This has been a year for the record books.
In 2015, the calendar had little influence over real estate market activity. Seasonal business patterns we’ve come to expect were erased this year.
The headline-making theme for all of 2015 was the extreme shortage of listings available for sale. Supply never really caught up with demand this year, which helped drive prices higher. In October, there were 32-percent fewer homes on the market, compared to the same time last year. Even with the short supply, the volume of pending sales made last October the second-best October on record.
Home prices in King County are about 7.3-percent higher than a year ago. In Seattle, the median home price is up 7.8 percent over 2015. Condominium prices are surging, according to the Northwest Multiple Listing Service (NWMLS). The median condo price was $291,000 in King County, 18?-?percent higher than a year ago. In Downtown Seattle, the median condo price in October was $539,000, a whopping 35-percent higher than a year ago.
Needless to say, this is one of the best real estate markets I’ve ever seen — for sellers, that is.
According to the NWMLS, there is an acute shortage of inventory. Right now, there is a 1.2-month supply of homes in King County, well below the four- to six-months’ supply, which is considered a balanced market. In Seattle, the supply of homes has been one month or less for most of 2015.
Given the extremely tight supply, homes and condos that do come on the market are receiving multiple offers and selling quickly. (This is also true of commercial real estate and vacant land, where inventories are also at record low levels.)
The latest trend is rising prices in the suburbs. In October, median prices of single-family homes sold increased the most in the suburbs: The median price jumped 17 percent from a year ago to $449,950 in North King County, and also 17 percent in Southwest King County, to $297,824.
The trend, combined with relatively few homes for sale, is supporting price gains outside King County, too. Snohomish County’s median home price was $365,000, up 11.3 percent over the year. The median price in Pierce County was $255,250, a 10.5-percent increase, according to a recent Seattle Times report.
In 2015, the bidding wars so familiar to Seattle migrated to the ‘burbs. Will the supply-and-demand imbalance continue in 2016? I’m betting, yes. Buyers should work closely with their Realtor to strategize how to best position themselves for winning a bidding war in 2016.
Higher interest rates?
The other issue that poses the greatest impact to the real estate market is interest rates. Where will rates be in 2016? There’s only one answer: higher.
Nearly seven years ago, the Federal Reserve set its benchmark interest rate near zero as a way to stimulate the economy. For most of 2015, the Fed has been hinting that rates may rise near year’s end. The interest rate in October was 3.74 percent; in November, the interest rate was slightly higher, at 3.81 percent.
So when might the Fed raise interest rates? The Federal Reserve will most likely take action to raise interest rates on Dec. 16. That’s because the unemployment rate has dropped to 5 percent, and that’s considered “full employment” by the Federal Reserve and many economists.
The odds-makers on Wall Street show a 70-percent probability of a Federal Reserve rate hike in December. That’s the highest probability reading yet ahead of a Federal Reserve decision. About 92 percent of the business and academic economists polled by The Wall Street Journal in November said they expect the Federal Reserve to raise interest rates at the December meeting. (In the unlikely event that the Fed takes no action on interest rates, the next likely dates are Jan. 26 and March 15.)
Stabilizing rental rates
For those who rent, there is good news for 2016. The soaring rental rates are easing. Between October 2014 and October 2015, rents increased 5.3 percent, according to the U.S. Bureau of Labor Statistics. In the prior six months of 2015, rents in Seattle have decreased 1 percent, or $19. As of October 2015, the average one-bedroom apartment in Seattle rented for $1,634 and a two-bedroom apartment rented for $2,073.
2016 is shaping-up be a record year for Seattle real estate. Seattle is ranked fourth on the list of Best Real Estate Housing Markets for 2016. Home prices will rise as much as 14.9 percent, according to housingpredictor.com. You can bet 2016 will continue to be a seller’s market. Buyers will need to connect with a skilled Realtor if they hope to win a bidding war in 2016.
Renters may catch a break in 2016, as dozens of new apartments are completed, adding much needed rental inventory and bringing back some balance to the rental housing market.
In summary, Seattle is poised for great year in 2016. The healthy economy — anchored by major employers like Microsoft, Amazon and Boeing — will continue to produce higher salaries, which will bolster the housing market.
RAY AKERS is a licensed Realtor for Lake & Co. Real Estate in Seattle. Send your questions to ray@akerscargill.com or call (206) 722-4444.