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Strategy is Key in an Extreme Market
The beginning of 2016 has been quite the ride so far in our local real estate market. It has been the most extreme seller's market we've ever seen. At the end of February, both King and Snohomish Counties ended the month with only one month of inventory based on pending sales. Pending numbers (the amount of homes going under contract) were up 35% in King County from the previous month and up 24% in Snohomish over the previous month. Demand is strong! How we manage that demand is critical. Every type of market calls upon different skills to achieve the best outcome for our clients. In this extreme seller's market the strategy one creates for their sellers to gain the best possible outcome is a fine-tuned, high-effort approach.
First, market research and price positioning not only takes studying the history of the market, but anticipating what is next, so no opportunities are missed. Second, properly bringing the home to market is still paramount. Even though there are less homes to choose from in this market, how a home "shows up" could make a difference of thousands of dollars in return for a seller. An investment in professional photography, staging and marketing only adds to the exposure, increasing interest from the buying public. Third, managing the demand – this is huge! This is where communication and being the calm in the storm is key. It is always our goal to harness control and bring calm during the intense initial market time. It is not our goal to take the first offer that comes our seller's way. Instead it is our goal to massage what the home has to offer over a set period of time in order to garner a great price for our Sellers, but also superior terms, such as waived contingencies. Fourth, it is our goal to end with a contract that has a great price, but also one that will make it to the closing table. There are obstacles in this accelerating market, such as passing appraisal, which we anticipate up front to insure a smooth journey through closing.
By completing extensive market research, studying upcoming trends, highlighting a property's features with superior marketing, executing a strategy to manage the demand and negotiating the best terms for our sellers, we are creating above market-average results! In the first two months of 2016, the average cumulative days on market in King County was 40.5 days and Snohomish County was 50.5. My office averaged 23 days and 25 days respectively. In those same two months the list to sale price ratio in King County was 100.5% and 99.5% in Snohomish County. My office averaged 101.2% and 103.1% respectively. Saved market time and higher price acceleration is resulting in a better bottom line for our clients.
These results do not come without a refined, strategic approach. Understanding the nuances that each market brings equals results in the best interest of our clients. If you or any one you know is contemplating participating in this extreme seller's market please contact one of our agents. It would be our honor to have the opportunity to help create and navigate a successful strategy resulting in a win.
It’s an Amazing Time to be a Seller!
The two graphs here illustrate the amount of homes for sale and the amount of homes sold over the past two years in King and Snohomish Counties. This gives us a good look at the simple principle of supply and demand. 
We are currently experiencing one of the strongest Seller's markets in recent history. A Seller's market is defined by having three or less months of available inventory. Currently, King County has 1.2 months of inventory based on pending sales and Snohomish County 1.3. Where this particular Seller's market is unique is that it is not only a shortage of inventory creating this environment, but very high buyer demand as well. Our local job market is thriving, so much so that many people from out-of-state are relocating here to be a part of our economy and the quality of life the Greater Seattle area has to offer. Couple the healthy local economy with still historically low interest rates and the audience for homes that come to the market is huge! Multiple offers are very common and prices are increasing.
In order to get a better understanding of the market conditions we dug a little deeper and were quite surprised. We looked into the amount of new listings that came to market this January, assuming that there would be a huge deficit of new listings – we were wrong! In King County there were only 111 less listings (-4%) that came to market this January compared to last January, and only 16 less listings (-1%) in Snohomish County. Yes, fewer homes are coming to market, but the high buyer demand has eaten up any inventory carryover month-to-month, leaving us with 30% less homes to choose from compared to the year prior – hence the very low months of inventory. We are coming close to selling out of homes each month and new inventory is required to create more market. It is sort of mind blowing! The good news is, if you look at the graphs above you will see a seasonal uptick in inventory in the Spring and Summer months, and that is needed to meet demand. If you are considering putting your home on the market this year I would advise the sooner the better, as buyers did not hibernate for the winter and will not be worried about flowers blooming in your front yard. Sellers that beat the Spring increase in listings will enjoy a larger audience due to less competition. If you’re a buyer, it is overwhelmingly important that you are aligned with an agent that knows how to win in this market. Terms, negotiations, communication and market knowledge is what sets a highly capable selling agent apart and is required to prevail.
If you have any curiosities or questions regarding the value of your current home or purchase opportunities, please contact any of our agents. It is always our goal to help keep you informed on all things real estate, and help you manage these investments.
Housing Demand Defined
What defines a housing market? We have had many different markets over the years that have been defined by certain identifiable factors. Will the last person leaving Seattle- turn out the lights, do you remember that billboard from 1971? Or the global housing boom of 2005-2007 that was driven by sub-prime credit lending options (which no longer exist, thank goodness!). Our current market is defined by strong demand and low inventory – the basic economic principle of supply and demand – Economics 101! A market with 0-3 months of inventory is a seller's market, 4-6 a balanced market and 6+ months a buyer's market. The route of the 2007-2011 economic down-turn, where months of available inventory favored buyers and was as high as 13 months, seems like ancient history. Since the Summer of 2012, months of inventory has favored sellers in both King and Snohomish counties, with an average of two months of available inventory between the two counties over the last three years. There is a market divergence going on between King and Snohomish County due to some unique factors each county possesses.
First, King County's lack of inventory has been drastic. Year-to-date, it has hovered at one month of available inventory, which means that each month we are nearly selling out of homes! This is due to the fact that demand is high and inventory is down. In the last 12 months, Seattle has had 27% less homes for sale than the previous 12 months, and closed sales are up 6%. In fact, Auction.com just named Seattle the number one housing market in the nation. This is due to the city's large technology sector driving employment, low interest rates and an increase in household formation. The housing premium in Seattle is rooted in shorter commute times to job centers, high walk scores and hip urban centers. The premium is real though, with the median home price over the last 12 months in Seattle reaching $528,000 – up 13% from the previous 12 months.
In Snohomish County inventory is still tight, with an average of two months of available inventory this year. Inventory has been somewhat supported by new construction and improved equity levels for re-sale properties. The median home price over the last 12 months was $347,000 – 34% less than Seattle. Median price growth is up 9% complete year-over-year.
What should we expect going forward into 2016? In both counties there was an increase in inventory in the third quarter. This is a promising indicator that folks are feeling more comfortable coming to market due to price increases after a booming spring market and healthier overall economic environment. Where this market is different from the bubbly market of 2007 are the drivers of the strong local economy, low interest rates and job growth, versus the unsustainable lending standards of the sub-prime loan movement. I believe we will see more homes come to market, especially as we head into the spring 2016 market. Folks are ready to move on to what is next for them, and recouped prices are enabling those choices. This increase will be welcomed as it will provide more options for buyers and will start to temper price growth, which is a good thing.
Where this market has gotten a bit tricky, is where one goes once their home sells. The low inventory has made this challenging, but with any market challenge you find creative and strategic ways to maneuver through and find success for your clients. Windermere has a great Bridge Loan product to utilize, temporary moves have solved these transitions, and longer closings with seller rent-backs have also been widely used to help make seamless transitions. This an exciting market to participate in, and creative strategy is the name of the game. Please contact one of our agents if you would like to know more about the current market conditions and how they relate to your bottom line and lifestyle decisions.
