Whether I am talking with clients or catching up with neighbors at the grocery store, it seems that every day someone asks me, “How’s the market?” or I’m asked, “What do you think is going to happen in a year or two?”
My answer to the first question begins with what I know today — what’s going on in the real estate market, the stock market and life in general. The Seattle real estate market remains very strong — all the data tells us property in good condition under the $1.5 million mark will sell fast, at or above asking price, and fielding multiple offers.
At the moment
Timing, though, can be the difference between selling a home quickly or seeing it sit. For example, a handful of homes in that market sweet-spot failed to sell by the end of 2017. They came off market, then returned earlier this year and are all either sold or pending. There weren’t dramatic price drops or changes in the condition of the homes; it was a factor of time. The buyers either weren’t looking, weren’t here — like job relocators — or had to sell their current home and were not liquid. But now they all wanted to buy and had the ability to do so.
If you’re a seller and your home remains active, be patient, but be smart and use the feedback you’re getting. Listen to what brokers and buyers are saying when they pass on your home. If you’re hearing that the price is too high, that’s all the market information you need to know to prompt a price cut. It’s telling you the price is, indeed, too high.
It’s a little tougher when it’s not about price. Look at how the home is being marketed — maybe have new photos taken. Take a look at how other homes are advertised. Ask your broker what else can be done.
Down the road
The second question, about what I think is going to happen, is harder to answer. But major economic forecasters are predicting an interest rate hike. Nationwide, the prediction is that the real estate market will level off. But what it means here depends on who you are.
If we take, as an example, that million-dollar home in Seattle, we can get a glimpse of the future. A typical buyer has to finance that home purchase.
So, for a home that costs $1 million, financing buyers are looking at this scenario:
• A 20 percent down payment of $200,000
• Financing $800,000
• The current interest rate of 4.25 percent
• The monthly payment will be approximately $3,890
But if interest rates rise to the forecast 5 percent, there’s a change:
• That same 20 percent down payment of $200,000
• Still financing $800,000
• New rate of 5 percent
• The monthly payment is now approximately $4,250
In real terms, the change in the monthly payment only rises by $360 a month. But the psychological jump from a monthly mortgage in the $3,000 bracket to one more than $4,000 is much bigger. You see a real change in comfort level and confidence. It’s the difference between hearing buyers talk about the first as “$3,000 and change, I think we can swing that,” to “Yikes! It’s over $4,000 a month!”
If a buyer is already stretching, that $360 could represent not being able to afford the utilities or something else. Even though the higher rate sounds scarier than it really is, it has a definite impact. There may be fewer buyers in the market when rates rise, because there won’t be as many able to buy or willing to buy.
If you’re a seller this year, fight tooth and nail to get your house on the market before the rates rise, and take advantage of timing. Even if you can’t buy your next home, take your money and run. Rent for a while. Don’t get forced into some random house — be patient and see what happens. Maybe the rate rise doesn’t affect the market by next year, but you’re still in a great position. You have cash to buy your next house.
If you’re a buyer, prepare to be aggressive this year — buckle up and be ready to move. If you want to know what that means to you, give me a call.
As always, any change — or lack of change — in the Seattle real estate market will affect an individual depending on their own circumstances. It will vary according to who you are, what you have and what you want.
Chris Sudore is a Madison Park resident and managing broker at Coldwell Banker Global Luxury. Reach him at Chris@KingCountyEstates.com.
By Chris Sudore