Is The Seattle Real Estate Market About To Explode?

Christian: [0:10] To another episode of the Awesome in Seattle podcast. This is your host, Christian Awesome, of the Awesome, Awesome group at Wilson Realty Exchange, Inc. We are a real estate agent group based in Seattle. We work all over the Seattle metro area, from up north, east side, down south. We're all over the place. Today's episode is gonna be a really helpful one, we think. That's what we try to do with all of our episodes, but this one especially, we're gonna give you an update on the Seattle-area real estate market. There has been a lot of change over the last six, seven months, since January, and we've had a lot of questions from people as to what exactly is going on. So let's go over that. Before I do, I gotta introduce my wonderful co-host, Joanna Beecher, of the Awesome, Awesome group.

Joanna: [0:56] Hello.

Christian: [0:56] Hello. Thank you for being here. Why don't you kinda start us off with a quick recap of what happened the second half of 2022, which helps set the stage for where we're at in 2023.

Joanna: [1:08] Okay. Well, the second half of 2022 was pretty volatile.

Christian: [1:12] Mm-hmm.

Joanna: [1:12] That's when rates jumped from being in the 3s and then jumped up into the 6s and the 7s- Mm-hmm … within a matter of weeks. Yeah. That was- It was crazy how- … a lot … quick that

Christian: [1:22] happened, yeah.

Joanna: [1:23] So this, you know, I guess you could kinda figure out, halted our market here, and it just stalled out. Buyers didn't wanna buy, sellers didn't wanna sell, and there you have it.

Christian: [1:35] Mm-hmm, yep. So that brings us to the start of 2023. In January, the median sales price for a single-family homes and condos in Seattle, and all stats we're using are Seattle-specific, only because we have to limit them somehow. What happens in Seattle generally is happening other places as well, nearby. So that said, the median sale price for single-family homes and condos in Seattle in January of 2023 was $750,000. As of June, which that's the last month that we have complete stats for, home prices had increased $65,000, up to a new median sales price of 815,000. On average, homes were selling in just seven days, which is much, much faster than the 35 days in January. Which, that said, there are time of year things going on here as well.

Joanna: [2:31] Absolutely.

Christian: [2:32] Every winter, the market slows down. We always have the fewest number of homes, and home prices are always lower in December, January as well, just because there's seasonality built into this. So take this with a grain of salt. But 35 days on average was the longest that we've had for a couple years at this point. Yeah,

Joanna: [2:51] absolutely, even in, for wintertime.

Christian: [2:53] Yes, exactly. So as you can see, though, there were, these were some extreme differences in just a six-month time period, between 35 days on market to six days, seven days on market, and 750 sale price to 815,000 for the median sale price.

Joanna: [3:10] Yes. A reason for this is that we have a large deficiency of homes for sale.

Christian: [3:14] Yep.

Joanna: [3:15] Last July, we had 300 more homes for sale than we had this July, and two years ago, we a- had almost 500 more homes for sale. It's a big difference. When there were only 1,024 homes for sale like we had last month, having 500 fewer homes for sale makes a huge impact.

Christian: [3:32] Mm-hmm. That's, like, a third less homes for sale. Like, it's a- Yeah … huge

Joanna: [3:37] impact. It's huge, and when you have just as many people looking, that's not gonna help- Mm-hmm … um, our, our real estate market move forward in a good way. Yep. And this lack of inventory has led to more competition for these homes, which, as we just learned, has made an impact home, on home sale prices. They've jumped considerably.

Christian: [3:56] Yep. Now let's talk about interest rates. Now, we are currently, as we're recording this, it is early August. Rates are currently into mid to high sevens. They're the highest they've been, I think, all year at this point. Even with rates being this high, there's still people buying.

Joanna: [4:13] Yes.

