Q1-2023
State of the Market
Good News for the Long-Term Investor
Just Sold in Mill Creek
What’s Trending
Property Spotlights
market cycles are an inevitable part of the landscape. They bring about periods of growth, stability, and, at times, softening. It is during these phases of market softness that we find ourselves at present in the Seattle real estate market. In this quarterly report, we will delve into the current state of the market, emphasizing the importance of adopting a long-term outlook to achieve success in these times.
Over the past few quarters, we have observed a gradual shift towards a softer market in Seattle. The fervor that once characterized the buying frenzy has subsided, replaced by a more measured approach from buyers and a reevaluation of their purchasing decisions. It is crucial to understand that this softening is a natural part of the market cycle and should not be seen as a cause for alarm.
During these periods, it is imperative to adopt a strategic approach that considers the long-term prospects of real estate investments. While short-term gains may seem appealing, true value lies in recognizing the potential for growth and appreciation over an extended period. By focusing on properties with underlying value and favorable long-term prospects, we position ourselves for success amidst market fluctuations.
Moreover, investing in real estate during softer market conditions requires thorough evaluation and analysis. Conducting comprehensive due diligence, assessing the location dynamics, and considering the overall economic outlook of the region are crucial steps in identifying properties with strong potential. By engaging in meticulous research and strategic decision-making, we can maximize the potential return on investment.
In this report, we will also shed light on the importance of embracing patience and resilience in times of market softness. It is natural to feel a sense of uncertainty, but by maintaining a longterm perspective, we can navigate through these cycles and position ourselves for future growth.
As we move forward, it is essential to acknowledge the resilience of the real estate market and its capacity to rebound from periods of softening. History has shown that market cycles are part of a larger pattern, and recovery often follows a period of adjustment. By understanding and accepting these cycles, we can make informed decisions that align with our long-term goals.
In closing, I emphasize the significance of adopting a long-term outlook when navigating the Seattle real estate market. Market softening is part of the normal market cycle, and with a strategic approach, it presents opportunities for growth and appreciation. Our team is here to provide guidance, insights, and unwavering support as you navigate the ever-evolving real estate landscape with a focus on long-term success.
Together, let us embrace the current market phase, maintain a patient mindset, and position ourselves for a prosperous future.
Although the data does show a decline in Seattle’s sales prices, it is a fairly marginal decline, and life in the bustling city continues to return to what it once looked like pre-pandemic, with more people returning to their downtown office jobs and businesses bouncing back. The median sales price is down 9% year over year at $864,000, a relatively small dip from Q1-2022. Homes are staying listed for longer with the average days on market at 39. As is expected when buyers begin to slow their home search and take their time looking for the perfect residence, months of inventory crept up from 0.4 months to 1.7 months year over year, but remains a seller’s market. Buyers still have to contend with higher mortgage rates than the exceptionally low rates of 2020, but as rates drop and the number of Seattle homes listed for sale increases—up 173.2% year over year—they’ll have more freedom to find their ideal property.
The market’s significant shift towards the end of 2022 signaled that the first quarter of this year was certainly going to look different than the previous year’s first quarter. The Eastside saw some of the region’s biggest changes, with a Q1-2023 median sales price of $1.345 million, dropping 21.7% from last year’s $1.568 million. Fewer homes sold which led to more inventory on the market at 1.6 months. However, it’s still firmly a seller’s market, and even with the inevitable price correction after a period of unsustainable price growth and intense demand, sellers are still entering a market with plenty of interested buyers, due in part to the enduring desirability of the Eastside area. The stark contrast between average days on market from the quarter’s 52 days to Q1-2022’s six days does indicate that buyers are now taking more time on their homebuying search and feeling less pressure to make an offer on a listing as soon as it hits the market.
Inflation above 8%, volatility in the stock market, the rising cost of borrowing money, public discord, employment concerns, and international conflict are a few of the major influences that drove the housing industry’s transition from a market heavily favoring sellers to one more ideal for buyers.
As a real estate appraiser and consultant for over 47 years, [Alan Pope] has actively analyzed the characteristics that create the ebbs and flows of the housing market. During [his] years in the industry, the Seattle metropolitan area experienced five major corrections and several smaller transitions. In the 1960s through 1990s, employment fluctuations at Boeing drove the housing industry. A typical 10-year period saw a slow market during the first two to three years of a decade, stability over the next two to four years then strong demand and an appreciating market to finish the cycle.
continued to become a major factor in the demand and pricing for residential real estate including changes in the architectural style, home square footage, and cost.
The 2000 dot-com bubble and the 2007 subprime lending and collapse of the banking industry created two of the major transitions from an appreciating market to one in decline. Fourteen years following this last major correction, the housing industry is experiencing another slowdown. This economic shift is driven by the Fed’s desire to control inflation by raising interest rates. The interest rate for a typical mortgage has more than doubled since the beginning of 2022.
