Tips to help home buyers navigate a hot real estate market
Seattle is in the national spotlight again. No, not for the Seattle Seahawks Super Bowl championship and the next three that we are going to win. It is because our real estate market is booming, and there is no sign that it is going to cool off anytime soon.
That is good news for homeowners, but can be pretty daunting for those searching for a new home. Buyers are feeling a real sense of urgency. Many feel their home-shopping experience has not been fun because every home they are interested in has five other interested buyers. When they make an offer on a home after searching for months, there are several other offers already on the home.
This can get frustrating. If you are looking for a home in the Seattle/Bellevue area, it helps to prepare yourself to navigate this competitive marketplace.
For starters, ignore friends who are telling you “oh, you should wait until the market cools off a bit” or “don’t offer full price on that home; no one does that,” or “this is a bubble and we are going to crash again.”
The reality is, based on numbers and data, this market has shifted up due to our economic boom and a lack of inventory. These factors have contributed to the current home market in Seattle and Bellevue.
Seattle/Bellevue growth: A Google search for “what is the current population of Seattle,” returns hundreds of sources pointing to the fact that Seattle/Bellevue is growing. For example, an article on Geekwire states that Seattle has become one of the Top 10 areas of growth. That is right; sleepy Seattle, that once had a single major industry in the late ’70s and ’80s, is growing fast.
Boeing once was king here, and was a foundation for Seattle’s middle class. Today, the Seattle/Bellevue areas are home to many more Fortune 500 companies: Microsoft, Amazon, Expedia, Starbucks, just to name a few. As these companies locate and grow here, their workforces search for housing.
Lack of inventory: The recession has had an effect on available inventory of homes on the market. In King County, building permits for new-construction homes dropped 65 percent to 70 percent. Builders were not building, but at the height of the recession, Seattle had a surplus of 6-8 months’ attrition rate for homes. That meant that at the current rate of sold and pending homes, there was as much as eight months’ worth of homes on the market. A normal market is four months’ worth of inventory. Today’s market is 30 days!
Builders of new-construction homes are trying to fill this void. It is easier to build new homes in empty places. Finding a large plat of land to build new homes in Seattle/Bellevue is difficult. Builders have taken to buying older homes and tearing them down to build new homes. The industry term for this is “in-fill” building.
This type of building practice is happening throughout this market. What this means to buyers is not only are they competing with other buyers for homes in the Seattle/Bellevue market, they also are competing with builders. With the rule of supply and demand, this directly affects what buyers are going to pay for the home.
The sense of urgency that buyers are feeling is real. Buyers will have to contend with a lack of inventory when looking for a new home and will be subject to price increases due to the high demand for housing. Waiting for a housing adjustment in our market might put buyers at risk of either being priced out of the market or not finding the combination of right home and price.
Five tips for home buyers in a hot market
- Get pre-approved: Purchasing a home can be stressful. In a hot market, the stress levels can be even higher. Talk to a lender about your goals. Once you get a pre-approval you can turn your attention toward finding a home that you can afford.
- Find a Realtor: Working with an experienced Realtor gives you a distinct advantage in navigating this busy marketplace. For example, at some price points, sellers are dealing with multiple offers. Your Realtor should have a strong understanding on how to put you in a winning position.
- No large purchases: Your pre-approval letter was based on a “snapshot” of your situation at the time of the application. Any large purchases that are financed or new credit cards you get can change your credit score and your financial picture to a lender. So as much as you might want to purchase a new car … don’t! Wait until you are in your new home.
- Make a list: No home is perfect and will have everything that you want on your list. As you search, keep an open mind. If a home is perfect in price, location and size, can you make a compromise if it has an older furnace and needs a little work? Treat every home as “one of a kind” and consider whether there is a compromise that could be made to make the home suit your needs.
- Lastly, have a schedule, but be flexible. When looking for a home, set aside some time to do so. New homes coming to market will typically list in the middle of the week. This gives people enough time to plan on seeing the home over the weekend. In a hot market, like the one we are in, being flexible is advantageous. Communicate with your Realtor about your availability.