Dear Ray,
I’m concerned about having too much of my retirement invested in the stock market. I plan to reduce my ownership of stocks, and I’m considering investing in local real estate.
I wonder if you can suggest some neighborhoods where I might expect higher appreciation in 2016?
— S.B.
According to Colliers International, a leading global commercial real estate company, 2016 will be “the year of real estate.” That’s because oil stocks are in the tank (no pun intended) and China’s economy continues to decline, creating a drag on the global economy.
In the United States, the stock market lost ground in 2015, and early volatility in January signaled that 2016 may be another year of losses for Wall Street. Now may be a good time to reassess your investment strategy.
From the Colliers International’s Global Investor Outlook 2016: “Sentiment toward real estate remains positive. More than half of the respondents with multi-asset portfolios said that they would increase their real estate allocations in the next 12 months into 2016. The United States will be a preferred destination for global capital.”
Increasingly, Seattle is feeling pressure from foreign investors, and there are a lot of investment dollars in search of a finite number of properties.
Last August, Seattle’s tallest skyscraper, the Columbia Tower, sold to a group of Hong Kong-based investors for a whopping $711 million. In January 2016, Microsoft co-founder Paul Allen bought another waterfront home on Mercer Island for $5.4 million. Allen is no stranger to Mercer Island; he owns at least 11 properties there.
My advice to you: Take inspiration from Paul Allen and invest in real estate closer to home, in a good location. Even if you aren’t a billionaire, you can adopt Allen’s strategy of buying real estate in a community you already know and where you’ll be near enough to self-manage.
Seattle has a number of very desirable neighborhoods, with home prices at a premium. But there are solid investment opportunities at more affordable prices if you look just beyond the pricey neighborhoods.
For example, in Seattle’s exclusive Broadmoor community, I found one home listed for more than $3.7 million. Outside the gates of Broadmoor, a few blocks away, I found a modest one-bedroom house listed for less than $350,000.
In West Seattle, there’s a house on Palm Avenue Southwest with a postcard view of the Seattle skyline. You’ll pay a reasonable $1.6 million to live there. Just a short distance away, there’s an undiscovered hilltop in West Seattle known as Pigeon Point; there, you’ll find a view home listed for $379,000.
Pick any of Seattle’s choicest neighborhoods, then target the “outer ring” of that neighborhood for affordable investment opportunities.
Keep in mind the famous real estate adage, “Location, location, location.” Location is always an important criterion, and your Realtor can point out which neighborhoods are trending hot in 2016, plus a few soon-to-be-hot spots on his/her radar.
For those with a smaller budget or an appetite for a bit more risk, consider investing outside of King County. In the four counties in the central Puget Sound region, Pierce County had the lowest median sale price in December, at $249,950. Area-wide prices increased 8.6 percent from a year ago. Some neighborhoods experienced double-digit appreciation, according to the Northwest Multiple Listing Service’s January 2016 Market Update. It’s likely we’ll see pockets of double-digit appreciation in 2016.
Since you’ll liquidate stocks for your purchase, you’ll have cash on hand for your purchase. That will help you be more competitive in the current market, where listings are in short supply and bidding wars can be expected.
My best tip: Hook up with an experienced Realtor in whatever neighborhood you’re targeting. Ask your friends, neighbors or co-workers for the name of an agent with whom they’ve had a good experience. In “the year of real estate,” you’ll benefit from having the guidance of a seasoned real estate pro.
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.