Christian: [4:14] Many predicted that rates were gonna drop by the end of this year, and while they still might, the Fed doesn't believe that inflation is still under control. They just haven't gotten it all the way under wraps, and because of that, they have indicated that they're gonna bump up interest rates one more time at least before the end of the year. We'll see if they actually do it. Obviously, the data's gonna come out, and they're gonna evaluate at that point. But the nice thing is all indications are showing that inflation is leveling off, and it isn't out of control like it was. So the Fed raising rates like they have is working. Because we are getting it more under control, and because it is stabilizing, this is actually a great thing for everyone, including buyers. Uh, interest rates will start to go down most likely because of this. And now, when I say that interest rates are starting to go down or are expected to go down, I want you to understand, we're not talking about them coming back down to the 2 or 3% range. It's probably never gonna happen again. So if you are waiting for rates to drop, 'cause we hear this a lot, if you're waiting for rates to drop back into the 2s or 3s, you're probably gonna wait your entire life, if it ever gets back down to that point. Yeah. So don't. Don't wait that long. It's not gonna happen. Most likely, rates are going to be in the 6s, maybe the 5s. If you can get an interest rate in a couple years or a year that is in, starting with a five at the beginning of it, you're probably doing great.

Joanna: [5:48] I wanted to share a story of a couple of my clients- Mm-hmm buyers- Yep … who have, I think, a really great success story- Mm-hmm … in this time, and very, very telling of what's happening in this market. Yeah. So they came to a class in-

Christian: [6:06] Our Beers and Home Buying class. Yes. Beersandhomebuying.com (opens in a new tab).

Joanna: [6:08] They came to our Beers and Home Buying class- Mm-hmm … in March.

Christian: [6:12] Okay. Yep.

Joanna: [6:13] And few days after that class, they had a strategy session with me-

Christian: [6:19] Mm-hmm

Joanna: [6:20] and a lender.

Christian: [6:20] Mm-hmm.

Joanna: [6:21] And at that strategy session, you know, we talked them through many of their questions, and also just really gave them a roadmap for, you know, what their budget might be.

Christian: [6:33] Mm-hmm.

Joanna: [6:33] And then they got started rolling with the lender on getting pre-underwritten-

Christian: [6:38] Yep … Joanna: approved Next step with me was we were getting together a sold search. Yep. I put together a sold search for them, for them to understand more of what they were looking for, and where they could afford to buy, and what they could afford to buy. Yeah. Which is a huge step of our process- Mm-hmm … which is incredibly helpful for all of you home buyers out there. Yeah, and we do this before you even go look at houses.

Joanna: [7:03] Yes, we-

Christian: [7:03] We want you to understand what can you afford, where can you afford it, and that helps you understand, should I even buy right now or not?

Joanna: [7:11] Exactly, and it's a, you know… I can highly recommend do not even start touring homes until you've had this conversation.

Christian: [7:18] Exactly, and these are totally free, by the way.

Joanna: [7:19] Yes. So that being said, we got through the sold search, and they were still like, "Okay, I think maybe we're probably a year out." Mm-hmm. And absolutely, you know, 'cause we're here to support you and your journey, and what that looks like for you, which is different but similar for a lot of people. Yep. Basically, they started going to some open houses on their own. I prepped them for what to expect there. You can also listen to it on our podcast. Yes. We talk about how to approach open houses.

Christian: [7:46] Yes, please check out that podcast. You want to do that before you go to an open house, so you can understand-

Joanna: [7:51] Yes

Christian: [7:52] what's happening, and why the agent that's there is doing what they're doing.

Joanna: [7:55] Exactly. Super important.

Christian: [7:57] Yeah.

Joanna: [7:57] So they've made it through a few open houses. Mm-hmm. Then, once they got a little bit more clear about what they were looking for-

Christian: [8:05] Mm-hmm … Joanna: they started scheduling tours with me. And honestly, you guys, it was four months from the beginning of this process, like I said, in March- Attending the class

Joanna: [8:15] attending the class, strategy session, sold search, looking at homes. They found a home and were in escrow in the middle of July, closed before the end of July.

Christian: [8:27] Yep.

Joanna: [8:27] Four months, not e- barely. Yeah. Beginning to end of their journey, and they thought they were a year out.

Christian: [8:33] Mm-hmm.

Joanna: [8:33] And they found exactly what they wanted, and the interesting part, and this is why I say it's particularly timely for this market, is they found something that had been sitting on the market for a couple of weeks- And basically, that being said, when we went to negotiate this offer, I was able to get them credits towards this home-

Christian: [8:56] Mm-hmm

Joanna: [8:56] which helps with what they wanted to do to kind of, you know, do some remodeling in the house- Mm-hmm … uh, before they really wanted to take, you know, start living there. So we got them credits, uh, in their, negotiated into their deal.

