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2020 Outlook

2020 is shaping up to be a big year in Seattle-area real estate.

2019 Recap 2019 was a fairly stable year with most areas holding their value and some depreciating between 1-4%. This is a drop in the bucket taking into consideration the fact that nearly every neighborhood has consistently appreciated for the last 5 years. The highest appreciating neighborhoods in King and Snohomish county were Federal Way/Auburn at 10.5 % and Lake Stevens at 8.9%. Given the consistent double-digit appreciation that the core Seattle and Bellevue neighborhoods have experienced, it only makes sense that more affordable neighborhoods, that are further out, are seeing the demand. When the average salary does not rise with the level of appreciation, prices can only go up so much before buyers start looking elsewhere to make their dollar stretch further relative to square footage and lot size.

2020 Outlook

Looking at how 2019 ended is a good place to start as we predict what the 2020 housing market will bring. Seasonality aside, the inventory for King and Snohomish County at the end of December 2019 hit its lowest point since May 2018, at one-month of housing inventory. One-month of inventory means that if no homes were to come on the market, all the homes would theoretically sell within 30-days and there would be no housing inventory. It is a classic supply and demand situation. Given the current housing supply going into 2020, it is going to be a strong seller's market in 2020. Over the last 5-years, on average, inventory only changes by a deviation of about .17. Therefore, we can reasonably expect housing inventory for the first 6 months of 2020 to be between .83 and 1.17 months. This is very low. We have not seen inventory that low since April-2018 where the market was extremely competitive. Interest Rates Inventory aside, another major driver for home purchases and market activity is interest rates. Interest rates are at another low-point and the market is already near the lowest point for interest rates in nearly 30-years, again.

November 2012 was the bottom of the 30-year-fixed-rate mortgage, with rates at around 3.32%. Today, we are around 3.5%. Rates recently "peaked" (around 4.9%) at the end of 2018 when the Fed raised rates but then scaled them back at the start of 2019. Some rough math to explain how much impact rates have on buyers' monthly costs. Purchase Price: $500,000 Downpayment: 10% or $50,000 Insurance: $800/per year Property Tax: $5,000/per year Mortgage Insurance: none for this example Interest Rate: 3.5% Total Monthly Cost: $2,504 Now let's run the same example with the only difference being a 4.5% interest rate instead of 3.5%. The total monthly cost for the higher rate would be $2,763. That is nearly $260 per month, or $3,120 a year. This ultimately comes down to the fact that with lower interest, money becomes cheaper to borrow, therefore property becomes more affordable to prospective buyers.

My Experience so far in 2020 So far in 2020, my Buyer clients have been very successful in beating out other offers in competitive situations. All my buyer clients have encountered competitive situations while on their search. We are seeing the return of the "offer review date" indicating that sellers are gaining confidence about their property getting multiple offers. This has particularly been the case on the Eastside, around Bellevue and Redmond, where the competition has been high since early-December. We have seen competition pick up immensely in January, west of Lake Washington, which is an indication of how the Spring market will look.

What this means for you! AS A BUYER there are a number of positive aspects about being active in this market. The first point is that with interest rates so low it is a huge advantage allowing you to potentially buy much nicer property verses when rates were over 1+% higher. While it is a competitive market and prices are looking like they are rising this year, if you can get into a home early on in the year, you will ride the wave of appreciation throughout the rest of the year and gain equity quickly. If you struggle to compete, are not represented well and educated about the market, it will make getting into a home a challenge. AS A SELLER, with housing inventory at such a low point and demand ramping up as we get into springtime. Now is the time to prep your home for the market. If you can market your home, price, and present your home well, as a seller you can capitalize on your equity by selling and trying to push your sales price in a competitive market in favor of you.

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