Fall is now upon is, and that brings two things to mind. 2nd half 2023 Property taxes are due November 1st and its time to get your home or investment property ready for winter.
1st things 1st– many of you are fortunate enough to have paid off your mortgage or have a private loan that does not require escrow of taxes. THIS IS YOUR REMINDER – Time to write that check or log in to the county website and get those 2nd half taxes PAID.
NEXT – Get your home ready for winter!
Make sure gutters are clean & downspouts drain away from the foundation.
Disconnect & put away all hoses & add foam or other faucet covers to outdoor faucets.
Winterize outdoor sprinklers.
Check outdoor lighting for those long winter nights.
Tune up your furnace and change the filter.
And now is a good time to know where your water shut off and water meter are. Watch for my upcoming blog ‘7 things to know about waterlines’ for more details.
Fall is also a good time to check in on the value of your home, visit my website for a free Home Valuation. No email or phone required unless you want me to refine your value.
Contrary to most Headlines & other ‘Market Experts” I do not believe the US Housing market is a ‘Bubble about to Burst’ or that there will be a crash in home prices. The reason is simple Supply & Demand. While it is true that inventories are rising, homes are sitting longer & raising interest rates have pushed some buyers to the sidelines, there are still more potential buyers reaching average first time home buying age than there have been in 20 years. As shown the the above chart, this influx of buyers peaks next year but the number of 1st time home buyers remains higher than the last few years for 8 to 10 years.
To understand how demographics affect housing, one must go back to the housing crisis in 2007 – 2010. Referring back to the chart, you see US births dropped sharply starting in 1972 through 1976. With an average first time home buyer age of 30 at that time, this meant a shortage of buyers in 2002 through 2006. Few buyers meant few home loans, so banks started getting creative with mortgages. Lending standards were lowered, loans made & banks made their money by repackaging & selling loans as securities. Loan, package, sell & then do it again. In turn, this encouraged builders to build too many houses. The home ownership rate raised to an all time high of 69.2% in Q2 2004. But by 2007 loans defaults rose as homeowners could not / did not make their payments. By the fall of 2008 lending froze, no one could buy except with cash, sellers had no equity because of plummeting prices. If you were there, I need explain no more.
Other demand side factors are high immigration, an ever increasing population and household formation rate, and COVID induced migration patterns turning renters into buyers. These we will leave for another day.
The other side of the coin – Supply
The other side of the coin is the inventory of available homes to buy. Several factors are at work here, but we must again revisit the 2008 to 2012 Housing Crisis to put it in context. As I mentioned, in the early 2000’s builders reacted to the demand caused by easy mortgages by building an average of 1.75 million homes a year from 200o to 2006, peaking at 1.98 million in 2006. This created an oversupply of houses to buy that started to show in 2006. Sellers also came out in droves to take advantage of high prices and / or avoid the impending downturn. This increase of supply with no buyers was one of the drivers of the the Housing Crisis.
Most builders were wiped out by the Crisis & an average of just under 1 million homes a year were built between 2007 & 2020, dropping to a low of 585,000 in 2011. With an average of 1.3 million to 1.6 million new homes are needed each year, depending if you count vacant homes, 2nd / vacation homes, & Built to Rent (BTR) homes, this created a shortage of homes which was compounded by institutional buyers buying to fill increasing rental demand. The resulting shortage accumulated to 3 million homes by 2020, and shown by this chart (click image to enlarge), just barely met demand in 2021 & so far 2022. Adding to the inventory shortage are home owners staying longer as they do not want to give up the low interest rate by selling. The result is an expectation of lower than normal inventory, even going into the next few months & year ahead.
Fall 2022 & beyond –
Moving forward we are seeing inventories rise across the country. As one would expect, the areas that were once the hottest like Pheonix & Austin have seen inventories go from 3900 to 16,250 & 1461 to 8758, respectively, in August (Per the St Louis FED). Locally, here in the market I advise clients, the 23 county NWMLS has seen inventories nearly double to 14,683 since one year ago, & nearly triple since the end of Q1 2022. But this increasing inventory has resulted in only a 1.8 month supply, showing just how dire the inventory was due to buyer pressure. Prices, although down since the spring / summer highs, are still up year over year. The 4 county Puget sound area has seen prices up from 5.9% to 9.2% in King & Kitsap counties, respectively. (per Northwest MLS September press release). This price resilience, in spite of the pull back from summer highs, shows how strong the market continues to be. While homes are sitting longer & Buyers are no longer begging sellers to empty the buyers bank account, properly priced homes are still selling. As buyers adjust to a new normal in their buying power, & having more choices, I predict they will continue to jump back in, albeit with a little more leverage. But, I am advising clients that Sellers are still in Charge.