Christian: [9:11] Mm-hmm.

Joanna: [9:12] And- Which a

Christian: [9:12] credit basically is cash from the seller that goes towards their closing costs and down payment.

Joanna: [9:18] So- Which helps leave them with money in their pocket- Exactly … in the end to do with what they need to do-

Christian: [9:23] Mm-hmm … Joanna: for themselves. Yeah. It doesn't directly pay for- No … the remodels that they wanted to do.

Joanna: [9:28] Good clarification.

Christian: [9:29] But it does help them keep that amount of cash in their pocket so that when it closes, they have that extra cash on hand, and then they can use that money.

Joanna: [9:37] Exactly. Yeah. And that's very, very helpful. And the thing to note about this too is not all houses are gonna have this option. Mm-hmm. If they're a hot house and there's a bajillion people touring all the time- Mm-hmm … and a bunch of offers, more than likely you're not gonna have that chance to do that. Yep. But we did because they, they knew what they wanted. Mm-hmm. They knew it didn't have to be a hot home, and in fact, it would probably work in their favor to not do this. Mm-hmm. And that's what we found, and that's what we moved forward on, and this is what they ultimately now own.

Christian: [10:08] Yeah.

Joanna: [10:08] So I think that's a great success story.

Christian: [10:10] Exactly.

Joanna: [10:11] And, you know, well, very well worth it, uh, for them, and it's very exciting.

Christian: [10:17] Yeah.

Joanna: [10:18] Good clients.

Christian: [10:18] So that's, that's one end of the spectrum where the house had been sitting for a little bit, it wasn't even a lot- No … but a few weeks, and you were able to negotiate, which normally you're not always able to do that. On the other end of the spectrum, I have a story as well, and that is about a listing that we had in Green Lake. Obviously, a great location. We helped them buy this house back in 2015. They came to us, said, "Hey, we're wanting to buy a new house. We need to sell this one. What do we need to do to prepare this house for sale? How can, what, what updates do we need to do to make the most money?" And so there were kind of two options. One was spend, like, $100,000, almost $200,000 on totally remodeling the kitchen and the floor plan and doing all sorts of crazy stuff. The other option was much, much more minimal, and that was, it only cost them a little under $30,000. Paint, some flooring, um, some repairs here and there, curb appeal, just some basic stuff. They went with that lower price point for, for the costs of remodeling, and it paid off in dividends. They spent, like I said, about $30,000 redoing the house. It ended up selling w- in six days, six offers- $200,000 over the asking price, and there were zero contingencies. The buyer waived everything, gave the earnest money up early, uh, early release of earnest money. They were a super solid buyer, and it closed in three weeks, I think. So that's the other end of the spectrum where if you find something that's been on the market for a little bit of time, you might be able to negotiate. If you see something that's a hot home, meaning it is priced well, a ton of people are interested in it, and they're getting multiple offers on the offer review date, that end of the spectrum is where it's gonna be competitive, and you're gonna have to waive everything, and we have lots of podcast episodes going over this. If you wanna learn more, you can always listen to those, or you can just come to our Beers and Home Buying class. They are free. We do one once a month all over the Seattle area.

Joanna: [12:24] And they're fun.

Christian: [12:24] They are very fun. It's only an hour. It's zero pressure. There's always free beer, so doesn't suck. Awesome combination.

Joanna: [12:32] It doesn't suck.

Christian: [12:32] No. So what do we see moving forward? So in talking with a lot of lenders that we work with, they have so many buyers that are fully approved, ready to start buying. They could buy a house today if they wanted. Normally, a lender has, depending on how big the lender is, but, like, an individual lender will have, you know, 10 to 25 maybe pre-approved buyers that are shopping, ready to look at a time, and they're turning over all the time Right now, we have more than one lender that have told us they have 150 to 200-plus buyers that are pre-approved. They just need to decide they want to buy. Most of those people are waiting for interest rates to drop. Again, we're in the sevens, the high sevens. Interest rates are expected to drop at some point, maybe into the sixes, maybe into the fives. All these buyers are waiting for that to happen. When that happens, Joanna, what do you think's gonna happen? When rates drop, what are all these buyers that are ready to go, and this is just two lenders that I'm referring to- Right … that have a couple hundred people. What about these big banks and, and all these other buyers that are sitting on the sidelines waiting? What's gonna happen?

