Should anyone Buy or Sell Real Estate in this Market? Seattle Real Estate Market Conditions and Trends.

Seattle Real Estate Market Conditions and Trends. Seattle is still experiencing a buyer’s market with prices trending downwards and very favorable interest rates. The majority of properties in the market are short sales and foreclosed homes.

The news reports positive data one day and negative data the next day for the real estate market. This back and forth leaves everyone on edge and confused at a time when people are hungry for relief and good news. Homeowners who have seen their home’s value decline and are upside down (they owe more than the home is worth) are hoping prices will go up. Buyers in the market are not willing to commit to anything because they hope (or fear) prices will continue to decline.

So, what is really going on? Where do we think the Seattle market is going? (Note, we are not economists and some of this information is being passed on from articles read, etc. but we did not create a bibliography. Some is pure speculation on our part, an educated guess. You are encouraged to read and do your own research from non prime-time media sources.) According to Zillow*, in the 3rd quarter of 2010, Seattle’s median home value was $273,000, posting a 4.3% drop in value from the 2nd quarter, and a 10.6% drop in value from this time last year. Zillow further reports 23.2% of America’s homeowners are behind on their mortgages. However, in Seattle that number is higher, with an average of 27.7% homeowners behind on mortgage payments. As we near the end of 2010, the housing market in Seattle and most of the rest of the country remains fragile at best. Slow economic growth, weak employment and foreclosures continue to put pressure on the real estate market. It is our opinion that it will take several years to see a considerable improvement and true recovery in the real estate market, but first we may be in for some additional downward movement in home prices. The Fed has announced a new program of Quantitative Easing II. Basically it is a plan to print more money and try to get inflation jump started. Most people think that inflation would already be rampant due to all the money that the Fed has created out of thin air, but the money the Fed printed and gave to banks, GM, AIG, etc. has not been circulating in the economy. Despite historically low interest rates, more people then ever cannot get loans, credit card companies keep slashing credit lines, people are paying off their debt at an astonishing rate (and not spending on buying more things) and the money the Fed wanted to circulate in the economy is not circulating. The money supply has significantly decreased, not increased, which is called deflation (the banks are hoarding it or putting it in the risky investments or the stock market to buy up their own stock). Now back to inflation (a lot of money circulating in the economy), which is what the Government wants in order to allow the United States to keep current on its debts. There is no way that the United States can ever pay back all it has borrowed and so to keep current on the debt service, the dollar needs to be devalued (inflation) in order to pay back the interest on our country’s immense debt. Did you know that our (government’s) debt is equal to $47,000 per person in the United States? That is $188,000 per family of four. But, we don’t have inflation yet (much to the chagrin of the Fed), we have deflation. Prices are going down. We will eventually see inflation and when that starts, real estate is a terrific investment because it keeps up with inflation. If we have inflation of 3% per year, typically real estate will keep up. So, for those of you who own a home and are happy there, don’t worry if on “paper” you are underwater because the values will return, with help of inflation.

Should anyone buy or sell in this market? There is no easy or blanket answer for this but for some people this is a good time to buy with affordable prices and favorable financing terms if they are looking at real estate as a long term investment (and they get a great deal). For move up buyers this may be a great time because although they may perceive a “loss” in the sale of their current home, they can more than make up the loss with a great “discount” on a purchase. Homeowners who are struggling might weigh their options of a short sale or foreclosure on their primary residence and get a “new start” with the burden of debt relieved. Schedule an appointment with us to find out if this is the right time for you to buy or sell.

Kerstin G. Brooks
Brooks & Heinze Real Estate Team
http://www.propertyinseattle.com