About Seattle Bubble
Seattle Bubble is the Seattle area’s #1 resource for news, analysis, commentary, and community discussion on the local real estate market. This community site is focused on productive and open discussion of the local housing market, so that everyone involved can work toward a goal of improving understanding and dispelling myths.
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Founded in August 2005 by Timothy Ellis
Editor: Timothy Ellis
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Publisher: Thatch Mound
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Some Thoughts on Today’s Housing Market
Don’t take anyone’s word when it comes to what will likely be the largest financial decision of your life. Do the research, and determine if the market is right for you. That’s what Seattle Bubble is for: providing a resource where regular people can assess the local housing market on their own.
So what’s going on with today’s housing market in Seattle? Where have we been, and where are we going?
Here’s what happened with the market from about 2003 through mid-2007:
- Irresponsible, loose lending drove prices to artificial highs, pricing out responsible individuals and families that just want to make a decent down payment and get a traditional loan on a reasonably priced house.
- Virtually anyone that could “fog a mirror” was given a loan, regardless of their ability to pay it off. The resulting record volume of sales (across the country and in Seattle) was simply borrowing home buyers from the future.
- These macro-economic factors drove home prices up further than the fundamentals could support.
- Home prices in Seattle did not rise as fast or as far as some other places in the US (though they did rise faster than many), but they still rose faster than they would have based on a strong local economy alone.
- The resulting level of local home prices was not supported by any of the fundamentals that drive a healthy housing market:
- Incomes – “Seattle has lots of high-paying jobs!” (See: 1, 2, 3, 4)
- Employment – “Seattle is adding tons of new jobs!” (See:1, 2, 3)
- Population – “Lots of people are moving here, and they’re not making any more land!” (See: 1, 2, 3)
- Rents – “Rents are rising, and you’re throwing away your money if you rent.” (See:1, 2)
- However, beginning in March 2007, the financial house of cards collapsed, knocking the legs out from under the Puget Sound housing market.
Here’s what’s happening now:
- We are presently seeing a return to responsible lending standards, as the banks experience the consequences of writing loans to people who did not have the ability to pay them off.
- Not only is it more difficult to get a loan today, but because of all those borrowed buyers in 2003-2006, there just aren’t very many people out there buying homes today.
- As a result, the number of homes sitting unsold on the market has reached record levels, while the number of sales continues to fall through the floor.
- This is pushing prices back down, but because of the nature of the housing market, prices generally move much more slowly on the way down than on the way up.
- In order to buy a home today, you must be highly qualified financially. There are a record number of homes to choose from, but a clear risk that prices will continue to fall.
Where are we going from here?
- Despite the slight drop since 2007, homes in the Seattle area are still priced higher than the fundamentals would suggest they should be.
- As lending standards continue to tighten and interest rates move up, further downward pressure will be placed on home prices.
- Macro-economic factors drove prices up, and will in turn continue to bring prices back down (yes, even in Seattle).
- Because Seattle did not experience as much of a price boom as some other regions, prices here likely will not fall as far. However, they will most likely continue to fall for at least a few years.
So is now a good time to buy?
On average, now is probably not a very good time to buy a home in the Seattle area. It’s definitely a better time to buy than 2006 or 2007, when it seemed like every house on the market had a bidding war with waived inspections, but with prices likely to continue falling, it’s hard to call this a great time to buy.
That being said, whether or not to buy is a personal decision that only you can make. Don’t let a blog or a real estate salesman make that decision for you. Consider all the options and risks, and make an informed decision based on your unique circumstances. If you find a home that you love, at a price that you’re comfortable paying (i.e. – you wouldn’t be upset if the price dropped another 10-20%), and you plan to live there for a long time, then go for it. If you are looking at a home as a place to invest your money, then you should probably reconsider.
Again, don’t take our word for it. Go out there and do your research, and make an informed, intelligent decision. You’ll be glad you did.
