Recovery Slows, but Remains Steady
It may feel as if the housing recovery is slowing to certain finality, but its overall health is still improving. Existing home sales have been declining monthly and new homes starts have fallen flat – but year over year, the local housing market is still showing growth. As we see areawide increases in price cuts and accessibility begins to improve, the market will continue to strengthen as affordability constraints ease up, even as mortgage rates continue to rise.
Surges in both mortgage rates and demand, coupled with a lack of supply, brought steady hikes in sale prices in 2018. While 2019 will continue to bring healthy growth, home value increases will stabilize, making home buying both more affordable and accessible.
For listing agents, this presents a prime opportunity to communicate a sense of urgency for homeowners on the fence about listing. By the end of 2019, the housing market is expected to shift to a buyer’s market. Price cuts will increase, as days on market increase.
For buyers, the shift will signal more favorable conditions for affordability and negotiating price and contingencies. Reaching out to buyer leads who’ve struggled with a lack of inventory or affordability in hot markets early, as the market starts to shift, will show you’ve got your finger on the pulse of the local housing market and position you as a solid resource as they navigate their real estate journey.
With Seattle’s home prices already falling, recent reports see that trend continuing into the new year.
According to Redfin, a handful of major housing markets that saw prices go up in 2018 will “experience the biggest slowdowns in price growth in the first half of 2019.”
Such markets include Seattle, San Francisco, Portland, San Diego, Los Angeles, Denver, and Honolulu, where Redfin expects “demand to cool the most.”
That seems to fall in line with data published in a recent report from the Northwest Multiple Listing Service. In the report, the NMLS predicted less of a free-fall in home prices, and more of a balancing of rates.
“I expect this trend (to a more balance market) to continue into 2019, which will cause appreciation to slow somewhat, while giving buyers more options,” OB Jacobi, president of Windermere Real Estate, said in the report.
“This does not mean the real estate sky is falling, rather it’s a much-needed shift towards a more sustainable, balanced market.” says Lennox Scott of John L Scott Real Estate Services.
If you’re looking to take advantage of that right at the beginning of the new year, though, you might want to pump the brakes. The report predicts a sellers’ market to start 2019, as the backlog of holiday home-buyers begin searching in January.
As for that surge, it could very well last past the beginning of the new year before things eventually even out.
Here is a look at what we predict for 2019. A slight Sellers market for the first couple of month, moving to a balanced market early spring, and a serious possibility of a BUYERS Market starting in May where we will see a flood of inventory, price drops and closed sales under actual list price.
The market of the past 4 years was unsustainable.
By MAY 2019 we expect the HIGHEST Housing Inventory Levels in 5 Years!
“We will experience a strong/surge housing market in the spring, which will taper off to a strong market for the remainder of 2019,” said J. Lennox Scott, John L. Scott Real Estate CEO, in the report.
This aligns with falling home prices in late-2018 across the Seattle area.
King County single-family home prices surged by nearly 136 percent since 2012, reaching a new median of $726,000 in May of 2018. But since then, in just six months, prices have retreated 11.3 percent, to $644,000 marking the largest drop of any major metro area in the U.S.
This seems to build on what the NMLS report said as well — in it, Windermere President OB Jacobi noted that the end of 2018 brought us “closer to a more balanced market.”
“We are not in a buyer’s market yet, however we’re heading toward a more stabilizing market,” Gardner agreed.
Without a true buyer’s market, many are deciding to adopt the “wait and see” approach as they house-hunt.
“A lot of home buyers now are saying ‘perhaps we’re just going to wait, perhaps there’ll be more choice next year, [or] perhaps prices will continue to soften,'” said Gardner.
The total number of homes listed for sale has roughly doubled in the past year and is at its highest point since the market was bottoming out in 2011. Yet people are putting their homes up for sale at the same rate as in the past.
The difference now is that homes are sitting unsold for about three times longer than in the past because there are fewer buyers out there competing. Total sales have dropped more than 20 percent compared to the past couple of years.
Come spring 2019, we expect prices to be up at a far more modest rates than in past years. More in the 5.5% range which is in line with that is considered sustainable appreciation by The National Association of Realtors.
As for the days in the Seattle housing market where dozens of offers would come in on a single house within days? Those might actually be numbered. What we saw over the course of the last couple years, (where) a home came on the market on a Sunday, and there were 25 offers by the Wednesday, has all but gone away.
Additionally rising interest rates and declining foreign buyers have also affected the local real estate market:
Mortgage interest rates, which often get a lot less attention than home prices but can have a significant impact on affordability for the three-fourths of local homebuyers who take out a mortgage. After years of historically low interest rates, banks are signaling increases are ahead, though they have taken a small step back in recent weeks. Increases have very serious implications for what house hunters can afford to buy.
Brokers and buyers have reported a noticeable dip in competition from foreign buyers, who have an outsized presence in the market since they often come in with large, all-cash offers that can be impossible to compete against.
There are reports that tighter capital controls in China — where the most foreign buyers here come from — have made it harder for residents there to get their money out of the country, as well as surveys showing general declining interest in U.S. real estate from buyers in China.
Juwai.com, a search engine for Chinese buyers looking for homes in the United States, says search inquiries from mainland China to the Seattle area have dropped about 40 to 45 percent in the past six months compared to the same period last year.
The next year for the Northwest’s housing market will be one to watch, as prices continue to settle into the more balanced to buyers market.