On Tuesday morning we had our staff meeting. A weekly thing,
but this week we had our company President and COO Mike Grady speaking. It was
a good morning to receive a customer service award but then again there really
isn’t a bad time to get one as it’s always a blessing and a reassurance that I
am doing the right things. Within these months I have come far, and this year
has exceeded both my own and my boss’s expectations. I never even dared to
dream of being on the list of top performers during my first year, well – ever if
I want to be frank. But in October that happened too.
Real Estate is a cyclical business as is pretty much
anything in life. Now you’re probably going; Hello! Please, tell me something
new… Commercial real estate and residential real estate both operate in cycles,
but those cycles, even though in ways going side by side, are still quite
different from each other. In commercial real estate it starts way slower, then
gains speed, escalates, panics and comes to a halt. In general, the halt lasts
for about ten years before the cycle starts over again. Why am I telling you
this? Have you counted the cranes in Bellevue or Seattle? I encourage you to do
it! I remember hearing several years ago that all the cranes west of Mississippi
were in Seattle and Bellevue areas, and that there was a serious shortage for
cranes. That was years ago.
For a while now, I, like many others have waited for things
to reach the phase where we are overbuilt, and there is way more office space
and retail space than anyone needs. You know, the time where you see those
signs going up everywhere offering commercial real estate. However, according
to the latest report the region is at about 40% of its need for commercial
space, and the ones that really believe in this hype think we have somewhere
from 6 to 8 years of building commercial left before we hit the halt. That
sounds quite crazy to me, but if those stats are even close to being correct,
we should have at least a few years left even from a very conservative point of
view. Mike Grady stated 2 to 3 years at the very least. His not God, but he’s
been doing this for quite some time.
How does the commercial real estate stats reflect upon
residential then? I do not work on the commercial side of things; my clients
are all looking to buy and/or sell their homes. But if we are in dire need of
commercial space, that translates to an equal need of homes on the residential
side, which really isn’t any news either. What I’m trying to say, it does not
look like things are about to change. I have clients that have concerns. I
cannot promise things won’t change, but at this point it does not look very
likely. I also thing going either north or south should be an awesome
investment as you can still find somewhat affordable properties in both.
Looking at October stats, remember, I told you that in
September the amount of inventory was finally larger than the homes pending
sale on Seattle Eastside. It wasn’t by much, but it happened. Well, that’s gone
now and once again we sold more than we have for sale, and in October there
were 954 homes listed and 1078 pending for closing, meaning under contract. A
year ago, in 2016 the inventory was larger than homes under contract from July
to September, in 2015 there was only one month – March – when this was not the
case. You see where I’m going here? The market is absorbing way fast. This year
the absorption rate has been under 100 only in September (94.6) and this month
we are back at 113. In 2014 the absorption rate never crossed the point where
more is for sold than what we have available. In 2015 it happened once. In 2017
it has been the case in every single month apart from September.
Just yesterday we were laughing about the fact that if you
list a home, and it has not sold in two weeks you now panic as homes get
tainted by the “there has to be something wrong with it” faster than ever. There
used to be a time when selling a home took months. Now, in most cases we are
talking days, if we operate in the Redmond-Kirkland-Bellevue area. There was
even a new construction home, listed for closer to 3 million that sold in just
a few weeks.
Many of my clients leave the core of Seattle Eastside, or
look for a fixer upper in the upcoming neighborhoods. You may actually have
options, you might even be able negotiate, and you definitely get more bang for
your buck. The other side of the coin is the commute. The inventory is getting slimmer
everywhere in north and south King County and Snohomish County. Pierce still
looks a little bit better with an inventory of over 2200 homes in October. That
is way more than double to what Seattle Eastside had to offer.
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