Recent events—namely the coronavirus pandemic—have caused a ripple of uncertainty across all sectors of our national and local economy, including the housing market. While that uncertainty can feel unsettling, and we won’t know the full extent of COVID-19’s effects on the market for several more months, the unknown consequences are not entirely negative. If you are considering buying a home right now, read on to learn more about the current market and what recent events and trends could mean for your home search.
Here’s what’s happening:
- We’re Reevaluating Our Priorities
With all this time sheltered at home comes time to reflect. As a society, we have been contemplating what is most important to us. Are we happy with our pre-pandemic lifestyle? Are we happy in our current homes? Are our families changing, and thus changing the kind of space we need or want to live in? Though we don’t yet know exactly how, we do know that life will look a little different for all of us post-COVID-19, and those changes may cause an increase in demand to make a move.
- Sellers Are Motivated
While many would-be sellers might consider postponing putting their homes on the market, in the Puget Sound area, there is still buyer demand. This means that there are fewer listings than there normally would be at this time of year—in Seattle specifically, inventory was down about 38 percent in June 2020 compared to June 2019. However, sellers who brave the market tend to be more motivated, which may result in better prices and more room to negotiate for current buyers.
- Buyers Are On the Rise
The number of active buyers in the Puget Sound region is increasing steadily each week. As inventory is still limited, that means there is more competition for the limited number of homes on the market and bidding over asking will become a more routine event the longer one waits. However, with Washington’s phased re-opening approach in effect, more sellers may be encouraged to list their homes in the coming weeks, potentially reducing competition for eager buyers. But statistically, new buyers are returning to the market 3:1 over new listings, so the current buyer advantage may be dwindling again, as it was before COVID-19.
- Distress Sales Are Deferred
The federal government’s stimulus (aka the CARES Act) to boost the economy and to mitigate economic fallout as much as possible, has allowed homeowners to defer listing unless they have to. There isn’t much panic-selling now, as loan forbearance allows homeowners more time to sort out their mortgage payment. But with many of these measures set to expire or as funding dries up, that could change, and we could see more homeowners forced to sell unless, of course, more steps are taken to alleviate the negative economic impact of the pandemic long-term. That said, market pundits are not anticipating anywhere near the level of foreclosures or short sales as the last recession, because homeowners today are much more qualified and market prices regionally are proving resilient.
- Mortgage Rates Are At a Historic Low
The current health crisis and steps to minimize its aftermath have kept mortgage rates from rising. Combine that with the fact that we’re in a presidential election year (an event that predictably affects housing markets across the nation), and you can expect interest rates to stay low (below 4 percent) for the foreseeable future, giving home buyers greater purchasing power.
- The Tech Sector Is Traditionally Recession-Proof
Industry titans like Microsoft, Google, Facebook, Apple, and Amazon are still expected to grow and gain value in the coming years, despite the dubious outlook for the economy overall. And restricted stock units (RSUs)—a type of employee compensation that’s been growing in popularity in recent years, especially among tech companies—are being valued at all-time highs. While this kind of income comes with certain caveats, buyers who possess RSUs that have vested and been counted as income (i.e. included on a W-2) may be able to use them to qualify for a mortgage, giving a greater number of buyers the means to buy up in a down market. As this trend continues, however, more buyers will be created, increasing competition for limited inventory.
- New Projects Are Nearing Completion
Some new condominium projects have standing inventory or are being completed during these uncertain times. As these developers are motivated to accelerate sales, we may witness price reductions, price protection, or other incentives to prompt buyers. However, these incentives will disappear as this added inventory depletes. In other words, this trend, if and when we see it, may be relatively short-lived, so buyers shouldn’t count on seeing a sustained advantage unless there is a much longer-term increase in supply.
- New Construction Isn’t Getting Any Cheaper
The cost of building new homes has been on the rise. The money developers have to put up to cover the price of land, materials, and labor is only part of that cost (other things like government fees and regulation requirements factor in, too), and all of that means that new housing today is typically priced higher than similar resale properties. While new projects are still in progress, rising costs plus the fact that most developers are now looking ahead and targeting 2021 or 2022 market conditions when setting their pricing strategies, means that these homes will be priced 10 to 30 percent higher—so buying a home now, before building costs and prices for new construction projects increase even more, should be a consideration.
- Prices May Resist Correction
Prices across the Puget Sound region were modestly lower in May 2020 than the month before, but this may be a short-lived condition. (If you’re searching for specifics, you can easily find the latest market stats and trends for your area.) Perhaps more importantly though, prices this spring are still generally higher across the board than at this time last year. The closely monitored S&P/Case-Shiller Home Price Index still projects positive growth throughout the first half of 2020, despite everything. Once that information is confirmed and released publicly, it will likely inspire buyers who have been waiting on the sidelines to start their search in earnest—meaning more home buyers and more competition in the near future. It will also motivate sellers to enter the market, but with higher price expectations based upon the positive headlines.
- Puget Sound Real Estate Is Still a Solid Investment
The region’s nationally ranked schools, lack of state income tax, resilient tech sector and steady economic prosperity mean that the Puget Sound will still be a desirable place to call home for years to come. That may mean that, despite COVID-19, our region will continue to draw buyers relocating from more expensive U.S. markets like California, as well as continue to appeal to investors from Asia and other international locations. The latter may be looking at alternatives to nearby Vancouver, BC, with its foreign buyer, speculator, and vacancy taxes, which makes buying there a pricier endeavor. And again, we’re talking about the likelihood that there will still be more buyers, more investors, and more competition for properties in the near future, even once we’ve fully addressed the realities of the COVID-19 crisis.
If you would like to discuss your home search, investment path, or how the COVID-19 health crisis is affecting the Seattle-area market with a trusted real estate advisor, please contact us→. We want you to have the information, advice, and insight you need to meet your real estate goals, and we’ll help you find an agent→ who understands your individual needs.