Winds in the East, Mist Coming In

Winds in the east, mist coming in, like somethin' is brewin' and bout to begin.  Can't put me finger on what lies in store, but I fear what's to happen all happened before. - Bert 

A year ago, I wrote a blog post on a potential slowdown. Wait!!!! A year ago. Here’s a link to that post, dated July 27, 2017 but I’ll also copy paste some of it:

“Looking at the inventory since beginning of 2012, the graph looks like a ball that someone bounces at it keeps going less and less high with each bounce. In January 2012, the inventory for Seattle Eastside was at 2,514 homes with the number being the highest that year. Pending sales were at 805. This year our inventory has been climbing since January reaching its highest point of 1,046 homes in June. That is 217 homes less than the lowest inventory in 2012. At the same time, pending sales hit 1,399 homes under contract but not yet closed, 95 more than the highest pending sales in 2012. See what I’m talking about? Year by year, the inventory is lower, and lower, and lower.

Most likely July will be slower than June, but as the market is constantly absorbing over 100% of what is in the inventory, it looks different than what you may think of as a slowdown. In high demand areas, there may be 5 offers instead of 15, or some homes may be on the market for longer than from Thursday to Tuesday. However, homes in high demand will still be in high demand. Like the one down the street from our house. The one and only Arch home for sale that had - according to rumors, you know, neighbors talk – over 200 people walk through the home in 3 days before it went pending. As I’m curious, I would love to hear how many offers they got.”

Did you read it? Yup. We were talking slowdown a year ago, and a year before that too. The media loves to talk about this and it will use every single possibility it can to do it. I have even seen several articles talking about a potential crash, burst of a bubble, you name it. So, are all of those articles, predictions and views completely off then? I wish I had a crystal ball and I could tell you for sure, but I don’t, and I can’t. I can tell you a few things though.

Seattle isn’t quite the same as most of the other areas in the U.S. And as we are not quite the same, the behavior of our market isn’t going to be the same either. Past couple of weeks there have been several articles on the Seattle area, articles like; “Ignition’s John Connors: Seattleis becoming the most important tech market behind Silicon Valley” or “KirklandNamed a Top 10 City for STEM Workers” or how about this one? “‘Brain gain’ helps Seattle land title of second best North American tech market” I have posted all these articles either on Facebook, LinkedIn or Twitter, some of them on all three.

However, this summer has looked a tad different from the summers before in the Eastside (NWMLS areas 500 to 600, Eastside and Mercer). The absorption of our inventory peaked in March. June was the first month when pending sales were less than what was available in the inventory, something we really haven’t seen in a while. The absorption rate dropped below a hundred in June, for the first time since September of 2017. In order to even try and grow a healthy inventory, the absorption rate would have to stay under 100%, we will see what will happen. Our inventory has been steadily growing ever since December of 2017, peaking end of June at 1527 for residential and condo combined. Today we have 1,694 homes listed within the same area, 850 of them are priced under $1 million, that’s under a half of all residential and condo units currently for sale.

To tell you the truth, sellers have been getting a bit queasy, we call it being motivated to sell. This is the result of getting first a little greedy, pricing a tad too high, thinking that buyers would be so desperate to find a home that it really wouldn’t matter, and not getting your home properly prepped for sale because you maybe thought the buyer wouldn’t care if the windows were washed, the carpet cleaned, let alone replaced. This year, we have seen more homes priced above what they should be priced at than before. We have been in a sellers’ market for so long, that sellers have gained a false feel of confidence at times.

We have also come to the point where buyers are calling it quits because they don’t want to pay $900K for a home that needs a complete remodel, a home that is really worth $700K. The buyers want options, and they are waiting for them. A properly prepped and priced home will sell. A properly prepped and priced home is very much wanted. It is still all about the location and condition when it comes to pricing. May I point out that within Bellevue, Kirkland, Redmond and Sammamish the median time for a home to be for sale is still only 8 days, and 86.97% of all homes sell within the first 30 days, regardless of price.

So, is the sellers’ market over? Are we entering a buyers’ market? Not so quick. No, we are not in a buyer’s market. We are still far from even a healthy market. A Healthy market would mean 3 to 5 months’ worth of inventory and we are barely over 1-month worth of inventory, 1.38 to be exact. Seattle is the fastest growing city in the Nation and last year the area grew by over 65,000 new residents. Since 2010 the Puget Sound region has added 370,000 jobs. No, it’s not over yet. The rapid growth maybe slowing down a bit due to the plain fact that money does not grow on trees, and the wants and needs of our buyers do not match the recent reality of the real estate market on Seattle Eastside.

Time will tell if our inventory will keep growing which would be a very welcome event for our market. It would be awesome to be able to offer options for our buyers and it would be even more amazing to allow them at least a little bit more time to consider before making the biggest decision of their lives. And sellers, just listen to your broker when it comes to recommendations on how to price and prepare your home for sale. A good broker knows what buyers are looking for and will give you recommendations worth listening to.

Early morning meeting with a client... did you read this far? Thank you!