State of the Market
Today there is no shortage of “expert” opinions, conflicting predictions and market rumors concerning real estate. While it is certainly true that our local market has slowed from it’s supersonic pace a few years ago, it is still outperforming most other markets nationwide. Here are the facts:
Our state and local economies are strong, new jobs are being created every month, and our corresponding population increases should mean higher demand for housing.
In 2007, roughly 57,000 new jobs were created in King, Pierce and Snohomish Counties. At the same time, Western Washington experienced a net increase in population of over 97,000! To accommodate these new residents, approximately 34,800 new dwellings needed to be built in 2007, yet only 11,731 new homes were sold. 2008 will bring more of the same, with the Seattle Times reporting that 9,300 additional jobs have already been created in Washington in January and February of this year.
When you also consider that new construction starts are at a 10 year low, you begin to see why rentals are increasingly hard to find and rents are going up at a rate faster than home prices. We believe this indicates a pent-up demand for homes that has yet to be realized, and with more jobs coming in 2008, competition for homes is likely to grow more intense as the year goes on.
Will there be challenges in 2008? Certainly.
The mortgage industry continues to sort out the practices that have severely restricted or eliminated many of the high risk lending programs that drove the speculation in housing in many areas of the nation during 2004-2006. This will shrink the buyer pool in some market segments. With more homes on the market, affected sellers will be asked to be more flexible in negotiations. Pricing a home at its true market value, and remaining flexible terms will be much more important than in the past few years.
Aside from these manageable challenges, there is great opportunity.
For qualified buyers, low interest rates and safe,stable financing is readily available. Increased inventory means better selection and potentially more favorable negotiations. Owning a home helps insulate you from future increases in housing costs due to rising prices and rents, and Puget Sound history tells us that real estate is still one of the best long-term investments that can be made.
For sellers, there is also a silver lining. Typically, when someone sells a home, their next home is approximately 50% more expensive. Consider this example:if your current home is listed at $400,000 and sells for 97% of asking price, you’ve reduced your price by $12,000. However, if the home you’ll then buy is listed at $600,000 (50% higher than your last home) and you also purchase it at 97% of value, the reduction you’ll receive is $18,000, for a net gain of $6,000 in total equity.
Finally, when you read or hear the media make comparisons of today’s real estate market to last year’s, it’s important to remember that 2007 was Washington state’s 3rd best year in history. Even more amazing, the national market finished 2007 as the fifth best year in real estate in American history!
Ron G. Sparks
VP, Sales
Coldwell Banker Bain
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