THE BUYER’S GUIDE TO OVERCOMING SEATTLE’S HOUSING SHORTAGE

TABLE OFCONTENTSSeattle Home Price Forecast Suggests Modest Decline Through 2020 1-4

Report: Seattle Housing Market Inventory Still Tight in 2019 5 -8

Seattle Real Estate Outlook for 2019 and Beyond 9-11

Most Affordable Housing Markets in Seattle Metro Area 12-15

Whether you’re a first-time buyer new to the region, or a lifelong resident and seasoned homeowner, Seattle’s bustling housing market can be a challenge to navigate. This guide gives potential buyers an overview of the Seattle-area market, including the current state of inventory, the forecast for 2019-2020, a rundown of the most and least affordable areas within the Seattle Metro, and tips for buyers in one of the nation’s most competitive housing markets.

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SEATTLE HOME PRICE FORECAST SUGGESTS MODEST DECLINE THROUGH 2020

A recent forecast for Seattle home prices suggests that house-value decreases could be in the low single digit range. One source predicts a decline of around 3.8% between now and May 2020. Due to limited inventory, competition among buyers remains high.

The Latest Home-Price Forecasts for SeattleHome prices in the Seattle metro area have risen steadily in recent years, usually outpacing the national average. House values in the city, and across much of Washington State, have risen by double digits a few years back. But a recent Seattle home price forecast offered a different picture, suggesting that house values could drop slightly over the course of the next 12 months. According to this same source, house values have declined by 4.5% over the most recent 12 month period.

This month, the economists at Zillow predicted that home prices in Seattle would drop by 3.8% between May 2019 and May 2020. That’s a big change from the double-digit annual gains seen in previous years. But it’s a phenomenon predicted by basic economics. If an area experiences larger than average gains, this tends to be counteracted by slow downs and declines.

Zillow’s forecast for Seattle home prices is quite a bit lower than for the nation as a whole. The company’s research team expects house values nationwide to rise by 2.5% during the same 12-month period mentioned above.

Of course, this is just one forecast. Other analysts have predicted slower rates of decline. But the general consensus appears to be that there will be a small depreciation in the coming months.

There is evidence for this trend in other sources beyond Zillow. Earlier this month in July 2019, the Northwest Multiple Listing Service reported that King County has seen a dip in year-over-year prices, and that transactional activity was down. This is contrasted with the experience of recent previous years in which growth was phenomenal.

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One of the Most Competitive Housing MarketsWhile the latest home price forecasts for Seattle suggest a small drop in median values, the market itself is still pretty hot. This is largely the result of limited inventory. There just aren’t enough homes listed for sale in the area to satisfy demand, and this continues to put upward pressure on house values.

According to a recent news release from the real estate brokerage Redfin, Tacoma is actually the hottest market in the country right now, and this is mainly due to migration by priced-out buyers from the Seattle market. Seattle's small price declines are consistent with this southward search for lower prices. But, Seattle is still a fairly competitive market.

To quote the Redfin report: “In Seattle, 13 percent of Redfin offers for the four weeks ending on May 12, 2019 were part of a bidding war, down from 71 percent a year ago.” So, the bidding war percentage is down, but it's still considerable.

So buyers who are planning to enter the market in 2019 should be prepared to act quickly when the right house comes along. Our Seattle home buying survival guide will help you get ready.

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DISCLAIMER:

This article contains Seattle home price forecasts for 2019 and 2020. These predictions were offered by third parties not associated with our

company. We have presented them here as part of our educational mission in support of homeowners and home buyers.

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REPORT: SEATTLE HOUSING MARKET INVENTORY STILL TIGHT IN 2019

We’ve written before about the tight inventory conditions in Seattle’s housing market. As we noted, Seattle was one of the top three real estate trends we identified back in 2017. Now, a new report reveals that the Seattle area has experienced a bit of inventory growth from Q1 2018 to Q1 2019. A report published In May 2019 by the real estate information company Trulia included Seattle in a list of cities which had experienced substantial inventory increases. Other cities which were also mentioned were Provo, Salt Lake City, and San Jose (CA), among others. The number of homes for sale in Seattle increased by 40.6% between the 12 month period referenced in the report (Q1 2018 to Q1 2019).

Largest Year-Over-Year Listing Increases, Q1 2018 – Q1 2019Here are the five housing markets with the largest YOY increases in inventory from Q1 2018 to Q1 2019. The percentages shown by each city indicate how inventory (the number of homes for sale) has changed during this period.

