Curious what will happen with Seattle area real estate in 2020? Spoiler alert – a lot of the same, but read on for a synapsis of information I have gathered about our economy and housing.
First – I must tell you that this year has already started with a BANG..
My open houses the past few weekends were packed. *Interesting side note (I had to have people text or call me to be let in the home) most of the phone numbers were not local. Fellow brokers have had busy open houses as well and many listings that have been on the market for weeks/months received offers, sometimes multiple offers.
I just attended an event to hear Windermere economist Matthew Gardner’s take on Seattle’s 2020 economy and how it will impact the real estate market:
On the national level we are experiencing a slight slowing down in the economy. Trade wars are causing some inflation concerns and business confidence is wavering. There is more to that but many of you have been wondering about the possibility of a recession.
Will a Recession Happen?
Mr. Gardner predicts a 26% chance of recession later in the year. Although he did say that likely it will not happen. Worst case, if it does, it will be a normal business cycle recession and will not affect real estate prices.
In fact, recessions do not always lower real estate prices. If you remember the last recession, the ‘Great Recession’ (December 2007 – June 2009) you might know it was CAUSED by real estate. Big difference. So don’t panic if you hear this word uttered.
What’s Going On in the Seattle Area?
Lots of people want to move to our beautiful part of the world. Many are relocating to the Seattle area for tech jobs – I read that Amazon will be adding 10,000 jobs this year. It’s not just Amazon, we have Facebook, Google, Expedia, Microsoft, F5, list goes on… People are moving to Seattle not just for tech jobs; some are coming for the quality of life, some are ‘climate migrants’ searching for a better home for their future generations.
Where are these people going to live?
Interesting question – for many years now we have been struggling to keep up with the housing demand of the growing population. Low ‘inventory’ of homes for sale coupled with high demand – lots of buyers shopping – has in part, been the reason for prices skyrocketing in the Seattle area.
Why is Seattle not building more homes to meet this demand?
We are not building because land is scarce and expensive, labor and materials are expensive and the real whammy is the high cost of regulation to build anything in this City – something like 25 cents of each dollar spent on construction goes to regulation fees. To make a profit, builders are not building entry level homes, or even many mid-range homes. Most of the building is happening in the higher-end and luxury market.
Wait, what?
There is NO MORE LAND. We can’t build over water (yet). Seattle is at it’s max for large scale developments. Everything now has to be built on infill – meaning on empty lots within the City – these are scarce.
Seattle needs to zone for more density. Yes, I am sorry, but this is true. Look, I have lived in Seattle since 1999, dare I say I saw a part of ‘old Ballard’ – but the people ARE coming!
- Did you know that 73% of Seattle is zoned for single family? and that…
- HALA (the last re-zone that was to create affordable housing) only re-zoned 4% of single family?
Materials are expensive because they are and because the tariffs on construction materials have increased the prices – Tariffs on lumber from Canada. Tariffs on PVC pipe, steel aluminum products, etc…
Labor is expensive. There are less skilled carpenters available because there are less people interested in learning trades. For general labor we now have less immigrants who used to do this type of work for pay most USA born won’t touch. And – in Seattle, who can afford to work for low pay?
To add to that people are staying in their homes longer (average of 8.2 years versus 4.2 years in 2000). In part because the options for a move-up homes are slim and in part because we have locked in historically low interest rates. But also, people are not moving around for jobs as much as in past history and many people are not retiring.
With not as many retirees downsizing the ‘move up’ buyers don’t have larger homes to buy; in turn they are not freeing up smaller homes for first-timers.
Are you still reading? – Here is what you really wanted to know:
- 2020 will continue to be a year of low inventory of homes for sale and pent up demand from buyers.
- Mr. Gardner predicts there will be a ‘modest’ price appreciation for homes. About 6.6%
- Sellers still have some unreasonable expectations of prices. It is a seller’s market but the homes that sell are listed within the market price range. Buyer’s are smart now and buyers are still experiencing buyer fatigue from being ‘beat-up’ in the market over the past years. Both groups need to be educated to have realistic expectations.
- Mortgage rates will edge up some but stay below 4% – well below historic averages.
- Seattle economy will outperform the US economy, there will be continued corporate growth and income growth will continue to head higher but at a slower pace.
I have summarized Mr. Gardner’s forecast thoughts here and added some of my own. For any readers who want MORE you can find Mr. Gardner’s 2020 Economic Forecast here as well as many of his insightful forecasts. Thank you @matthewgardnerecon !
Are you thinking of selling or buying this year? Let’s talk soon – make that plan of action now!
Stressing because you want ‘move up’ or ‘downsize’ but the transition doesn’t sound fun… don’t couch surf!… ask me about the Windermere bridge loan or various other plans of attack we can use to make the process easier for you.
Thank you for reading.
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