This has effectively priced many buyers out of the market. Those that are still shopping are cautious as they see and feel the changing climate, with many taking a conservative approach to buying decisions. They realize that the demand of multiple buyers seeking to purchase the same home through bidding wars is no longer a factor, time is now on their side.
In the 1990s the growth of the high-tech and bio-tech industries in the Puget Sound region created changes in every aspect of local housing. Once a blue-collar community of modestly priced subdivision homes, the Seattle metropolitan area experienced inbound migration and demand for a highly paid, well-educated workforce, and for the next 20-plus years, these influences have
Throughout most of this economic growth cycle, prospective buyers were able to benefit from rising stock prices and use the value of their portfolios as a tool to finance real estate. As the stock market declined, this also impacted the economic wealth and purchasing power of prospective buyers.
Inflation is placing pressure on the everyday pocketbook as prices for goods and services continue to rise. Many prospective buyers are seeing household costs increase dramatically while personal incomes remain stagnant or fall short of the trend.
Many cycles are short-lived and those that last under three months have a nominal effect, such as 9/11, minor stock market corrections, and COVID-19. Yes, COVID-19 has had a long-term impact on how we live but its effect on the housing market lasted from March to June 2020. The fear of the pandemic and state government restrictions on showing houses slowed demand for three months. However, changing lifestyle circumstances and real estate brokers’ ability to quickly pivot to virtual showings eclipsed health concerns. Many prospective buyers transitioned to working from home and needed more space and less access to the office. This created more demand in rural and destination locations and/or homes that included recreational activities on-site for life-work balance. Between the summer of 2020 and the spring of 2022 property values were appreciating at an unprecedented rate. The King County Assessor raised the assessment values for 2022 by more or less than 30% in many suburban neighborhoods.
An appreciating or declining trend in each market segment will vary depending on location, price point, and site and home characteristics. A home close with characteristics prerequisite to meeting a broad need will experience greater demand than a rural home further distant from employment and offer characteristics that have limited appeal. An appraisal or consulting service within a market area requires an independent study to have a thorough understanding of market conditions, appreciation, or decline.
In 1992 [he] gave a speech on residential value trends studying real estate publications and the NWMLS. [He] found that there is a direct relationship between the supply of inventory and the number of pending sales occurring each month. Dividing the pending offers that occurred over the month by the number of listings at the end of the month calculates the absorption rate. It measures the strength of the market, the higher the absorption rate the stronger the demand for housing.
Historic trends illustrate that the local housing industry experiences an annual cycle each year. A slower market occurs during the winter/holiday season, demand increases through the spring, stabilizes during the summer, a slight uptick after “back to school” then the traditional holiday period.
When [he] gave the speech three decades ago, the housing market in past years was experiencing a stable trend and absorption rates were measured for King County at some 25% to 30% of the available inventory each month. In the summer of 2020 through May 2022 the absorption rate was calculated at over 65% each month and reached a high of over 250% in the first quarter of 2022 indicating that there were at least 2.5 prospective buyers per listing. Due to the short supply of inventory, sellers were receiving multiple offers, buyers making cash offers above the asking price, waiving contingencies, and paying prices that exceeded normal buyer behavior.
With rising interest rates in the spring of 2022, the housing industry began its transition from a sellers’ to a buyers’ market with many areas experiencing a softening in demand, sellers reducing their asking prices, and buyers acquiring real estate below prices paid in the spring months. Over the past six months, absorption rates have declined from some 250% to just under 50%. While there appears to be a softening in the market there remains a limited supply of inventory and reasonably stable demand.
From the peak of the market in the spring of 2022 to the trough in the final quarter of 2022, the market has seen a decline in property values from some 1% to 3% monthly, depending on location, property characteristics, the cost of borrowing money, and supply and demand. For 2023, [he] anticipates the market will see an uptick in activity due to the limited supply of inventory.
[He] believes that the market experienced the trough in the latter part of 2022, and in 2023 the first two quarters should receive positive demand and the potential for increasing property values. The justification for this transition is based on the limited supply of inventory, strong demand for housing, and interest rates that have declined from their high of over 7%.
When priced competitively, sellers are seeing multiple buyers and many placing the value of the real estate above the asking price. The first two quarters of the year are typically the most active. This appears to be the case for the future of 2023, when in January, we experienced a trend of multiple offers where many buyers are paying at, or in excess of, the list price to achieve homeownership.
What do the trends of the past tell us and how do they relate to the future? The housing market is resilient. With every down cycle of up to three years, there are, more or less, seven years of stability and growth. For those who have a short-term horizon in home ownership, acquiring a residential property may not be the best investment at this time. Historically, home ownership has always been a solid wealth-building option. [He] does not see that changing, particularly for those who plan to own their homes for at least five to seven years which will likely experience appreciation over time.
