Seattle home prices drop by $70,000 in three months-market cools

31 Replies

IT CAN"T HAPPEN HERE! (Wherever "Here" is)

Looks like a correction is in the making

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"Home prices are continuing to fall across an unseasonably cool Seattle real estate market, with homes that would have been snapped up in an instant just several months ago now sitting unsold."

"Neighborhood-level data is more volatile, but in the past three months, median prices have dropped $397,000 in Kirkland-Bridle Trails, $125,000 in East Bellevue and $87,000 in Southeast Seattle. And they’re down more than $70,000 in the past three months in Queen Anne/Magnolia, Ballard/Green Lake, and Shoreline/Richmond Beach."

Account Closed A correction is always occurring sometime, somewhere in this country. 

Going off incomplete data sets with minimal trend analysis can make anything look extremely bad (or good). 

Maybe you can provide us actionable advice i.e. what to do, when to do and how to profit off this correction? 

@Account Closed I agree with Omar. You might be seeing the results from bad local government policies. Live in South Florida, I spoke to a realtor yesterday and properties she has sold in the past month were in the market for less than a week. She said buyers in the dozens are jumping on new listings as they come out.
@Account Closed This has been going on for months. The market needed to cool. The increases have been out of this world. It has given me a chance to look around at who is doing some major price decreases. I like the opportunity.
Originally posted by @Account Closed :
@Mike M.

This has been going on for months. The market needed to cool. The increases have been out of this world. It has given me a chance to look around at who is doing some major price decreases. I like the opportunity.

 Personally I wouldn't even suggest buying in the area for at least a year. Prices went up so high so fast, I don't think "sustainability" is in the vocabulary for King, Snohomish & Pierce counties.  I wouldn't want to be caught at the top of the market if I was flipping. I'm sticking to Arizona and Texas where the market is stable and government likes investors.

Account Closed  median prices in Kirkland have NOT dropped nearly $400,000 in the past three months.  So I question the validity of the source, which is who by the way?

Originally posted by @Patrick Britton :

@Account Closed   median prices in Kirkland have NOT dropped nearly $400,000 in the past three months.  So I question the validity of the source, which is who by the way?

this is usually one 5 million dollar listing that was listed 1 million to high to begin with and they dropped it 500k and there you go prices are dropping and this is for a 2500 sq ft fixer upper  LOL...   

Keep in mind that high-price markets like Seattle, San Francisco, and NYC are extreme outliers in relation to the country at large. High-price markets tapering off is not indicative of a bubble bursting. The U.S. has an affordable housing shortage. When the demand is concentrated in the entry-level and median price ranges it stands to reason that the luxury market which has an over-supply would contract proportionately. 

Originally posted by @Josane Cumandala :

Keep in mind that high-price markets like Seattle, San Francisco, and NYC are extreme outliers in relation to the country at large. High-price markets tapering off is not indicative of a bubble bursting. The U.S. has an affordable housing shortage. When the demand is concentrated in the entry-level and median price ranges it stands to reason that the luxury market which has an over-supply would contract proportionately. 

 we are seeing prices peak in the Portland market the big run up has happened.. but sales are still brisk and your right low end is still on fire.. my wife put a 250k condo in escrow yesterday.. but we were lamenting it took 30 days to get it sold instead of 30 seconds.. LOL

markets ebb and flow.. and for sure to Mike's point if your business is flipping higher end homes you do want to be cautious I know a few fo the guys I work with are not reaching for deals. it will be the newbie who reads a book on remote rehab that will get caught.

In my neighborhood, 4 doors down really, 94087 of Sunnyvale, a young couple bought for $2.5m in Feb... better houses are sitting on the market for $2.2..... sitting and sitting and sitting ....

