2016 was another stellar year for the Seattle housing market, in which a surplus of buyers and a deficit of sellers drove home prices higher across the board. So, can we expect to see more of the same in 2017? Here are some of my thoughts on the Seattle/King County housing market for the coming year:
1. Our market has benefited greatly from very healthy job growth, driven in no small part by our thriving technology companies. Economic vitality is the backbone of housing demand, so we should continue to see healthy employment growth in 2017; however, not quite as robust as 2016. Migration to Seattle from other states will also continue in the coming year, putting further pressure on our housing market.
2. Are we building too many apartments? The answer to this question is “maybe”. I believe we are fast approaching oversupply of apartments; however, this glut will only be seen in select sub-markets, such as South Lake Union and Capitol Hill. Developers have been adding apartments downtown at frantic rates with many projects garnering very impressive rents. In the coming year, look for rental rate growth to slow and for concessions to come back into play as we add several thousand more apartments to downtown Seattle.
3. The Millennials are here! And they are ready to buy. 2016 saw a significant increase in the number of Millennial buyers in Seattle, and I expect to see even more in 2017. The only problem will be whether Millennials will be able to find – or afford – anything to buy.
4. Home prices will continue to rise. But price growth will taper somewhat. The market has been on a tear since bottoming out in 2012, with median home prices up by a remarkable 79% from the 2012 low, and 14% above the pre-recession peak seen in 2007. Given the fact that interest rates are now likely to rise at a faster rate than previously forecasted, I believe price appreciation will slow somewhat, but values will still increase at rates that are well above the national average. Look for home prices to increase by an average of 7.5 – 8.5% in 2017.
5. More homes for sale? I am optimistic that inventory levels around Seattle will increase, but it still won’t be enough to meet continued high demand.
6. This is my biggest concern for the Seattle housing market. Home prices – specifically in areas with ready access to our job centers – are pulling way ahead of incomes, placing them out of reach for much of our population. This forces many buyers to move farther away from our job centers, putting additional stress on our limited infrastructure. We need to have an open discussion regarding zoning, as well as whether our state’s Growth Management Act is helping or hindering matters.
7. New Home Starts/Sales. As much as I would love to say that we can expect a substantial increase in new homes in 2017, I am afraid this is not the case. Historically high land prices, combined with ever increasing construction and labor costs, slow housing development, as the price of the end product is increasingly expensive. This applies to single family development as well as condominiums. We should see a couple of towers break ground in 2017, but that’s about all. Vertical construction is still prohibitively expensive and developers are concerned that there will not be sufficient demand for such an expensive end product.
8. Are we setting ourselves up for another housing crash? The simple answer to this question is no. While home price appreciation remains above the long-term average, and will continue to be so in 2017, credit requirements, down payments, and a growing economy will all act as protectors from a housing crash in Seattle.
Windermere Blog | 2017
Matthew Gardner, Windermere Chief Economist
You want a real estate revolution? We’ve got you covered: Next year, more than half of all homes will be bought by first-time home buyers, according to an exclusive survey of buyers by realtor.com®. It’s a seismic shift from 2016. And here’s the kicker: Most of those newbies will be millennials.
Get ready for a new-look housing market.
Each year, realtor.com® does an annual survey of home shoppers to get to the heart of home-buying trends. And what we found this year is a true sea change in the buying population that will affect which homes and neighborhoods are the most desirable in 2017.
In sharp contrast with 2016, when only 33% of people planning to buy a home were first-time buyers, 52% of buyers with their eye on a home purchase next year will be first-timers. And 61% of those are under age 35.
“This represents an ‘Oh, shift’ moment in housing,” says Jonathan Smoke, chief economist for realtor.com®. Smoke’s team analyzed responses from active shoppers on our site who plan to buy a home in the spring or summer of 2017. “With so many first-time buyers in the market, competition will be even fiercer next year for affordable starter homes in the suburbs. Those looking to buy may want to consider a winter home purchase in order to avoid bidding wars and higher prices spurred by a potential increase in millennial buyers.”
What motivates—and scares—millennial buyers
Although a shortage of homes for sale will continue to dog the market, first-time buyers are more worried about financial issues, according to the survey. Topping the list: coming up with a down payment (37%) and finding a home within their budget (30%). With all the emphasis on financial issues, millennial buyers want to make sure that their money is well spent: Making a sound financial investment is a top goal.
This new generation of first-time home buyers is focused on safety, privacy, and more space, indoors and out. That’s because millennials’ top reasons for buying a home are that they’re getting married or moving in with a partner, growing tired of their current living space, or planning a lil’ addition to the family. Or perhaps all three!
So it’s no wonder that millennial buyers prefer single-family homes (39%) or townhomes (34%). Just 15% are interested in multifamily homes, and 10% in condos.
Suburbs appeal to millennials and boomers alike
So, let’s see, where can you buy a big house with a yard in a safe neighborhood? You probably guessed it: the suburbs! First-time home buyers identify the suburbs as their No. 1 preferred location (43%). In fact, so do 50% of all respondents.
“The majority of home-owning Americans live in the suburbs, so the popularity of the suburbs isn’t a new phenomenon,” comments Smoke. “But the increasing preference by millennials represents a shift from the more urban locations where many of them have been renting.”
But that doesn’t mean our cities are going to empty out: Those urban areas are the second most popular option among millennials.
Meanwhile, baby boomers are also keen on the suburbs—either because they already live there and want to remain close to friends and family, or because they’re moving to another suburb where their adult children (and probably grandchildren) live.
Source: Realtor.com – Cicely Wedgeworth