Predictions for 2012 Seattle-Eastside Real Estate?
I’d just written a post with predictions for this year’s real estate market, when I happened to come across this post from 2 1/2 years ago with positive predictions about the 2012 Bellevue/Eastside real estate market.
Looking at the reprinted post below, how much looks like it could be true for 2012?
Rebound in Seattle/Eastside real estate? Wait until 2012.
A rebound in Seattle real estate? Yes, but not just yet, and it will probably be a small rebound, IMHO. Both Yahoo, via the Plugged in Finance blog and Businessweek had articles projecting a faster return to a more positive real estate market for Seattle than for many other parts of the country. Seattle ended up on the top 10 real estate rebound lists on both Yahoo and Businessweek.
Why a rebound in Seattle? Seattle’s chances are among the best in the country and for the same reasons the Seattle/Eastside area was so strong for most of the last two decades. It’s our economy and our geography.
First, the geography. (Bear with me for this brief geography lesson. This brings me back to my roots as a social studies teacher who loves geography.) There’s a lot of empty space east of Seattle, Bellevue and other parts of King County. This is where the foothills of the Cascade Mountain range begins. It looks like there’s lots of open space out there, and there is, but it gets pretty steep! It’s certainly not conducive to building a home. Couple this with strict land use regulations, protecting salmon streams as an example, and even less land is available for development. It’s double-edged sword. We need to maintain a healthy balance between people and nature, to maintain our wildlife, our trees, and our quality of life. But the natural elements of the Seattle area, Puget Sound, Lake Washington, and the Cascade Mountains do provide a challenge to our growth. Less land to develop=higher prices, but it won’t happen for a few years and increases should still be modest.
The economy in the Seattle area is hurting like the rest of the country. But there’s a strong economic base that will re-emerge as things start to turn around. The old stand-bys, Microsoft, Starbucks, and Boeing are struggling now, but should bounce back.
Another thing to watch is the number of homes for sale, the housing inventory. We’re still at higher numbers, but things are starting to balance out. If you look at the maps, you’ll see the Seattle real estate market of 2009 is far more balanced than the Seattle real estate market of 2008. (A balance market is when the number of homes for sale in an area is less than a 6 months supply. Yellow on the attached maps indicates a balanced market in the area.
Builders are NOT buying land right now. Over the years, builders would have huge amounts of land tied up for future building. This is no longer the case. It can take a couple of years to develop a site and to start building homes. With less land available for building and less land owned by builders and ready to be built out, existing homes will be more in demand in the future.
On yesterday’s “Morning Edition” on NPR Station, KPLU, John Maynard interviewed Richard Hagar about another issue, the influx of new people moving to Washington State, the majority of whom are moving to King County. Some of these people rent and some buy condos and homes. The in-migration of people will only help our real estate and economy over time.
The year 2012 seems like a long way off, but we’re halfway through 2009. It’s around a really long corner and it’s not going to be an easy “walk” to get there.
Now we’re at the end of the first month of 2012, what’s happening with Seattle-Eastside Real Estate? There are differences from what I wrote in 2009 that actually bode well for the Bellevue, Kirkland, Redmond, Sammamish, etc areas:
Builders are buying land now. We have a client who was approached by no less than 4 builders last year when his property was not even listed for sale. Within the same week, he received several builder solicitations. He’s not the only homeowner with land who has been approached. Builders are actually looking to beef up their inventory of land so they can build again.
The number of homes on the market has reached the lowest level since February, 2007. In all of King County there are approximately 7500 homes and condos for sale.
The geography hasn’t changed and I believe it will take millions of years before it does and the economy is still performing at a far better pace in the Seattle area than in other parts of the country. Amazon, Microsoft, and other companies are hiring.
What does your crystal ball say?
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?