Have you heard the news? There are even more signs the Greater Seattle real estate market is cooling.
Bidding wars have exited stage right and price reductions are becoming common place.
By now, most everyone is catching on to the fact that our crazy seller’s market has gone away. Gone are the days of bidding wars all over the place. At least for now.
Today, we are going over 3 of the latest factors indicating that the greater Seattle Real Estate market continues to soften and it doesn’t look like this will end anytime soon. Let’s get right into it.
Our local market peaked in April with such dramatic increases in both prices and rates that buyers could no longer afford to buy a home, or at least not the one they had envisioned just a month earlier. If you want to see how and why so many buyers can no longer afford a home (despite their desire to make a purchase), then check out this video linked here (https://youtu.be/OPgJShXNvAc).
So what are these 3 latest indicators that show our market is in a longer term slowdown? Number 1: Industry layoffs. Zillow, which is based here in Seattle, laid people off earlier this year. Now Redfin and Compass, both real estate brokerages, have laid off employees as well. Redfin, which is also based here in Seattle has recently laid off 500 employees. You can read about it in the article linked here (Seattle Times Article: https://bit.ly/3ndA1WU). Glenn Kelman, the CEO of Redfin commented, “We could be facing years, not months, of fewer home sales. I said we wouldn’t lay off people unless we have to. We Have to.”
Compass real estate, which has 11 offices locally, has also laid off 450 employees. And that’s not all. Redfin, Compass and Zillow stocks are all currently hammered. At the time of this recording, Redfin and Compass stocks are at all-time lows and Zillow stock is down significantly.
Number 2. Slowing Housing Starts. Another telltale sign of a slowing housing market has to do with this term “housing starts”. Remember housing starts are an important data point and refer to the number of new home construction projects that have begun during any particular month.
Housing starts in the US sank 14.4% from April to May in 2022. That’s a big deal. So why is this important to follow? Because builders can’t afford to break ground on new construction if buyers can’t afford to make the home purchase once completed. Due to the rapidly rising mortgage rates, inflation, and cost of materials, it has become more difficult and risky for builders.
One local builder we recently talked to had to drop prices on 3 of the 4 homes that he put on the market over the past 4 months. Those price drops have ranged anywhere from $100,000 to $500,000 with the $500,000 price drop being on a luxury listing. So, to incentivize buyers he has been forced to drop prices.
Bear in mind, we still don’t have enough supply of homes. Sure, inventory is slowly creeping upwards. But the demand has gone down simply because of high prices and rates, not because we have too many homes on the market. When the Great Recession first hit housing in 2007 builders stopped building. Eventually, after several years of too much inventory, this reversed and became a lack of inventory. So, we still need builders to build. But we also need buyers to be able to afford the new homes.
Number 3. Boots on the ground and networking with active agents. This refers to both our personal experience working with buyers and sellers AND by talking to other full-time brokers. In a rapidly softening market like this one, this can often provide a better indicator of the state of the real estate market versus simply looking at the monthly market stats, which often lag behind real time data. But If you are interested in looking at the latest numbers, be sure to check out our June Market update linked here (https://youtu.be/S-FUJDjzd9g).
Every broker we have talked to over the past 2 months has noticed a significant slowdown. For instance, at our latest monthly office meeting, all the brokers agreed that the market is no longer a slam dunk for sellers. Yes, clean, move-in ready and well-priced homes are selling successfully – meaning relatively quick and a good sales price. But, IF the home isn’t well priced, well marketed or has something challenging with the home (like a weird layout or needs fixing up), it is going to sit on the market.
Will prices slide to a point of a market dump? The answer is, it is still too early to tell. If jobs remain strong and we maintain a relatively low supply of homes for sale, then prices shouldn’t go down drastically. These past 2 years have been a roller coaster ride and we are here to keep you in the know.
See you next time!