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 For over 35 years the Seattle area had a pretty solid record of home price increases - sometimes just a little, and sometimes breathtakingly, as in 1979, 1989, and 2006/07. Over that period, median single-family home price in the Greater Seattle-Bellevue area rose from about $35,000 to over $480,000 at the peak in '07.
But that string got broken in the subprime financing debacle of 2008, and I don't think it is coming back soon.
There are three major areas of consideration that make up my opinion - Demand, Supply, and Financing. Each has several points woth noting.
Demand: Demand is weak, plain and simple. Although we are told the economy is getting better, and consumer confidence is improving, we are still creating jobs at a rate that only marginally keeps up with population growth, and many of those jobs are lower-wage jobs than before. Also, net in-migration to the Seattle area is down to approximately nothing - it used to be about 20,000 net new people a year moving here for new jobs and homes, but the crash and the recession have put at least a temporary stop to that. And, last but not least, many of the homeowners who would like to buy up and move up can't, because their mortgage is underwater and they no longer have the equity for a down-payment - they're stuck where they are.
Supply: Supply is more than adequate, although we are not grossly overbuilt like Florida or Nevada, except maybe for high-end condos. A few years ago I had thought that we might be moving into a shortage of single-family homes because of the population and job growth versus the restrictive building practices of Washington state and King County. But, unfortunately, we have solved that problem with unemployment and foreclosures, and it looks like it will take at least another 2 to 3 years to work through both of those factors. And those factors alone are creating enough back pressure on prices that I don't think we'll see any significant home price increases during that workout period.
Financing: At this point FHA, formerly the lender of last resort, is now almost 50% of the market, and their lending and appraisal standards are still tightening. And the banks are pretty restrictive too while they work out their own problems. The pendulum has clearly swung from lending practices that were way too loose to practices that are way too tight. But on the brighter side, it appears that the Fed is committed to keeping interest rates low, although perhaps not as low as last summer, so that high interest rates don't damage our still-fragile economic recovery. I also believe that lending practices will start loosening as more big-money outfits start trying to get out of the low-yield bond market and back into something that pays a decent return. There is a lot of money out there that needs to be put somewhere, and there are way too many people in this world who make their living selling money to leave an opportunity like this untouched.
Conclusion: So where I think we wind up is that both home prices and volume of homes sold will stay right about where they are at for the next couple of years, as long as no one throws a new monkey wrench in the works. That being said, I'd suggest that if you have good reasons to move, not dependent on price appreciation, and worth the cost and effort, go ahead and do it....and if you don't have a good reason, don't.
There are still over 1,500 people a month in King County that find they have those good reasons; if you are one of them, please give us a call :-)
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