Another year ends and a new year begins. The Seattle area housing market reached new heights, again, and the region has now led the nation in home price increases for 14 months in a row, tied for the longest streak for any metro area in the country since 2001, according to the Seattle Times. But how long will it last?
The NAR chief economist concurred, “The housing market is closing the year on a strong note…backed by solid job creation and an economy that has kicked into a higher gear.” The NAR noted that existing home sales ended the year (2017) at 5.54 million (up 1.7% from 2016’s 5.45 million sales). But they expect to see 2018 sales at 5.52 million, with price growth moderating around 2%. However, the senior economist of a national listing site expects continued demand, “An economy that keeps adding jobs, and wages that continue to grow, both have consumers feeling confident.” While I appreciate optimism, I think a little dust settling is due, and will yield a positive outcome for the local market.

So when could the Seattle market slow down, and by how much can we anticipate? It might already be happening, just very slowly. In my humble opinion, this is not a bad thing at all. In prior decades, US cities with skyrocketing prices often saw cliff diving prices crashing back down.

But that’s changed more recently as the hottest cities have begun to cool down gradually. Earlier this decade, several housing markets like Las Vegas, Miami and Los Angeles saw housing prices surging upward quickly before returning to a growth rate similar to the national average — without a precipitous crash resembling a skydiver without a parachute.

Single family home prices grew 12.7 percent in October from a year ago across King, Snohomish and Pierce counties, according to the monthly Case-Shiller home-price index. Home prices nationally rose 6.2 percent, three times the rate of inflation and the biggest increase in more than three years. Even so, Seattle home costs grew almost twice as fast as the U.S. average. The pace at which homes went off the market made the competition more intense this year. Homes found buyers after a median 45 days on market, six days fewer than 2016.

Markets fluctuate and correct. The tide ebbs and flows. Why do we assume higher home prices are good and lower home prices are bad? If the price of iPhones dropped, we’d be happy! It should be the same for real estate. As a value add investor, I prefer buying real estate for less money — I’m adding value for profit, not profiting off the current market condition. Keep in mind that inventory is one of the highest factors in market time, and the lack of inventory is still very much in our favor.

Lower home prices also have an affect on the mortgage banking industry in a positive way; providing greater affordability, and lower DTI (debt to income) scenarios for home buyers loan qualification. This makes buying more welcoming, and makes for an even more rewarding experience.

If home values casually decline in our core areas, I welcome the discount. Supply and demand remains in our favor

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