Blog - Seattle Real Estate Agents - Seattle Homes for sale in WA

The Current Real Estate Market Today in Seattle (as of June 2009)

Wow has our market changed since the summer of 2007 or what?

We have had a very strong sellers market in Seattle/Bellevue from 1995 to the end of 2006 with a few short price corrections scattered in.  Some reports in the Seattle Times had prices increase in Seattle an average of 21% in 1998 and another 12% in the spring of 1999.  2000 started out comparatively strong, and then the market started to soften in the spring/summer of 2000.  Prices actually fell by about 5% to 6% between the winter of 2000 and the summer of 2001, but then the market had another growth period from the fall of 2001 to the end of 2002 but only for properties under $500,000.  From 2003 through 2006 prices increased again by about 10% to 15% a year.  Then at the beginning of 2007 when home prices started falling in most of the cities across the country Seattle remained strong until the summer of 2007, and 2008 was a very different story indeed.

2007 started off stronger than most people thought it would and while actual numbers of homes sold decreased, prices continued to rise or hold in the core neighborhoods of Seattle and Bellevue.  But by September 2007 however, the Seattle Real Estate market changed drastically.  Inventories more than doubled, marketing times tripled, and home prices started falling.  It became very difficult for buyers to obtain financing and the national housing crisis that started in early 2006 finally hit Seattle.  We started seeing a huge increase in home foreclosures however a majority of these were in the outlining areas, like Tacoma and Everett.  The market in the city had changed and changed quickly, but a huge part of this was psychological and lenders not lending money.  People became scared to buy homes and for good reason.  We estimate that we now had about 60% to 70% fewer buyers in the market and consequently home prices started falling but by how much depended on the neighborhood.  The close in neighborhoods like Magnolia, Queen Anne, Wallingford, Ballard, Green Lake, Bryant and Ravenna were falling but at a much slower rate than neighborhoods farther out.  The farther out from the core you went the faster home prices were falling.  We were in the first real Buyers market since the early 1990's and no one could predict where it was all heading.  Real fear that turned to panic had set in across the country and finally in Seattle as well.

2008 was a very difficult year for the US economy and Seattle's economy and the housing market.  By most estimates home sales were down by about 60%, inventories were up by about 3 to 4 times depending on where you were and prices kept falling every month.  Some people thought that we were at or very near the bottom of the market by the end of 2008 however.  We thought that might be the case, but there were still too many economic problems and too much uncertainty to be 100% sure we were at the bottom.  But what we did know by the end of 2008 was that we were starting to see some excellent values out there.  You actually never know if you are at the bottom of any market until you are well past it however, and as of the end of May 2009 there are some very good signs that Seattle was at or very close to the bottom.  Having said that however, our market is not going to see any rapid increase in home prices for at least a few years.  At best we believe that home prices will firm up and stay pretty flat for a couple of years or until the economic health of the country and region improves.  What we are sure of is that there are wonderful buying opportunities right now in the Seattle real estate market in all price ranges.  In the last few months we have been helping clients buy homes that a year ago would have sold for $1,100,000 for $850,000, another home that would have sold for $695,000 we got for $550,000 and two new town homes that would have sold for $449,000 six months ago we just got offers accepted at $360,000 with all the buyer’s closing costs paid by the lender and the builder.  If you have a job, good credit, and some cash in the bank this could be one of the best times to buy that we have ever seen.  Mortgage rates are at historic lows, but now lenders are making sure that the buyer actually qualifies for the loan.  Lenders are back to the old qualification ratios they had in the 1970’s and 1980’s.  The zero down loans or 80/20 loans are not available anymore, but depending on the loan amount and the buyer’s credit scores, rates can be found for under 5% on a 30 year fixed rate loan right now.  FHA has also made a resurgence, and the typical cumbersome FHA policies have been greatly streamlined and we have closed FHA deals in 30 -45 days now.  With a qualifying FHA loan you can put down as little as 3 ½ percent of the purchase price.  And with the new $8000.00 tax credit for first time homebuyers, the State of Washington is working on a bill to allow that $8000.00 to be used as part of your down payment.