2023 Forecast Report. To read the original article or the report, please visit philgreely.rsir.com/2023-forecast-report.
Location, location, location! You will fall in love with this solid Murray Franklin-built gem. Vaulted ceilings welcome you in the entry, living, and dining rooms. Plenty of space for everyday living and hosting a crowd. Quartz counters and stainless-steel appliances in the kitchen. Four bedrooms upstairs featuring a five-piece primary suite. Hardwood floors, fresh carpet, and two fireplaces. Milgard windows and a 50-year Presidential Roof with lots of life left. Did we mention the three-car garage? Pride of ownership throughout! Lovely backyard to relax and enjoy. Walking and running trails. Community park two blocks away with a playset and athletic courts.
Don’t just get it on the market. Get it the attention it deserves. Contact phil.greely@rsir.com to start your real estate journey today.
SOLD FOR $1,250,000
Working in partnership with buying and selling clients, The Greely Group aims to provide a phenomenal real estate experience from start to finish. The core tenets of their business are innovation and vision which flow through everything they do, whether they are showing a home to a client, facilitating relationships with trusted vendors and industry experts, crafting a marketing strategy to sell a home, or producing informative digital content. With nearly $13 million in sales volume in 2022, The Greely Group expertly navigates the everchanging real estate market, guiding clients through the process every step of the way—and at the heart of it all, they are honored to serve the local community and their clients by turning real estate goals into reality.
Sotheby’s Auction House (sothebys.com)
June 22 - 29 | Prints & Multiples
June 28 | Classic Design
July 1 - 31 | The Carrera Collection
Built-ins are becoming a popular home improvement trend as they offer a seamless and streamlined look to homes. These custommade features are integrated into the walls or existing furniture, providing added functionality and storage space. From bookshelves to entertainment centers, built-ins can add both style and practicality to any room in the house. Additionally, they can increase the value of a home by creating a unique selling point for potential buyers.
Asean Streat Southeast Asian Food Hall
Westlake Center’s first floor is now home to a vibrant and colorful food hall called Asean Streat. Its decor is a visual feast, featuring vividly hued tablecloths, chairs, and even milk crates suspended from the ceiling. True to its name, Asean Streat serves street-style cuisine from the ten ASEAN nations, all under one roof. You can order from a single kiosk and combine flavors from Thai and Laotian cuisine, such as the delicious larb from Zaab Eli, with mouthwatering Vietnamese fare from Phancy Pho.
aseanstreat.com
As the past couple years have shown us, “home” can mean lots of things and can span more than just one place. If you’re considering a move or investment outside of Washington, I have the connections to help. Please check out a few of my colleagues’ amazing listings around the corner and around the globe.
Contact Phil to learn more about these homes.
phil.greely@rsir.com | +1 206.465.7215
MARYSVILLE, WA | Offered at $736,000
Listed by Phil Greely
Realogics Sotheby’s International Realty
Property ID: K386L8
SEATTLE, WA | Offered at $1,195,000
Listed by Phil Greely
Realogics Sotheby’s International Realty
Property ID: X739V3
SEATTLE, WA | Offered at $1,148,000
Listed by Phil Greely
Realogics Sotheby’s International Realty
Property ID: 7CJ7G7
SEATTLE, WA | Sold for $939,950
Listed & Sold by Phil Greely
Realogics Sotheby’s International Realty
Seller Represented
DENVER, CO | Offered at $1,650,000
Listed by Stacy Resop
LIV Sotheby’s International Realty
Property ID: HS7VP7
DELRAY BEACH, FL | Offered at $1,350,000
Listed by Patrick Meyer & Stephanie Heyman
ONE Sotheby’s International Realty
Property ID: MX7F49
OJAI, CA | Offered at $1,150,000
Listed by Kristen Currier
LIV Sotheby’s International Realty
Property ID: 62E39Y
HONOLULU, HI | Offered at $1,420,000
Listed by Yusaku Inoue
List Sotheby’s International Realty
Property ID: M9RZL5
LAS VEGAS, NV | Offered at $800,000
Listed by Brian Burns
Las Vegas Sotheby’s International Realty
Property ID: 6FN8XR
SANDPOINT, ID | Offered at $4,695,000
Listed by Cindy Bond
Tomlinson Sotheby’s International Realty
Property ID: CT9T39
WE WANT TO KNOW.
We are working with a list of investors who pay cash for fixer uppers. If you know of a neighbor or family member in the Puget Sound region who may want a quick and convenient sale, please let us know!
Please email Phil for more details. phil.greely@rsir.com