The report also noted that significant increases to inventory did not necessarily translate into greater affordability. Many of these inventory gains were reported in the most expensive markets. And so these inventory gains may have improved conditions to some degree, but they didn't necessarily have an extremely high impact.

According to the authors: “The 10 markets with the largest gains in inventory are also among the nation’s most-expensive housing markets, including the San Francisco Bay Area, Seattle, Los Angeles and San Diego. But even in these markets, dramatic increases in inventory – especially among starter homes – have yet to stem the tide of declining affordability.”

Seattle’s real estate market inventory growth is notable, but in some ways this is a counterbalance to reductions in previous years. And the market will still be relatively tight when compared with other markets. Buyers should still expect a reasonably high level of competition, despite the sizable increases to inventory seen during the YOY period referenced in the Trulia report.

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San Jose, CA: 55.4%

Provo, UT: 53.3%

Seattle, WA: 40.6%

Salt Lake City, UT: 37.3%

Ogden, UT: 31.7%

According to Trulia, Seattle has also seen an increase in its "starter home" inventory. The report states that the starter home inventory increased by 14.4% during the YOY period from Q1 2018 to Q! 2019. The median listing price for a starter home in Seattle was $309,000 (2019). This is good news for first time home buyers in the Seattle region who are looking for something relatively more affordable. However, the Trulia report cautions that inventory gains don't necessarily mean a less competitive market overall.

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As the report states: "... a closer look at local inventory trends reveals that the markets with the greatest growth in inventory are also markets where prices have rapidly risen to notoriously high levels and supply has been severely constrained over the past few years. This rapid appreciation has caused affordability to deteriorate more quickly in these areas, and the nascent rise in inventory may actually reflect an exhaustion of demand in these communities, more than it reflects a greater number of sellers listing their homes."

Tips for Buying a House in a Tight MarketEven with the gains seen recently, inventory is still tight in Seattle’s real estate market, so home buyers need to bring their ‘A’ game. Competition is high, especially for desirable properties in popular areas. But there are things you can do to improve your chances for success.

● For starters, check out our Seattle home buyer’s survival guide. Itoffers a wealth of tips for succeeding in this hot market.

● Getting pre-approved for a mortgage loan before house huntingwill give you a leg up in the market. Sellers will be more likely toaccept your offer if it comes with a pre-approval letter.

● Narrowing your home search will increase your efficiency, therebyimproving your chances for finding a suitable property. Researchthe market ahead of time, with an eye of recent sales prices. Limityour search to the kinds of properties you can realistically afford,based on your pre-approval and/or personal budget. Don’t wastetime shopping above your price range.

● Quibbling with the seller over “nickels and dimes” or minorinspection issues could cause the home to slip through yourfingers. You can bet there are other buyers waiting in the wings.So when you find a realistically priced property that meets most ofyour needs, seize the day!

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SEATTLE REAL ESTATE OUTLOOK FOR 2019 AND BEYOND

A Real Estate Market to Watch in 2019In early 2019, Zillow came out with a report which listed the top 10 hottest markets in the country. Seattle was notably absent from the list. Zillow noted that Seattle's growth had slowed down considerably, while other cities have shown impressive growth in median values during the most recent 12 month period. Seattle is still a competitive market, but the recent drop in values is an expected counterbalance to the explosive gains seen in previous years.

Seattle Growth Has Gone Flat According to IndexAccording to the most recent S&P/Case-Shiller Home Price Index, published on June 25, 2019, Seattle experienced no growth whatsoever during the YOY period referenced in the publication, April 2018 to April 2019 (the latest data available at the time of publication. This was the slowest rate of growth among all metro areas included in the report; every other metro area reported at least some amount of positive gain.

This is an update to the Seattle real estate outlook we published back in 2017. It takes a fresh look at housing market trends in the Seattle metro area, with an outlook through 2019 and beyond.

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The June 2019 Case-Shiller report stated: “Las Vegas, Phoenix and Tampa reported the highest year-over-year gains among the 20 cities. In April, Las Vegas led the way with a 7.1% year-over-year price increase, followed by Phoenix with a 6.0% increase, and Tampa with a 5.6% increase. Nine of the 20 cities reported greater price increases in the year ending April 2019 versus the year ending March 2019.”