During a “normal” market, the Seattle real estate market usually has “strong” periods and “slow” periods.  Having a good understanding of the market cycles is somewhat important for buyers today as well.  Spring and then again the Fall has historically been the strongest real estate months in Seattle and late Summer and Winter are usually the slowest periods.  Even today in our current market these cycles are still somewhat present.  This Spring sales activity has picked up but we may very well see late July and August slow down with the Fall picking up again.  There are still just too many other factors that may come into play that may affect the market either way.  We talk with several escrow companies on a regular basis to get a read on their business volume, which gives us a much broader view of the overall Seattle/Bellevue market.  Their business is starting to pick back up across the board right now.  We hold open houses on a regular basis to get a feel for buyer activity and buyer attitude.  Last September and October (2008) there was very little traffic at an open house and even the few potential buyers were too fearful of the market to actually buy then.  They were renting or renewing their lease for another year.  Now we are seeing a significant increase in traffic at open houses and we are seeing many more buyers out there than just 5 months ago with a more positive attitude.  The fear is now giving way to some optimism finally, which usually marks the beginning of a turnaround, but this will be a slow one with some bumps along the way.  We now believe that we are at or very near the bottom of the housing market in Seattle, mainly the close in neighborhoods.  Yet, there are still many over priced homes on the market.  Most of the homes that have sold recently are the ones that are priced really well, usually under all their competition.  If a home is really over priced and some unsuspecting buyers with their inexperienced agent doesn’t buy it in the first week or two, then that home may sit on the market for several months with several price reductions and will usually sell for less than it would have if it were priced correctly to begin with.  If it’s a good home then this is the time to look at buying it and we usually get most of these homes for our clients at a price well below even the current market.  This is what happened to that $1,100,000 we sold, it was way over priced for the market and most likely if they had priced it at $950,000 it would have sold close to that (remember we got it for $850,000).  An over priced listing can be a buyer’s best friend if you are patient and know how to do it!

Seattle is still one of the fastest growing cities in the country with one of the strongest and diverse economies anywhere.  In the Spring of 1999, Forbes Magazine rated Seattle as the country’s most desirable place to live.  Seattle continues to rank in the top 10 best cities to live in every year since.  It has been predicted that the population of the Seattle area will grow by another 1 million by the year 2020.  Will escalating property values ever stop?  Not over the long run, but we just won’t see those double digit appreciation year after year.  We have a very strong and diverse business base.  Seattle is much more than Boeing and Microsoft today.  Our downtown area is still growing and very vibrant.  And because of the traffic and commuting problems we have, we believe that the close-in Seattle neighborhoods will continue to be the most desirable, and these neighborhoods should continue to see the greatest appreciation over time.  In late 2008 Forbes predicted that Seattle/Bellevue would lead the country for the fastest turn around in the housing market.

So why do we think we are entering a great time to buy in Seattle/Bellevue?

Any investment consideration, whether it’s real estate, gold, or fine art follows a pretty predictable cycle.  Usually this cycle starts with “Optimism”, the time in which many people are excited about buying, in our case a home.  We have seen many periods of Optimism over the past 20 years.  During this Optimistic Stage the market is strong, people purchase quickly, homes increase in value and soon that Optimism turns to Excitement which speeds everything up even more and then that turns to the Euphoria Stage.  We started in our last “Optimism cycle” in 2000 and by 2004 we were in the Euphoria stage and that lasted until late 2006.  Then in early 2007 as the housing market started to correct the Euphoria Stage was followed by the Denial Stage, which started in Seattle in early 2007.  As prices start to fall buyers and sellers go into the Denial Stage and tell themselves this is only short lived and home values will keep going back up soon.  For several months in early 2007 the number of homes being sold dropped by as much as 35% to 49% from the previous year but prices increased by about 5% to 7% depending on the neighborhood.  After Denial comes the Fear Stage, which started here in Seattle in the early spring of 2008 and by the summer of 2008 most buyers were in the pure Panic Stage.  They went out and rented a place, after all there were so many places to rent because no one could sell their homes.  After the Panic Stage comes the Despondency Stage and then the last Stage is the Depression Stage.  Then the whole cycle starts over again with Optimism.  We think Seattle was in the Despondency Stage by the Summer of 2008 and then hit the Depression Stage by the Winter of 2008, when very few homes sold (the people that were buying in late 2008 and early 2009 were investors) until just recently.  What we are seeing in the market today is that we are starting to come out of the Depression Stage in Seattle and depending on the national economy we should be moving up towards the Optimism range sometime soon.  And then the whole cycle starts all over again but this time we don’t foresee the Euphoria stage coming back for a long time, but we do believe that we will see prices start to raise slowly again by spring of 2010.