Here is the link to the article that was published in Seattle Time on 09/07/18:

https://www.seattletimes.com/business/real-estate/seattle-home-prices-drop-by-70000-in-three-months-as-market-cooldown-continues/?utm_source=referral&utm_medium=mobile-app&utm_campaign=ios

Originally posted by @Diane G. :

In my neighborhood, 4 doors down really, 94087 of Sunnyvale, a young couple bought for $2.5m in Feb... better houses are sitting on the market for $2.2..... sitting and sitting and sitting ....

 yup over 800k in our market has slowed. 799k and  under is normal 45 days on market selling for 98% of list.. if you list 50k high your property will sit..  but someone over paying will always happen.

just like you if you paid over 37k for your property were you live you paid way to much.. that's how much my parents paid for their house in Cupertino.. and I I paid 185k for my first house in Palo Alto and 80k for my first house in Milpitas etc etc.. 

someone at some point will always over pay.. they will make a mistake if they have to sell.. if you buy at a top you don't want to sell in a dip... but if your forced to then yes you over paid and are going to take a loss.

Median price points of closed sales dropping is extremely different from prices dropping.  Sample sizes of the high or low end of the market can cause extreme swings in the median or average.  Ive seen neighborhoods with median prices dropping while the actual values of prices are going up, simply because more low end houses were selling than high end houses. But those low end houses value rose from $300k to $400k, but the median dropped from $550k to $450k.

@Russell Brazil

What Russel said.  Especially the smaller the area you look at the more effect a few really expensive or really cheap sales can have on the median. You look at the wrong zip code in Vegas where somebody just bought 4 tears downs next to the hospital and you’ll see the median house price dropped from $200k to $70k that month. Of course there might have only been 8 sales in that zip code last month. 

Inventory is finally starting to catch up with demand. This has been discussed in other threads going back for months, esp the number of condo projects now coming online, when you have a building with a few hundred units completed it’s going to have a major effect on the YoY numbers when the whole county new listings are only around 4000 per month. 

https://seattlebubble.com/blog/2018/06/12/around-the-sound-king-county-sees-the-biggest-gains-in-listings/

Here in the SF Bay Area, we saw prices peak in June and then drop in July and August. I am not surprised by the price drops given 3 drivers: 1) Prices had moved almost 25% in some areas since early 2017. My own properties were appreciating 60 - 70k per month for nearly 15 months straight. 2) Interest rates have risen by an average of 80 bps. That always sets buyers on the back foot 3) New inventory is coming along at a faster pace especially new home construction Along the same lines I have spoken to a few people who were on the sidelines, and they are now buying new primary homes given this drop in prices The price drops in isolation does not bother me. But two trends do: 1) Banks and lenders going rogue on their lending standards is troublesome. Yup hearing 3% down payments are becoming very common. This bluntly sucks!!! 2) Creation of more investors! People tapping big into the equity of their primary homes to buy investment property. This is all sexy when prices are going up. But we know how this can end if prices start to trend lower. I personally see some red flags there.

We are also experiencing slowing down around San Francisco Bay Area as well. The local unemployment rate here is about 1% starting in May all of a sudden homes do not sell. Sold vs asked ratio in south bay(San Jose, CA) were selling 110-114% with 10+ offers now are selling 103-105% took 8 days longer with few offers than 1 year ago. Around FB, Apple, Google campuses with zero layoffs homes are not selling well. About 1/3 are sold at or below asked price. Flippers reduced asking stellar price. The outlier neighborhoods ~1-1.5 hours from tech centers are doing better. They are more affordable getting more interest. If you look at the high tech employers there are always too many competing in an overcrowded market. How many more autonomous car R&D centers do we need?  I have seen 5-6 smart phone companies. Average Jose painter who works at Tesla makes $16 an hour but there are no homes under 1 mil near Fremont factory. Isn't Detroit where they produce cars?

How many more social media companies can we live without? Few of these public companies are profitable. Same with some major employers in Seattle. 

This cooling effect is actually beneficial to stabilize the market. I imagine in 2019 one will see the reality of a normalized year in real estate.

