For the past three months the real estate market has been slowing down noticeably, sparking whispers of a bubble and a throwing some investors into turmoil. As we head into November the Northwest Multiple Listing Service has released the monthly statistics, putting a definitive end to the prospects of a bubble and assuring buyers and sellers of a “win-win” situation.
Inventory in the greater Seattle area is sitting at 2.3 months right now, a few months short of a 5-6 months of supply needed for a balanced market, which is tipping the scales in favor of sellers . Additionally, supply has decreased from the 2.5 months quoted in September. Traditionally this time of year brings a slow down to the market heading into the holidays, last month actually brought a slight uptick, indicating that the market is securely leveling.
“When you look at the big picture, inventory is still below what we call a balanced market, the economy is performing above average, and home appreciation is still increasing.” -Local real estate expert via the NWMLS
According to the State Employment Security Department, Washington State saw an increase in 4,500 jobs in September. There are still plenty of people moving to the area and looking to buy, but they have the luxury of shopping around and paying for the actual value of the home. Houses that are priced correctly are still selling fast. Last week, we had a property go pending in just six days because we priced the home correctly, based on comparables and the actual value of the home.
When looking at the overall picture of the current climate, the Puget Sound is still reporting year over year gains, inventory is still low, and the economy is continuing to grow. The only difference now, is that we aren’t seeing extremes in either direction. We aren’t having large spikes in inventory and we aren’t seeing huge price reductions. As we adjust into our new normal, we’re seeing a market that has all the makings of stability at a sustainable rate.
Despite the leveling market federal interest rates create another lingering variable changing the market buyers can afford. As rates rise, buyers have to look at prices in lower price points,changing the landscape of where buyers are looking, and making them less likely to make the concessions they did while the market was at its peak.
“Buyers aren’t substituting anymore which means you have to wait for the right buyer. Things like busy roads, bad neighbors, lack of parking, no garage, those things are going to take a little more time. Those houses will no longer sell to anyone who is looking.” – James Dainard, co-founder of Heaton Dainard Real Estate.
From the investor’s perspective, this means making smart decisions with your budget. Buyers aren’t going to pay more just because the investor did a good job. Buyers are staying firm in their budgets and if the price doesn’t work for them, they’ll move on to another house. When planning and budgeting, investors need to stick to a scope of work that is based on current market data, not personal preferences.