Home prices the real estate markets in many populous cities in the western United States have been at an all-time high for several years now. Seattle was the U.S.’s fastest-climbing housing market in August of this year, according to Redfin. And it’s still rising. In September, median home prices in and around Seattle rose 10.3 percent to $630,000, from last year.
This has been a difficult time for buyers, with severe competition from foreign buyers and minimal inventory. As a local mortgage broker for more than ten years, I’ve seen this as one of the most frustrating times for those looking to purchase a home – for the first time, expanding/upgrading, or additional investment property.
Increase of Foreign Buyers
One of the key reasons for our local housing market rise has been a flood of Chinese homebuyers. “To be honest, Chinese buyers have been flooding this market the past few years,” Jim Conlan, a Century 21 North Homes Realty real estate broker, said in a Washington Post article. “Some of them buy homes sight unseen, while others travel here for a kind of real estate tourism and buy real estate after only one viewing.”
For four years in a row, China has been the top foreign nation of buyers purchasing property in the U.S. And since Vancouver, B.C. just hit Chinese and other foreign buyers with a new 15 percent transfer tax, there’s a good chance that Seattle’s real estate market will see even more foreign buyers. This is especially probable because the median home price in Seattle, $630,000, is cheap compared with the median in Vancouver at $1.57 million.
In many cases, Chinese and other foreign buyers are purchasing local real estate as investment properties, and not personal residences. Companies like Amazon are also continuing to bring in new workers from out of state, with hefty incomes that have impacted the local rental market.
For more than five years now, the climbing home prices in Seattle have been driven up because there simply isn’t the inventory to create price competition. If located with any relative access to Downtown, a house sale is almost always preceded by multiple offer (including cash) situations. The market is starting to see a bit of a slowdown, with average offers on a home dropping from 10 to three or four, but it’s still highly competitive for buyers.
“I have definitely noticed that my buyers have more to choose from, but what it feels like to me is that the buyer pool has been so large, and ever growing, that the increase in inventory has not eased the demand issue,” Redfin agent Kyle Moss said in a Seattle Times article.
After so long with minimal inventory, buyers are starting to push back. “Homebuyers are starting to see a bit of price fatigue and are starting to step back and think twice about making that purchase,” said Svenja Gudell, chief economist at Zillow. “Prices have grown so much over the last few years as part of the recovery that many markets are well beyond their initial 2006 or 2007 peak, so homes are now more expensive than they’ve ever been.”
Homebuyers Are Looking Elsewhere
Homebuyers are starting to look further out of the city for homes with more affordable prices, and even still, they’re encountering bidding wars that end with the house selling for thousands above the asking price. Meanwhile, rents continue to rise and in the Greater Seattle area, are 9.3 percent higher than they were this time last year.