Seattle's situation was pointed out specifically in the report. The report noted the contrast between Seattle's double digit gains in prior years to the current rate. As it stated: "Year-over-year price gains remain positive in most cities, though at diminishing rates of change. Seattle is a notable exception, where the YOY change has decreased from 13.1% in April 2018 to 0.0% in April 2019."What to Expect

applicationsThe real estate outlook for Seattle in 2019 and beyond can be summed with a single sentence: Home prices will most likely decline through the end of this year, but at a slower pace than what we saw during 2018.

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The economists at Zillow, for example, recently put forth a projection of deterioration for the Seattle real estate market. They expect house prices in the area to drop by around 3.8% between May 2019 and May 2020. This rate of decline is a bit lower than what we saw last year, when prices dropped by 4.5%. Over the last couple of decades, home prices in the U.S. have risen by around 3% per year on average. So Zillow's outlook shows Seattle to be quite a bit down by comparison, but things must be viewed in context. Seattle showed huge gains in previous years, and so current trends are balancing out those abnormal gains of yesteryear.

Population Growth Begins to Slow Down a BitPopulation growth has a lot do with all of this. Seattle is a great city that attracts new residents from all over the country. This brings more home buyers into the real estate market, boosting demand and prices. Population growth contributed to the huge increases we saw before, but things are slowing down now to create a more balanced situation.

What's more, population growth has actually slowed recently as well. According to a recent Seattle Times article published in April 2019, Seattle's recent population statistics show a slowing down of growth in the King County area. To quote the article: "Population data released Thursday by the Census Bureau shows that, for the first time this decade, more people left King County than moved here from within the U.S." Of course, international migration complicates this picture. But, in general, population growth has slowed, and this is in part a response to the housing situation in King County.

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MOST AFFORDABLE HOUSING MARKETS IN SEATTLE METRO AREA

There is still good news for first-time buyers who may be intimidated by Seattle’s rising median housing price: There are pockets of relative affordability in the area. A report from the chief economist at Zillow back in 2017 highlighted the five most affordable cities in the Seattle metropolitan area, relative to the median income. These data are from 2017, mind you, but this information will still be useful for buyers today. If you're needing to look beyond Seattle proper for price reasons, you should consider one of these other areas.

Most Affordable Cities in the Seattle AreaThough high demand and limited inventory have forced home buyers to compete fiercely, especially in the more sought-after areas, there are more affordable options for people who want to buy a home in the Seattle metro area. The key is to be willing to look just outside of the city itself.

The chief economist for Zillow prepared a report in February 2017 for Seattle NBC affiliate King 5 News. It listed five of the most affordable cities and housing markets in the Seattle area, based on the percentage of income that goes toward housing costs in each area.

ZILLOW’S ECONOMIC RESEARCH

team looked at the median income for various cities in the Puget Sound area, and compared that to median home values.

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When this article was published, in February 2017, the median home price in Marysville, Washington was $308,000. In Seattle, it was $604,000 at the same time. That goes to show how much more affordable housing becomes when you drive a little further north (in this case).With a median home price of around $244,000, Tacoma is another affordable option for those who want to live in the area but have concerns about the financial feasibility. The other three cities above came in somewhere between $300,000 and $350,000.

The Most Expensive Housing MarketsOn the other end of the spectrum, the least affordable city in the Seattle area was Bellevue, Washington. People there spend nearly 30% of their income to cover their mortgage and housing-related expenses. In Bellevue, the median home price was $638,900. The median income in that city is $98,804.

Other cities that were more expensive relative to income included Seattle (of course), Everett, Renton, and Kirkland. “Seattle is certainly a very hot housing market right now,” said Dr. Svenja Gudell, Chief Economist for Zillow. “We’re seeing a lot of demand, a lot of newcomers to the area and as that continues, we’ll see even more of these outlying communities start to heat up a bit and get more expensive.”

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Marysville: 16.2%

Tacoma: 17.4%

Auburn: 17.8%

Kent: 19.5%

Federal Way: 20.1%

In the city of Seattle, at the time of this reesearch people were spending about 25% of their income on housing. Here are five more affordable cities in the metro area, along with the percentage of income needed to cover mortgage and housing costs:

FINAL THOUGHTSFOR BUYERSBecause Seattle is a wonderful and vibrant place to live, expect competition for the house of your dreams. Sammamish Mortgage has over 25 years of experience helping home buyers navigate this market, and we would love to help you get into your perfect Seattle-area home. Give us a call at 800-304-6803 to get started with an expert today. We offer highly competitive rates on a variety of loan products. Please contact us with any questions you have, or to receive a rate quote.

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