Market Update

The Future of the Seattle Area Real Estate Market

I have delayed sending out predictions on our market because up till now, it has been hard to sift through the fog of happy-talk, doom and gloom, spin, and mangled statistics and come up with an intelligent argument.

As usual, the news is both good and bad. Local economists and other experts predict our real estate market will continue declining in price levels, and bottom-out sometime in mid-2010. How fast it will recover after that is unknown, but the factors that make Seattle one of the best markets in the nation (educated, hi-tech employment base, high quality of life, geographical limitations to growth) will still be here on the other side. However, the times of high demand and 10%+ year after year appreciation probably won’t return. When buyer confidence returns, though, there will be some isolated pockets of scarcity, and some potential profits for astute investors.

Now, to answer the “Should I buy’? and “Should I sell”? questions.

First, let me say that the markets are not dead. Buyers are buying and sellers are sellling for the same reasons people have always bought or sold real estate. So, if you buy now, you will not be alone. If you sell now, there are buyers out there.

Reasons to buy now:

• You want to take advantage of some historically low interest rates, and have a down payment and good credit scores (700+). Presently 30 year fixed rates are dipping below 5%. How long rates will stay low is unknown. Unfortunately, all of the remedies that the new Administration has in mind to stimulate the economy are also inclined to be inflationary, and could lead to higher interest rates. In the long run, having a higher mortgage rate is more expensive than paying a little too much for the property.

• You want to take advantage of a big selection of properties available at some unheard of prices. This is an especially good time to buy new construction, as it is plentiful, and available at the biggest discounts. There are also some great foreclosure deals out there.

• You anticipate owning the property for at least 4 years. It will probably take that much time for the market to bottom and come back up to where you could sell without losing equity.

• You are an investor and have found a killer deal, have spotless credit, and are working with 25% to 30% down minimum.

Reasons to NOT buy now:

• You want to buy at the absolute bottom of the market. As much as we Realtors wish prices were at the bottom, and are going to reverse tomorrow, they probably are not. Many experts predict we will see the bottom in 2010.

• You are not sure you can continue to own for at least 4 years.

• You want to buy investment property. As an investor, there are some very tempting deals right now in some nice areas. Remember, we haven’t reached bottom yet, and unfortunately, the interest rates for investment properties are higher than for owner occupied, and minimum down payments are in the 25% to 30% range, and higher for apartment buildings. Also, rents will be coming down, and so will prices to maintain the healthy cap rates that investors now want. Still, many investors are buying now.

Reasons to sell now:

• You are planning on selling sometime in the next 3-4 years. As bad as prices are now, they will probably be getting worse before they get better. If they do bottom in 1.5 years in mid-2010, how long will it take them to come back up to today’s prices? Another 1.5 years? More? Today’s prices may be the best we will see in a while. Remember, there ARE buyers out therebuying, we just have to work harder to appeal to them.

• You have a distressed situation (adjusting mortgage, under- or unemployment, it’s usually best to find out your options and taking control of your situation sooner rather than later. If you’re not sure what to do, please call me for advice before its too late.