Seattle-Bellevue Market Update | May 2019
The Seattle-Bellevue real estate market continues to be vibrant as of May 2019. Now that we are almost half-way through the second quarter of 2019, it’s interesting to reflect on the data this year and forecast trends for forthcoming quarters.
There was a 94% increase in the supply of homes for first quarter of 2019 compared to the first quarter of 2018 as a result of the May 2018 price correction that caused home values to decrease during a period of decline in buyer activity. Home values stabilized during December 2018 to January 2019 when Buyers became active. This resulted in an excess supply of properties on the market beginning in 2019. See the article I posted in September 2018 on What to Make of Seattle’s Market Cooldown.
The following graph for King County outlines single-family home and condominium sales (Solds) versus properties on the market (For Sale/Inventory), while also indicating the quantity of properties that have gone under contract (Pended).
We began 2019 in a market more favorable to Buyers (more supply than demand) and it appeared, based on my personal experience with Buyers & Sellers, that supply was gradually decreasing while demand was gradually increasing, and the market was moving back towards a Seller’s market. However, the data this year includes some fluctuations.
Currently demand and supply seem to be moving almost in parallel with a fluctuating range of approximately 1,800 to 2,200 more homes (supply) than demand (solds), which means we’re in a more balanced healthy housing market. The following are the differences between supply (i.e. homes on the market) and demand (sold homes):
January 2019: For Sale 3,752 | Sold 1,603 | Difference 2,149
February 2019: For Sale 3,760 | Sold 1,957 | Difference 1,803
March 2019: For Sale 4,416 | Sold 2,246 | Difference 2,170
April 2019*: For Sale 4,791 | Sold 2,913 | Difference 1,878
*In April 2019, there was approximately 1.6 months of inventory. This is still low compared to the National Association of Realtors® data showing a national average of 3.9 months of inventory.
This is good. Healthy market conditions cannot persist if home values increase beyond what Buyers earn and can afford, which is one of the factors that lead to the May 2018 price correction and resulted in an excess supply of homes on the market.
Now, I’m seeing multiple offers below $1.6M and properties at the higher price points are taking longer to sell because there are fewer qualified Buyers. Although some homes receive multiple offers, I’m not seeing purchase prices wildly escalate, but Sellers are receiving more competitive offers with less contingencies. For example, prior to the May 2018 price correction during the white-hot Sellers’ market over the last several years, purchase prices in King county were on average approximately 2-4% above list prices. Conversely, in 2019, purchase prices are on average approximately 0 to 2% below list prices.
Moving forward, based on general seasonal trends for King county, both the quantity of supply and demand of single-family homes and condominiums increases from January to June and then decreases again to January. However, each micro-market (e.g. condominiums below $1M in downtown Bellevue) varies slightly.
The following graph for King County outlines single-family home and condominium sales (Solds) versus properties on the market (For Sale/Inventory), while also indicating the quantity of properties that have gone under contract (Pended) over the last 5 years.
Note the red curve above indicates the quantity of properties going under contract consistently decreases after May, which indicates Buyer activity begins decreasing.
However, each micro-market is slightly different. For example, the following graph represents single-family market activity in West Seattle, zip code 98126, over the last 5 years.
Based on the seasonal trends above, the quantity of properties going under contract (Pended) begins to decrease after June (AKA Summer Slump. See article I posted on July 18, 2017), but there is a surge in activity from September to October. Therefore, the best time for a Seller to list would be in late August before Labor Day weekend.
The following graph represents the average price per square foot ($/sqft) for single-family homes in King county over the last 5 years:
Home prices are generally the same or up to 3% lower relative to this time last year. However, the average $/sqft increased from April 2014 to 2019 from 236 $/sqft to 363 $/sqft, respectively, which is a 53.8% increase.
The median sold price for single-family homes in King county was $725,000 in April 2018 and $698,000 in April 2019. However, the median sold price in April 2014 was $432,000.
Home ownership is on average 6 years. If we conservatively assume a 3% to 5% appreciation rate, which is the national average, a $698,000 property will be valued at approximately $833,449 to $935,387, respectively, after 6 years. However, such appreciation rates are subject to exogenous events including recession, Federal Reserve monetary policy mistakes, trade, geopolitical matters etc that could adversely affect real estate values.
Based on current economic conditions, I believe home prices will continue into the future, but at a slower rate of growth. See article I posted in November 2017, on Slower (Not Lower) Home Price Growth.
The Federal Reserve appears to be considering a reduction in the fed funds rate, which could translate to lower mortgage interest rates. See Wall Street Journal article, dated May 22, 2019.
Please let me know if you’re interested in selling a property or looking to buy in the greater Seattle-Bellevue metro area. I’d be happy to help.