Real Estate Market


It’s official King County, we’ve recovered.

The Great Recession has been replaced by what seems like the Great Inflation, as year-over-year home prices in King County increased 10.3% in June 2015. Median home prices are now pegged at $500,000, according to a recent report by the Northwest Multiple Listing Service. This new peak surpasses the previous record set in 2007, which topped out at $481,000 before correcting. The difference this time around, however, is that we have a more robust and sustainable economy and only a fraction of the inventory for sale – down 23.2% in just one year, which drops our total supply to just 1.18 months. The larger looming issue is that new construction of for-sale housing, especially in the downtown Seattle and downtown Bellevue areas, is anemic at best. Greater still is the fact that thousands of would-be buyers are likely incubating in those shiny new apartment towers.


Dean Jones, President and CEO of Realogics Sotheby’s International Realty (RSIR), a top producing brokerage firm in downtown Seattle, points to a lack of supply, rising demand and the threat of increasing interest rates, which means a reduction in homebuyer’s purchasing power lies ahead. As the market moves away from renters who seek to purchase someday, Jones says that sudden realization will prompt many into action. Concurrently, other discretional buyer profiles are also entering the market, including downsizers, second homes, student housing, investors, and the like.

“It’s creating a perfect storm,” says Jones. “As the hurricane of the Great Recession passed through Seattle between 2008 and 2012 many consumers chose to rent apartments.  We’ve been in the eye of that storm for a few years and now the winds are blowing in the other direction with equal force and influence. Buyers are back. We see this new storm wall approaching and there will be a steep climb in home prices before we find some smoother air and market stabilization.”

While it’s true that homeownership levels in the U.S. are at 25-year lows, hovering around 64%, that doesn’t explain the logic of building virtually all apartment buildings in downtown Seattle.

“Demand for new for-sale housing units hasn’t corrected by 95% but the construction of for-sale housing certainly has,” adds Jones. “That’s creating a supply and demand problem and buyers are feeling the pressure.”

According to RSIR research, only 5% of the new housing stock recently delivered or under construction is for sale. What’s going to happen when, statistically speaking, 64% or even 30% of current rental demand decides they want to buy? Will there be housing for them? Will they be able to afford it by then?

Jones and other real estate opinion leaders recently attended a round table discussion with The Puget Sound Business Journal, which published a feature section entitled “The Manhattanization of Seattle.” The think tank considered the market fundamentals, ultimately projecting that rising demand, dwindling supply and increasing home prices across Seattle will become omnipresent by mid-2015.

The buyer boom has dominated headlines in recent weeks in part because Seattle is now the top destination for techies fleeing California. Thus it’s no surprise that half of the most influential tech giants are setting up shop in the Seattle area. Many of these companies are competing for recruits by promising an enviable downtown “live, work, play” lifestyle to complement higher salaries. The other promise is wage growth, which is rising in 2015 faster than it has since 2007. Consider that Washington State witnessed annual average increases of 4.2%, but in the tech industry, it was more than 10%. Seattle is also the second best place to be a landlord and the third tightest housing market because many of these relocating workers are going to rent for a few years before buying.

It helps too that Washington has no state income tax. In fact, a study by the Bureau of Labor Statistics, the Council for Community and Economic Research and the Tax Foundation concluded that the State of Washington is the second best state in the U.S. to make a living.

More and more national media publications, including Bloomberg News, are citing the fundamentals and impact on the housing market and will likely continue to do so as we shift into a bull market for housing of all types. But as the tower cranes rise so will the cost to live in those towers.

Move over San Francisco and Vancouver, Seattle is on the map.

2015 Real Estate Predictions

2014 was an exciting year for the housing market with price appreciation and growing consumer confidence leading into a more stable and new economic normal. Let’s see what 2015 has in store with the ever-growing international trend in U.S. real estate.


2015 Predictions

1. Rates will remain within a .25% close range in the next year  – The Federal Reserve will closely monitor the economy and raise rates only when the indicators signal that the move would not adversely affect the housing market recovery. A weak economic recovery still looms and it has been said this is the weakest recovery after a recession since the Depression. People are not feeling the recovery and wages are lower. The domestic economy is still struggling to create meaningful lift off. Employment, GDP and foreign relations will all play significant roles in the continued economic recovery and future of interest rates.

2. Lending standards will loosen – First-time home buyers may be the biggest beneficiaries. Lenders have a handle on their risk and have adjusted guidelines accordingly. Fannie Mae has announced the comeback of 3% down payment programs, FHA just reduced monthly mortgage insurance, and special down payment assistance programs are affording buyers additional opportunities to buy homes.

3. Home prices will rise more slowly – The price appreciation over the past few years will allow more and more people to sell their homes next year, leading to more supply and easing inventory causing a more balanced market. The December 2013 10.8% year-over-year increase can be compared with September 2014 4.8% year-over-year change illustrating how much has changed with the past year.

4. Affordability will decline – Although price appreciation has slowed, this doesn’t mean that housing will be more affordable. Price appreciation may still outpace wages. Accordingly to Trulia, 2013 incomes rose just 1.8% in nominal terms. predicts 5%-10% decline in affordability. Rising rates can further erode affordability.

5. Millennials will overtake Gen Xers as home buyers.  Millennials have been faced with some financial challenges not faced by previous generations due to the great recession. Approximately 42% of Millennials claim they want to buy a home in the next one to five years, compared to just 31% of Generation X. The Millennials are late bloomers to the housing scene and their lack of homeownership is not because they are not interested in owning, but this generation has been delaying getting married and having kids, which are two key drivers to buying a home. They have also faced mounding student debt and a challenging permanent job market.

6. Rent increases will outpace home value growth – Seattle ranked 5th nationally for annual rent growth in 2014. Strong job growth and an increasing population combined with limited housing supply will push rents higher. Rising rents combined with low interest rates and a more stable housing market will lure more renters into the housing market.

7. Second homes make a comeback – Vacation home sales surged 29.7% and accounted for 13% of all transactions in 2013 according to A strengthened economy, affordable interest rates, and a stable real estate environment are all contributing factors to this rebound. Recent growth in the equity markets has increased wealth and confidence and given way for investors to purchase recreational properties.

8.  Landlords reign – Rising rents make owing rental property an attractive investment. Multi-family will continue to thrive and drive investors into the market due to the opportunity. Consumers forming their own households will need to rent a home as they save up for down payment.

9. Foreclosures and short sales will fall  – 2014 foreclosure filings were down 17.2% from the prior year and are expected to reach pre-recession levels. A stronger job market, price appreciation, and consumer confidence have contributed to the economic recovery and it is expected to continue in 2015.

10. Global citizenship and international real estate investment will soar – There is a growing trend of international buyers hedging their home currency and investing in United States real estate.  The strength of the US Dollar, a thriving tech community, and recent extended VISA terms will continue to attract international buyers to purchase properties for vacation and investment. Many buyers are purchasing these properties sight unseen purely based on the economic opportunity.

Information obtained from and The Seattle Times