I am re-allocating capital from some value plays to cash flow plays...in MHP, SS, and MF.  And always forcing appreciation/adding value.  I am interested in actionable discussions on what investors are doing about market conditions.

Interesting - the market in Huntsville right now has not slowed down at all;  in fact, I would argue it is even crazier than it was 3 months ago, and is now virtually impossible to find a property to cash flow unless you go to C/D neighborhoods or go in areas that typically have zero appreciation (outside of Huntsville and Madison city limits).    

@Mike Dymski I have been a big seller in the last year via Owner Financing with 2-3 year balloons. I suspect the market to take a turn during the next reelection (Ray Dalio and alot of PE firms suspect the same if not sooner) and plan to purchase alot of properties and lots subject-to on the coast. Subject To’s and Lease Options are going to be the next play for me.
@Account Closed I live in Bellevue (hotter market as compared to neighboring Seattle market). I think that average sized homes 3 bed 2 bath in some parts of King County are definitely cooling off (Federal Way, Lake City, etc..). These were areas that had inflated due to all of the hiring from Amazon, FB, Google but now that they are fully staffed (for most part, AMZN - ran out of Class A office space). That may pick up. Homes are sitting on the MLS longer than say those crazy days of 1-2 and you get an instant +30% appreciation with just two years of ownership. I do agree flopping is tough. I flip and my friends who are REI also seeing shrinking profit margins not only due to rising material and labor costs but also the loss of multiple bids. However, with any market there are locations still commanding high dollar. You as a flipper put out a good product and you’ll still get top dollar. As Jay has stated the new strategy seems to be shifting from list price is set below market to generate foot traffic for multiple bids and revert back to pricing it to market or slightly above for concessions as it’s slowly shifting to buyers market. But I agree, don’t expect insane triple digit net margins anymore. Run your numbers carefully and triple check. I’d say decent expected returns are 6-10% off of sold price, for a 6 month rehab (more if less), this of course is project dependent. My friend has bought a dump of a home in Rainier Avenue area but next to Kubota garden (high demand and gentrifying quickly) for 500K, investing 100K rehab, and planning to sell for 600K. After closing fees should net 50K. Standard 3 bed 2 bath 1500 sq ft (400$/sqft). I also definitely love AZ. I think that silver tsunami via Baby boomers are going to hit major cities like Phoenix and Tucson. You can just drive along I-10 and see all of the crazy infrastructure building, they are adding ramps, and increasing capacity on 4 lane highways (each way). And areas are re-zoning for MF or retirement homes. Great cash flow, and you can write off T&E. I’m also looking at Texas next. But I would wait for Seattle and other hot markets to stabilize, the city government are morons - for example almost passing 150$/head tax to combat rampant homelessness. I’m thinking of renting my primary residence (3200 sq ft, lake view in Bellevue Lake Heights) as future AirBnB. I’ve talked to many Washingtonians - we love our state but the unsustainable economic growth has build an anti-business city planning council and local government. I mean we loss Amazon HQ2, that says something. So: 1) if you are looking to flip in Seattle/Bellevue be very careful and conservative with numbers so you don’t come out with a loss 2) for Commercial MF cash flow, definitely look to other states. If you have your heart set in investing look at Spokane, or Bremerton. 3) Double digit YoY appreciation is not going to occur for most of King County but some Eastside cities may. Highly - Highly dependent on school districts that have strong STEM programs. Goodluck fellow BP REI.
Originally posted by @Mike Dymski :

I am re-allocating capital from some value plays to cash flow plays...in MHP, SS, and MF.  And always forcing appreciation/adding value.  I am interested in actionable discussions on what investors are doing about market conditions.

 50% of businesses are owned by boomers.  I am devising ways to re-purpose retail, warehouse, industrial,etc properties as the wave of retirees grows.  

These high end McMansion price-reducing trends in the most expensive areas of the country hardly mean squat to investors.

While we're at it, I heard Buffet reduced the price of one of his homes by $3M, down to 7.  I think he's in it for $150k.  Discuss...