlying areas, where fewer and fewer people can now afford. This is largely the result of lopsided supply and demand. According to recent real estate reports, housing markets across King County are still suffering from a lack of inventory. There are plenty of buyers entering the market, but not enough properties to go around. Last year King County prices soared over 11% on average with some areas nearing 30% appreciation in just 1 year.
So what can home buyers expect from the King County, Washington real estate market in 2018? High competition, a continuing tightening of supply, and rising prices. That’s the general consensus among housing economists and analysts who have offered their forecasts for the King County real estate market into 2018.
In response many cities are enacting building moratoriums, but this is the wrong direction for us to take. While the goal of ensuring affordable housing is a noble one this is BAD housing policy that not only impacts market-rate housing but will also hurt affordable housing.
New market-rate housing also pays for affordable housing. Stopping construction will only exacerbate the problem. Building housing of all kinds improves affordability, reduces displacement and decreases the demand on our existing housing stock.
We need to build more housing and not less if we’re going to continue to address the housing crisis issue.
Supply and demand is fundamental
On the supply side, building policy in the Seattle area makes new construction expensive, time-consuming, complex, and in some places thanks to restrictive zoning and height restrictions, downright impossible.
On the demand side, the Seattle-area economy is currently booming, with high-paying tech jobs leading the way. People are moving to King County in record numbers. While the trend toward rising home values is most pronounced within King County and the Seattle metro area, it’s occurring statewide as well. In fact, the real estate market in Washington set records during 2017 where it lead the nation in appreciation for 12 consecutive months. (Article Here)
KIRKLAND, Washington (February 5, 2018) - "The Seattle area real estate market hasn't skipped a beat with pent-up demand from buyers is stronger than ever," remarked broker John Deely in reacting to the latest statistics from Northwest Multiple Listing Service. The report on January activity shows a slight year-over-year gain in pending sales, a double-digit increase in prices, and continued shortages of inventory.
"Sellers that have put their properties on the market early this year have less competition and are seeing multiple offers. Open houses are experiencing heavy traffic with hundreds of potential buyers attending," reported Deely.
For the MLS overall, last month's 7,820 pending sales marked a slight increase compared to January 2017 when members reported 7,724 mutually accepted offers, a gain in of 1.24 percent. Not all areas reported increases. Of 23 counties served by Northwest MLS, eight counties, including three in the Puget Sound region (King, Kitsap and Snohomish), reported fewer pending sales than a year ago. In King County, where acute inventory shortages exist in many neighborhoods, pending sales dropped 7.5 percent and closings dropped 18.5 percent.
We looked at the data on thousands of offers agents for The Cascade Team wrote and received in the last two years to see how the strategies we track affected buyers’ odds of winning a bidding war: (See Full Tips and Report HERE)
As of right now we are receiving a multiple-offer on everything, in a virtually sold out market. In all price ranges close to job centers and in the more affordable and mid-price ranges in surrounding counties, sellers are receiving premium pricing and home buyers are pouncing on each new listing.
Within the four-county Puget Sound region, King County had the largest year-over-year gain. Prices for homes and condos combined shot up 20.3 percent in that county, rising from $475,000 to $571,250. Pierce County reported a jump of 15 percent, followed by Snohomish County at about 12.2 percent and Kitsap County at nearly 3.5 percent.
Rental prices are also skyrocketing around the area and not just in Seattle and Bellevue. Reports put Tacoma and Olympia on lists of top cities for increased rents during 2017. "Investors, because rents are high, compete daily with home buyers, and they often win the deal in the lower priced homes. Because they are buying all cash, they consistently beat out buyers who have to get loans."
Builders are trying to respond to the pent-up demand, according to Moorhead. Seattle and the Eastside are seeing a growing number of infill homes in the core areas, some on lots as small as 3,000 square feet, he said. Builders are doing smaller releases and setting offer review dates, and then determine price ranges for the next phase.
"What used to be an affordable way to build homes has now become more mainstream for both smaller and larger builders," Moorhead stated, adding, "Historically, infill homes did not get the same return as homes built in large community plats, but now they're realizing similar price points."
Supply and demand is like global warming. It’s real whether you believe in it or not.
There is an incredible dearth in the supply of housing compared to the high demand leading to high housing costs. Yet a moratorium is a very purposeful manipulation of the supply curve in the wrong direction. While the housing market is more complicated than supply and demand alone. The complex nature of the housing market and the real estate development industry does not negate the fundamental role supply and demand plays. Those calling for a moratorium while simultaneously insisting it would not have negative effects either deny this fundamental role of supply and demand akin to denying the realities of global warming, or are simply ignoring it for political and rhetorical points at the expense of the very bloc of residents they purport to protect.
Concern is understandable, but bad policy is not
No one denies that housing prices are high—so high in fact that they are out of reach of the middle-class. We can all agree that we need to find ways to ensure a reliable stock of housing is available to everyone, but supply and demand is a fundamental part of our market economy. Whether you want to believe in supply and demand or not, its effects are pervasive across all sectors. Housing is no exception. A moratorium only ensures scarcity, making real estate investment that much more lucrative, continuing to lead to increased prices and likely even more condo conversions and evictions.
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