I Don’t Have A Crystal Ball But…
I think we all know where Seattle real estate is heading in 2018. Before I go on record with my predictions for this year, let’s look back at how I got it WRONG last year:
In my January 2017 email newsletter, I predicted by January 1st, 2018, our median sales price would be $650,000. It was actually $701,875. I missed it by a landslide…
Wrong in 2016. Wrong in 2017. The growth in prices we have seen greatly exceeded my expectations. My prediction of 9-10% price increases was wrong. We saw 14% price increases for single family homes and 16% price increases for condos in 2017.
Now Let’s Talk About 2018:
- I expect single family homes to appreciate 11%, with the median sales price at the end of December to be $775,000.
- I expect condos to appreciate 14%, with the median sales price at the end of December to be $550,000.
How I came to that conclusion:
As much as I would LOVE for prices to stagnate (but not drop), so that more buyers could get into our real estate market, I don’t think it’s possible for these 5 reasons:
- There is no bad money. Outside of hard money loans (which have always existed), there is no wide river of easy and bad loans. Credit restrictions are still tight and very few no or low-money down-payment options are widely available. Bad loans were a primary driving factor of our last market correction.
- We have jobs. Good jobs. LOTS of them. And as much as we like to rely on and blame Amazon for everything, they are not our only source of good jobs. We have aerospace, biotech research, Microsoft, other established as well as growing tech companies and a large military population. Our population is increasing at TWICE the national average, and a lot of that has to do with our availability of good jobs.
- Home Owners Aren’t Moving. Since we can’t build nearly as many new homes as we need (see below), we need people to sell their existing homes. Home owners are really hesitant to sell because even though they will get top dollar for their home, they fear facing the market as a buyer. Our turnover rate has dropped drastically in the last few years, and now when we need more resale homes in a desperate way, owners aren’t selling. The ultra-low interest rates of the past few years also cause potential sellers to reconsider selling, since not only will they be buying at a higher price point, but they will also likely have a higher interest rate than they currently do.
- Zoning and construction policies that hinder new construction and increased density. Most of our neighborhoods are already fairly dense, and there are no large chunks of land in which to build sub-developments. Our current zoning and construction rules make it very prohibitive for builders to build, and although we are making strides in the right direction, current zoning makes it really difficult to build more housing units on existing lots. Without more homes on our cities existing lots, we will not be able to satisfy the backlog of buyer demand.
- Hard geographic boundaries that limit growth. Take a look at a map of Seattle:
We are surrounded by water. We have lakes and mountains and the Puget Sound. We don’t have much space to sprawl out into suburbia, and we certainly don’t have the transit and freeway infrastructure to support a decent commute to homes outside the city limits.
Hunker down Seattle. It is going to be another year of really limited inventory, rapidly increasing prices, and a frenzy on the homes that actually do come up for sale. Come 2019, we can look back on this and see how wrong I was…. I think I nailed it this year, for the record :).