ASK RAY ABOUT REAL ESTATE | Home prices expected to rise, so buy sooner than later

Dear Ray, 

I’m reluctant to buy a home until the economy improves. Do you believe the Seattle real estate market has already reached bottom? Can you convince me that I should buy now? 

— B.B.

Yours is the most frequently asked question of 2011. In Seattle, the answer is yes. However, it’s unlikely I will be able to convince you that now is the best time to buy a home if you’re not ready to be convinced. But, I like a challenge. 

Would it surprise you to learn that agents are reporting bidding wars in Seattle? Nice homes in the popular Seattle neighborhoods are receiving multiple bids. New (pending) sales volume has been higher heading into the holidays, at a time when sales should be slowing. But if you’re not ready to be convinced that this is a good time to buy, then that information won’t persuade you.

As far as I’m concerned, this is the best time to buy a home in my 26-year career. The window of opportunity is wide open, but the low prices and record-low interest rates won’t last forever. The Fed recently signaled that interest rates may need to rise, reversing an earlier promise to hold interest rates low for the next couple of years. 

If the Fed decides to raise interest rates, it will happen quickly, and 4 percent will vanish overnight. Fearing this, savvy investors are already jumping back into the real estate market ahead of the Fed’s announcement. 

Anecdotally, I have more business right now than at any time during 2011. In conversations with other Realtors, they’ve told me they are busy, too. 

The increasing real estate activity we’re experiencing right now won’t show up in statistical data for a month or two, but there is every indication that we’re in the early stages of a strong recovery. I can feel the change in the market. 

More good news ahead

But don’t take my word for it: Credible experts are forecasting the Seattle-Tacoma real estate market will recover early and stronger than the majority of U.S. cities. Experts are predicting double-digit appreciation for Seattle home prices in 2012. 

CNN/Money released their forecast for Seattle: Prices will go up 10.8 percent in 2012. According to Fiserv, a financial analytics company, housing prices nationwide may drop another 3.6 percent in the first half of 2012. However, a sharp turn-around in prices is expected beginning in the second quarter (Q2) of 2012. 

Between Q2 of 2012 and Q2 2013, property values are forecast to rise 13.8 percent in Seattle and almost 15 percent in Tacoma. (Bremerton is one of the big gainers, with 17.9-percent appreciation forecast for 2012.) And we’re already seeing rising prices in some Seattle neighborhoods.

The Case-Shiller Home Price index documents a history of good news for the Seattle real estate market. Home prices have increased more than 130 percent since January 1990. During the same period, the Consumer Price Index in Seattle rose only 92 percent. That means, price fluctuations aside, the net wealth of every Seattle homeowner increased by a healthy margin over the rate of inflation. 

On average, Seattle home prices have increased 4 percent per year, since 1990. This pattern is not likely to change. In fact, Seattle is expected to experience an unusually sharp increase in property values in the next 12 to 15 months. 

Other indicators

New-home construction is a consistently reliable indicator of economic health. Nationwide, new housing starts are up almost 9 percent over 2010. The downturn in the economy sent builders running for the sidelines, but now they’re back. 

The gap in new construction is expected to create a shortage of new homes when the pace of economic recovery increases. The shortage of new homes will put upward pressure on the price of resale, or existing, homes. 

Mortgage lending is another indication of an improving real estate market. Banks have begun making loans at the highest rate since the financial collapse in 2008. Lending increased by about 10 percent in October alone. 

With record-low interest rates, banks making more loans and home prices beginning to rise, what more convincing is necessary? Now is the best time to buy a home. 

You should expect more buyers in the market in 2012, occasional bidding wars on nicer homes and rising prices by mid-year. 

Call your Realtor today, get approved for a loan and jump into the real estate market. You’ll be glad you didn’t wait longer.

Thanks to my readers and those who have contributed to the “Ask Ray”’ column in 2011. I wish everyone a prosperous new year! 

RAY AKERS has been a licensed Realtor for more than 20 years. Send your questions to or call (206) 722-4444.

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