The Wild Truth: A Market Crash?
There are so many people who tell me that they KNOW the market will crash soon and that we are in a housing bubble. The truth is that the data at least here in the Greater Seattle Area leads me to believe otherwise.?
Here is why I think you will agree:?
Agglomeration (Stay With Me)
Washington State as a whole is what is called an "economy of agglomeration."
In other words, this place is a hotbed for employers and workers in the CleanTech, Manufacturing/ Maritime, Life Sciences, and Global Health, IT/Tech industries:
“The basic concept of agglomeration economies is that production is facilitated when there is a clustering of economic activity.”
We have watched the city of Seattle transform over the years, and continue to attract people in these specific industries in sizable numbers.
When we see these industries that drive economies of agglomeration take huge economic hits, we can expect to see trickling impacts to other industries, like housing.
This tells part of the story behind the shortage of homes for sale over the last 18 months especially.
Tech Giants Here are Huge Employers and Are Not Going Anywhere
It would be a long shot to assume that the mega-companies like Google, Microsoft, Amazon, and Facebook would be planning on going anywhere anytime soon, and like I said months ago: even when agglomeration economies like Washington are blindsided by economic turmoil, you can expect things to turn around eventually, and this is what we have been seeing most recently.
Jobs, wages, and talent in Seattle's technology sector grew faster than in almost every U.S. city from 2016 to 2020, including through the pandemic, according to a new report from real estate firm CBRE.
The Ghost of Housing Crisis Past
Don't get me wrong, we still have a housing shortage, but we have seen an increase in the number of homes hitting the market, as the vaccine has become more available, and the COVID-19 safety precautions have been eased.
Believe it or not, another big reason for the housing shortage stems from the chaos of 15 years ago, during the 2006 housing crisis -- the lack of home building.
To put it most simply, we had a reverse problem back then: more homes than buyers.
This caused builders to scale back in the number of homes each year following the crisis, and essentially now here we are.
The data shows that there have been 20 times (20x) fewer homes built in the past decade than in any decade as far back as the 1960s.
In my head, I just picture a scale tipping from one way to the other…
Washington Won’t Stop Growing
The population also grew through the pandemic. According to the Washington Office of Financial Management, almost 7.8 Million people live in Washington now. 110,700 people moved here over the last year.
Despite much speculation about the desirability of WA (including from me) the population in every single Washington state county grew, except for Whitman County, which is a college town, and home to Washington State University.
So all of these economic factors point to one answer when people ask, “When is the market going to crash?”
The answer: “Don’t hold your breath.”
Millennials Feeling the Pain
In all seriousness though, a BIG segment of the population is truly financially “boxed out” of the opportunity homeownership because of this housing shortage.
领英推荐
With so many more buyers looking for homes, and so few sellers who want to sell their homes, a bidding war situation is almost guaranteed when any home hits the market at the right price.
According to the Northwest MLS, over 150 homes have sold for 300,000+ above their asking price.
Federal way homes sold for 107% above the asking price, on average in June. Yes, 1-0-7….percent.
Perspective Time: Here's How Insane That Is...
Imagine submitting an offer on a home in Federal Way for $460,000 (the average sale price in Fed last month) only to find out the next morning, that there were 14 other offers submitted before yours and the price is now $490,000!
If you were already at the top of your budget at $460K, sadly this house becomes a no-go.
Among the most boxed out are the millennial population; who I want to point out have now experienced 2 housing crises in 12 years.
In a recent interview, Daryl Fairweather, the chief economist at Redfin, told Insider Inc:
"Now that they have economically recovered and are looking to buy a home for the first time, we're faced with this housing shortage," he said. "They're already boxed out of the housing market."
With prices being bid up so high due to bidding wars, many just can’t afford to buy a house or condo….at least not in the traditional way.
Non-traditional Selling and Buying Becoming More Common (I Guess People Like Saving Money)
Alternative pathways to homeownership such as purchasing foreclosure and bank-owned homes, purchasing homes off-market, tax foreclosure sales, are a few clever strategies that many clever buyers have taken advantage of recently.
These routes involve purchasing homes that have much less exposure to the public eye, which is a great opportunity to purchase a home for a bargain. I talk quite a bit about this in one of my recent articles here.
No End In Sight?
Understanding the factors that drive the real estate market and economy helps us understand why we see what we are looking at, as well as what the future is likely to hold.
I hope that this article, based on real-time market data has shed some light on what has been a very popular topic of discussion throughout the Greater Seattle Area.
Leave Nothing to Chance
It is such a hectic time. Many people have questions.
Through the end of this month, I am extending an invite for you to schedule a short meeting with me to have all of your most important questions answered:
Etc…
I promise that your complimentary consultation will be the best step you take in this vital process; you can never have too much information.
Click here to book your in-person, virtual, or phone meeting to have your most important questions answered before making the leap!