Seattle real estate might be compared to a game of musical chairs. Anybody who has a seat is fearful of standing-up, because they won’t be able to find another home to buy. Low-inventory has been a persistent issue for several years, with Seattle making headlines with the lowest inventory of homes for sale in the nation in 2017. Adding more pressure to the local market, foreign investors have made Seattle the number one destination for investment in the United States Here are four predictions for 2018.
The historically tight supply of single-family homes will tighten further in 2018. After hitting a record low of 3.4 months in November 2017, the inventory of homes available for sale is expected to continue trending lower for 2018, according to the Northwest Multiple Listing Service. This tight-supply trend has been ongoing for more than five years. What has been called a trend may be the new “normal”.
Seattle-area home price appreciation will continue, but at a slower pace. Home prices have been rising steadily since mid-2012, and there is no sign the boom is ending. In King County, home prices increased almost 16 percent in 2017. Rising interest rates and tax reform will somewhat reduce upward pressure on prices in 2018. Even with some downward pressure, Zillow forecasts home prices will rise 6-7 percent nationwide. If local trends are consistent, Seattle will see home prices rise higher than the national average.
Entry-level home prices will rise fastest due to demand by first-time buyers. Year-over-year appreciation for the bottom third of homes is expected to come in at 10.5 percent to 11 percent for 2018 (December 2018 over December 2017) based on data from CoreLogic Case Shiller. At current levels of wage growth, this boom in entry level home prices is ultimately unsustainable.
Foreign investment in Seattle and Eastside will mean tougher competition for local buyers. The “Emerging Trends in Real Estate” report names Seattle as the nation’s top real estate market in 2018. Our diverse economy, ample job opportunities, and an educated workforce will keep Seattle at the top. Seattle became the number one destination for Chinese investors in 2016 and foreign investment dollars continue to pour into Seattle, affecting both residential and commercial real estate. Forecasters predict a slowing of real estate price appreciation, resulting in a more sustainable pattern of growth. However, the appreciation of home prices continues to outpace the growth in income for most workers.
With extreme demand pressures driving the local housing market, you can expect the building boom to continue, and upward pressure on home prices expanding outside of King County.
More first-time buyers will be forced to look beyond Seattle to the ‘burbs. They’ll find homes are more affordable, but commuting to jobs in Seattle will be nightmarish. You can expect more demand for homes adjacent to rail and transit stations.
Aging baby boomers will continue to stay put, remodeling their homes so they may age-in-place. This trend has baffled the housing industry and innumerable experts who forecast the boomer’s would sell and down-size in record numbers. Instead, aging Americans are staying and remodeling in record numbers.
According to Veros, a valuations provider, Washington State will dominate the nation’s real estate markets. The company’s latest VeroForecast for 2018 reports “Washington State is set to boom –occupying all Top-5 market spots.” “Never has one state held all top 5 spots in the forecast. The Seattle, Bellingham, Bremereton, Kennewick and Mount Vernon markets make up the ‘Top 5’ in Veros’ report.”
RAY AKERS is a licensed Realtor for Akers & Cargill Properties in Seattle. Send your questions to ray@akerscargill.com or call 206-722-4444