With the start of the new year, we’re seeing a more positive attitude out in the marketplace. It’s amazing what a new year can bring in attitude and outlook for people. Many are making choices to move because they want or need to do so. For some, the price issue is taking a back seat to the need to move. We have several clients who plan to move because they just got married and want a new home or would like to live in the city, downsize or relocate. These moves are lifestyle choices. Some will lose money, while others will make a profit on their home sale. Lifestyle wants and needs trump the monetary outcome for some. Truthfully, if homeowners can make a choice as to whether to sell or hold, they are the fortunate ones.
What’s on the horizon for 2012? As I was driving to a meeting recently, I heard a piece on KPLU about the expected improvement in the Puget Sound economy.
Dick Conway, an economic forecaster. had spoken at the 40th Anniversary Economic Forecast Conference in Seattle. Here are five reasons Conway thinks the future is bright:
- Boeing is showing strong employment, with the 737 MAX and the 787 being built here, the labor peace pact, and strong bonuses. Overall, it is a very nice scenario for the Puget Sound Economy.
- Job growth in the region is generally outpacing the nation. The strength of both Boeing and Microsoft causes a “multiplier effect,” bringing more jobs with them.
- Retail sales numbers have been a pleasant surprise. Conway predicts a 5.9 percent increase in 2012 and a bit more than 3 percent growth in 2013.
- Foreign exports are leading the recovery and Washington state is the nation’s top exporter, thanks again to Boeing. (Microsoft is also a factor here.)
- The Puget Sound is home to many strong local companies.
When combined with improving economic conditions, I would not be surprised to see several markets exhibit modest price growth in 2012. That said and, as we all know, real estate is all about location; therefore I do not expect that price recovery will be equal across all markets.
He tempers this line of thinking with the two elephants in the room: the expected supply of distressed sales that will hit the market and the difficulty of obtaining financing:
If this is actually the case, then why aren’t prices higher? Well, there are still a number of anchors that are holding us back. The first of which is the shadow inventory in the shape of distressed homes. Many foreclosures have been trading at below market value and, in some cases, below replacement cost. This naturally holds down values.
Secondly, and equally as important, are the continued issues with obtaining financing for the purchase of a new home. It remains remarkably difficult to get a mortgage, which has led to an unusually high percentage of proposed purchases falling through.
With the new year and promising economic news, we expect Seattle-eastside real estate to be the strongest since 2007. Home sales should be steady even as inventory rises into the summer. Prices, of course, may stay about where they are for now. The key to pricing will be the supply of homes on the market. The more homes, the more competition for buyers and the more flexible sellers will need to be about pricing. With fewer homes on the market and steady demand, prices should stabilize. If prices do go up, most likely it will be in the areas that are close-in, areas which are considered desirable locations. Expect distressed sales to temper the pricing this year. The number of homes for sale and pricing will vary from neighborhood to neighborhood. The eastside is filled with real estate micro-markets and they don’t perform in the same way.
If there are any price increases, they will be minimal, but if there are increases, we will be shouting this from the rooftops! Because we watch market trends so carefully, our sellers will be among the first to know about any price increases. You will, however, hear us shouting that 2012 is expected to be our best market in the last 4 years.
- Prices should not drop further.
- Some homes will be the “hot” ones because of price and condition. These homes will sell quickly and some will have multiple offers.
- Other homes and neighborhoods will move more slowly because of price and location.
- Local companies, such as Amazon and Microsoft, will continue to move people to the area.
- The supply of homes for sale will increase as the year heads to spring and summer, however, there are some homeowners who will choose to hold for a number of years. The supply should not increase as dramatically as it has in the last few years.
- Distressed sales will continue to be a significant part of the supply and will continue to affect pricing statistics. However, pricing will be stronger for those homes that aren’t distressed sales.
- There will be a more balanced market between buyers and sellers.
- The wide range of activity indicates a normal, active real estate market on Seattle’s eastside.
What do you think will happen real estate in cities such as Bellevue, Kirkland, and Redmond? Will prices go up, down or stay the same? Do you see a good market in your area?