Joanna: [13:46] Well, thousands of people are gonna come back onto the market- Mm-hmm and they're gonna all want the houses that are on the market that everybody else wants-

Christian: [13:54] Mm-hmm … Joanna: which is going to drive up competition, therefore driving up home prices. Yes. So home prices are only going to increase, and competition is only going to increase when rates do drop.

Joanna: [14:06] Yes.

Christian: [14:07] So the recipe for success that buyers are winning with right now is they are buying in today's market with these higher rates-

Joanna: [14:15] Yes

Christian: [14:16] knowing that the lender that they're using, if they're using the right lender, and we can recommend great lenders, knowing that those lenders will refinance their loan for them for free when rates do drop.

Joanna: [14:28] Yes.

Christian: [14:28] So they're buying at today's price with still some competition, but not nearly as much competition as we see on the horizon, and then they get to refinance and get that lower rate when it happens. That's kinda what we see happening. We predicted what was gonna happen in January. In January we said, "Hey, there's a two to three-month time period where you can get a deal."

Joanna: [14:50] Mm-hmm.

Christian: [14:50] And we were seeing deals left and right, 'cause there wasn't a ton of competition, and there were some homes. That actually ended. We thought it was gonna be three months' time. It ended in February. Like, it was only really a month and a half worth of time before everyone realized and the market took off again.

Joanna: [15:05] Yeah.

Christian: [15:06] We're seeing this opportunity where you can buy in today's prices, um, with the still competitiveness, but not as competitive as what we see happening on the horizon. When that might happen, we don't know. Might be three months, might be six months, might be a year, might be more. When that happens, though, it's gonna get crazy. And buying now, if, obviously it has to make financial sense for you. We never want anyone to buy- No … just because we said, "Buy." Like, it has to make sense for you, and we do so many things leading up, like you talked about, where you are making a very informed decision. You, you will know, "Hey, this is my budget. This is what I expect, I can expect to find when I'm shopping for a home."

Joanna: [15:45] Exactly. We never

Christian: [15:47] would- We're never gonna pressure anybody … Joanna: push you onto- No … any home. Um, it ha- yeah, it just has to make sense, and once it does, and you're ready to act, that's, you know- That's your decision

Joanna: [15:56] that's your decision.

Christian: [15:57] Yeah. Yeah. We're here to assist you with that, um, process, but you're the one driving.

Joanna: [16:01] Yes.

Christian: [16:02] So if you are someone that, you know, hearing this goes, "You know, maybe we should buy. Let's at least talk about it," we would love to sit down with you and have a strategy session. They are completely free. There's zero pressure. It's just, even, most of the time we do them on Zoom. Yeah. So you don't even have to go anywhere. Very easy. You just have a half an hour Zoom one-on-one with us. There's gonna be zero selling of any sort. We're just answering questions, and we're really trying to answer the question of, what can I afford, like how much money can I afford, and where can I afford to buy what I want? That's what everyone wants to know. That's the answer that we give you at these strategy sessions. So- Yes … if you are a buyer in this market, and you're thinking, "You know what? That all makes sense. That all adds up. I'd like to start this process," all you have to do is go to our website, AwesomeNossumGroup.com. There's a Schedule button. Click on that and schedule a free strategy session with us. Um, our calendars are all synced right on there, so you can choose a time that works for you. Evenings and weekends are available, as is during the day, obviously, because we're real estate agents. We never get to stop working.

Joanna: [17:07] We

Christian: [17:07] have those- We're always available … Joanna: flexible schedules. Exactly, yes. So that's it for this episode. We hope that you learned a lot, hope you understand where we were, where we're at now, and what we kinda see moving forward, and we would love to chat with you, or if you are a prospective buyer and thinking about, you know, could this make sense? And if you're a seller, we would love to chat with you as well, because there's a lot of people that are both sellers and buyers.

Joanna: [17:30] Yes.

Christian: [17:31] And as you saw with that Green Lake deal, we can definitely help you with that as well, and that's a whole nother podcast that we could go over, how that process works. So until next time- Coming soon. I know, exactly. Until next time, we'll see you then. Thanks for listening to the Awesome in Seattle podcast. See ya.

Joanna: [17:47] Bye.