We had the unique opportunity to work with Trulia and Sam Brannan on post that would explore the competitive Seattle real estate market. Given the opportunity to contribute we also agreed to post these well thought piece on our site. We hope you enjoy – we think the article is thoughtful and informative.
What does Seattle’s booming tech industry mean for buyers?
By Sam Brannan (Guest Post)
When a local economy is thriving, there tends to be winners and losers in the housing market. Typically, priced out buyers become discouraged about soaring home prices while sellers are cashing in with high offers.
There’s no question the game has changed for home buyers in the Seattle real estate market – and the agents who represent them. The market is experiencing growing pains in affordability and demand predominantly driven by Seattle’s rising technology industry.
The influx of these skilled and well-compensated workers is propelling the metropolitan’s record population growth and changing the approach to buying – and even selling – a home.
The urbanization of the Puget Sound
An estimated 86,320 new transplants flocked to the region from April 2015 to 2016, and many of them boasting impressive house-buying budgets. “What’s happening in Seattle resembles a lot of what was seen in the San Francisco Bay Area,” says Jeff Reynolds of Urban Condo Spaces. “The urbanization of the Puget Sound correlates directly with the tech boom.”
There are now more than 80 tech-related offices in the Seattle area operated by Facebook, Salesforce, eBay and not to mention Amazon – the e-commerce behemoth promising to add 100,000 jobs in the next 18 months.
As a result, Seattle saw a 3.4% increase in job growth from 2015 to 2016 alone. And with more jobs, comes more home buyers who will need to spend more to afford a home. A typical buyer would need to spend 32.2 percent of their income to afford the median-priced home. This makes Seattle the 11th most income-draining metro to afford a home out of the largest 100 metros in the country, according to the Trulia Inventory and Price Watch.
From 2015 to 2016, median starter home prices jumped 11.2% to $281,650 – and it’s not just entry-level buyers who are forced to increase their house hunting budgets. Trade-up homes saw the largest jump of 14% in median price from $399,599 to $464,650, and premium home median value jumped from $768,885 to $887,857 – a 13.4% increase.
From an inventory perspective, trade-up and premium home inventory at the metropolitan level have also dropped significantly from 2015 to 2016, making it difficult for buyers but especially for first-timers. Reynolds notes that Downtown Seattle condominium inventory has been hit the hardest. “There’s no new construction downtown and the next condominium project won’t be ready for three years.”
Once the new condo project is delivered in 2019, there will have only been 1,000 newly constructed units in Seattle proper over a 10-year period, according to Reynolds. Buying a condo in 2017 will certainly be a challenge for prospective buyers, but not impossible with the right guidance.
From depleting downtown condominium inventory to higher demand, Seattle is certainly a seller’s market. But as a buyer, how do you acclimate to these changing times?
Be patient and set realistic expectations
Searching for a home and getting an offer accepted is now a longer process as the listing price of a typical Seattle home acts more like a starting bid price. For many buyers, waiting for the right home and going all in requires patience – or being happy with 60% or 70% of what you expected.
Despite a formidable market, feeling eager to make offers in the target price range is still common for buyers. The reality is that many buyers will have to endure three or four lost opportunities with aggressive offers until realize they need to lower expectations. And, after several unsuccessful offers, eventually pre-inspection costs begin to add up which makes it even more disheartening for buyers to continue their search.
While the Seattle market may be daunting, there is light at the end of the tunnel. Rising prices are usually a deterrent for buyers but the price ceiling is nowhere in sight, which means waiting out for the right house and attempting to buy a home will be worth the effort. “This is a market that will reward those who are patient, and once you’re in, you will begin to see a great return on investment,” says Reynolds.
Patience is important, but only half the battle for prospective home buyers. Successfully purchasing a home requires realistic expectations, and feeling discouraged is common for buyers entering the competitive market. Mitigating this anxiety about buying a home, and setting a game plan to achieve a realistic goal is now part of the evolving roles of real estate agents.
Make smart, competitive offers and trust your agent.
When push comes to shove in competition with other buyers, making your offer stand out from the crowd might give you the nudge that you need. This is why partnering with an experienced agent will come in handy, to guide you through what can be a nerve-wracking process.
- Remove contingencies. If your agent suspects strong offers might be coming in on your target home, they might suggest removing all contingencies in a competitive market like Seattle’s. Although risky, removing contingencies is one way to prove to the buyer that you’re serious about buying the home.
Inspection contingencies protect the buyer from unforeseen repairs and warrants a grace period for a buyer to back out from purchasing the home. Removing an inspection contingency will guarantee your purchase if the appraisal is above or in line with your offer.
- Find a good loan, and be able to pay it off. Often times, sellers aren’t looking for the highest offer on the table. Sellers want to be convinced that escrow will close without any financial constraints, so find a loan with a solid rate that you’re comfortable paying off. While it may be tempting to put down a big down payment, your agent will be able to offer advice on a down payment that makes sense given your financial standpoint.
- Humanize the experience. When sellers are receiving several similar offers, it’s sometimes difficult for them to choose an offer based on qualifications alone. In the early 90s, before the industry moved to the internet, the buyer’s agent presented offers to the sellers in person. This was usually to explain low offers, or unusual offers to sway sellers. Agents would even come in with flowers and gifts to try to sweeten the deal.
Nowadays, these old practices are common in a competitive market like Seattle’s. If your offer isn’t 10-15% over asking price, it probably won’t have a good chance without the “human touch” factor. Writing letters, and even creating short introduction videos will help break the emotional barrier, gives weaker offers an advantage.
The Seattle real estate market is a force to be reckoned with. Being creative, patient and aggressive is more critical than ever to buy a home. And whether you’re buying or selling in Seattle, you’re in a position to reap the rewards of a growing market.