The questions I am asked the most, especially recently, continue to be, ‘Are we in a Bubble?’ or ‘Are home prices going to crash?’. If you are a regular reader of my posts, you know the answer is NO! Not because I am an optimist (which I am), or because I want to sell your house (which I do), but because of basic economic factors of supply & demand. There are simply too many buyers, today & coming of age in future years and too few houses for them to buy. I will go into those market factors in another post but today I want to discuss the SHIFT that has happened in the market.
SHIFT HAPPENED – looking back –
The shifting winds created during the last 2 years have begun to shift again. Craving bigger spaces & able to live where they want, those who could move, DID. Trading smaller for bigger, urban for suburban or exurban, people across all spectrums of homeownership moved into new diggs. Fueled by low interest rates & changed priorities, they paid almost anything just to get under contract. While this was a good moment for those sellers who had a place to go, it actually had a negative effect on inventory by locking up sellers who could not compete as buyers and they stayed put. It also locked out first time homebuyers who could not compete with cash or cash like buyers and also kept move up & /or downsizing buyers in place. In short, low inventory coupled with too many buyers lead to multiple offers & explosive price growth.
SHIFT IS HAPPENING AGAIN – what now?
Now with prices across the US up 15% to 32% in one year & interest rates on their way to doubling in a short few months, what comes next? Locally, we are already seeing a reduction in Open House traffic, Days on Market getting longer & only a few offers instead of too many. But the market remains strong with sale prices continuing to rise & the sale vs list price ratio hovering around 100%. Properly priced homes are still moving quickly. Even improperly priced or presented homes are going Pending quickly once the price is adjusted.
As the market shifts in the Buyers favor (or at least less in the seller favor), proper pricing is key. No longer can an agent carelessly price low & expect buyers pay more as they beat each other up. With the prospect of only one good offer, sellers must be prepared to accept the price they list at. Sellers & their agents must also prepare the home properly; staging, pre-inspection repairs, sprucing up… all should be on the table. But as I always say, sell when you need to, Buy when you need to; DO NOT try to time the market. Just hire an agent whose experience can maximize the market when you do decide to sell.
Let’s face it, 2021 was a hard year. We started it with hope, looking forward & feeling comfortable to travel again to see family, a new start politically and relief that 2020 was finally over. Then Boom, worse political upheaval, COVID getting worse rather than better, inflation and business trouble.
Each one of us has 2021 stories; mine is one of the loss of my 92 year old father, a theft in our home, family sick with COVID & a flood in our home. But, we persevered. Family & friends rallied around us when Dad passed, clients trusted me with their real estate transactions and referred me to friends. I started a consulting role in a new PropTech start up. We got to see our grandsons again. All blessings caused by people, people like you who did what you could, even if it was just a kind word. For that I am thankful
I started the year planning to stay in touch better but 2021 got in the way. My hope is that we can connect this year, I’d like to hear your story & laugh or cry over what you tell me.
So I leave you with a wish for a blessed & prosperous 2022 & an open invitation for coffee or lunch.
22321 NE 157th St Woodinville WA 98077 – $1,319,500
This sale was an off market sale, in this case called a Seller Representation to a pre-identified buyer. Approached by an eager buyer who was having a hard time competing in this market, this seller called me to negotiate on his behalf. Once we determined that the buyers were real, and had the necessary pre-approval and down payment, we allowed the potential buyers to tour the house. They loved it and made an offer. I was able to negotiate a price that gave my client the same net proceeds as if we had listed it, except we closed 3 months earlier. A win – win for both parties.
The benefits for both are as follows:
Seller received the same net proceeds as if listed.
Seller closed 3 months early.
Seller did not have to renovate home – it was sold As-Is.
Seller did not pay a full commission as we negotiated that the buyer pay most of their own agents fee.
Buyer found a house with out competing with other Buyers
Buyer determined how much their agent was worth, did not automatically get added into sales price.
Buyer got a lower sales price as commission, fix up and listing costs were less.
Buyers get to renovate home to their liking and tastes.
If you are thinking of selling and get a letter in the mail saying “I have a buyer, call me” I suggest you actually call me first. I will analyze your situation and prepare a market analysis outlining the advantages and disadvantages of both listing & selling on the open market or selling off market. You can then decide whats best for you. Let me determine if the buyer is real, can afford your home and help negotiate the best possible outcome for you.
This last month I had the privilege of working with 3 sellers on three different listings and they all closed in the last few days. All 3 had multiple offers and all 3 went over the original list price. So what does this mean for you. As a seller you need to know that your home or investment property is in high demand right now. Two of these sales were duplexes and each went at least 12% over asking with few contingencies. The residential condominium in Kirkland went over asking as well, showing a recovery in the prices of condominiums in Kirkland (SEE Previous blog on condo price’s HERE). As a buyer you may consider starting your search now, as prices will hold steady for a long time to come, in my opinion.
As a broker, I regularly get asked “Are we in a bubble?” or “are prices going to crash like 2008?”. Or a buyer will make the statement “I’ll wait till prices crash”. The answer is a resounding “NO, prices will not crash!” Let me tell you why-
Most everyone agrees that low inventory, high buyer demand, & low interest rates are the main drivers to higher & higher housing prices. While it is true that available inventory for buyers is at historic lows, & low interest rates give buyers more buying power, most writers are missing one very important factor that will perhaps be the biggest driver of price increase’s going forward – DEMOGRAPHICS– the coming wave of First Time Home Buyers.
I’ll explain this coming wave in a minute but first lets go back in history to see how Demographics can affect housing Prices. Most people call The Crash of 2008 through 2014 ‘The Housing Crisis’ but it’s roots were not in housing. It was a bank induced financial meltdown that in the end affected home prices. Banks made bad loans, homeowners had little or no equity, and builders built too much inventory. Then, because of this bank corruption, no one could get a mortgage and few could sell because they had no equity. In short, too many houses, no buyers (unless they had cash) and no mortgages; the exact reverse of what is happening today. But there was a silent factor in this Perfect Storm that few recognize: fewer First Time Home Buyers. You see, in 2006 the average age of first time home buyer was 30 to 32 years old, so they were born in 1974 to 1976. Birth rates had been dropping since 1970 and continued for 6 or 7 years, resulting in fewer first time home buyers 30 years later. Couple this with builders over-building leading up to 2008 and homeowners with no equity trying to sell and what happened is now history. See chart below
When were Average Home Buyers Born?
Now, lets fast forward to 2021, the average age of the first time home buyer has increased to 33 (National Association of Realtors®). Looking at the chart again, we see that an average of 3.8 million people were born in 1987 -1988. (That’s over 700,000 more than the 3.1 million average in 1974-1976). And, as the chart shows, the number of buyers will increase for the next 3 years, peaking in 2023 (Born in1990), just barely return to today’s levels by 2028 to 2030 and then peak again in 2040. So, as many &/or many more average age first time home buyers for the next 20 +years! And, this generation of home buyers has more wealth than first time buyers in the past!.
So what is going to happen? The silver lining is that in 2020, US home-builders were just beginning to deliver enough homes to satisfy an average years demand. The Mortgage crisis of 2008 – 2004 wiped so many builders out that we were almost 3 million homes behind by 2020. And except for the speed bump of COVID in spring quarter 2020, builders are now set to finally deliver at least enough homes to keep up with demand. If builders are able to keep up the pace and build what today’s post-COVID buyer desires, we may see some of the pressure on prices lessen. If you are a buyer, one can only hope. If you are a seller, rest assured, in my opinion, your value is safe for the foreseeable future.
The market continues to be hot and I was so busy with listings and offers that I could not get this post out for you to see. Hopefully you all received the separate emails for each listing, as I hope you are on the mail-out list! If not, reach out & I will get you on the list!! Hey, reach out even if you are on the list, I would love to hear how things are with you!
This duplex listing at 2018 S 233rd St Des Moines, WA 98198 (MLS 1729913) received multiple offers and went under contract in less that 2 days -At a price significantly higher than asking!. If you have a trophy property like this, wheteher it is an investment or your family home, now may be the right time to sell.
2020 started off as any ordinary year. We had made our New Years resolutions (& broken at least one!). We had pondered our goals and travels for the next year. Real estate was no different. The previous year had been strong, a slight sellers advantage due to low inventory and low interest rates. A slight seasonal dip with the promise of a strong spring market. Then WHAM! COVID took us all by surprise. The initial lock downs created havoc everywhere; work, school & home. In the real estate world, sales cancelled or stalled, open houses went away, potential buyers and sellers spooked. But after a short month or so the market changed. Buyers, eager for deals came out. People were now able to work remotely & needed space. Commute time was no longer as big an issue. The result was an exodus from the urban areas to the suburbs and beyond. Multiple offers, waived inspections, and other buyer concessions became not just normal but ‘required’ if you wanted the deal. This market change has lasted throughout the holiday season into January as buyers had no travel plans and little else to distract them. And no change is expected in the near future. According to a recent press release by the 23 county NWMLS, house & condo prices increased by 12.2% to $488,000 from December 2019 to December 2020. Single family homes set the pace with a 12.9% jump with condo’s far behind at 1.8%. This is no surprise as houses with more space are suddenly more in favor than their smaller counterparts. See below for more detail on your area, or reach out and we can chat more specifically about your area or home style.
year over Year change
23 County MLS
Source NWMLS – info deemed reliable but not guaranteed