To my Seattle area clients,
As we turn the page on a new year, it is natural to wonder what we can expect in 2017. There is no perfect crystal ball, but as your trusted real estate advisor, I want to be able to offer you some ideas on what the coming year may hold for you as a homeowner.
Seattle continues to be a national leader in economic growth as many corporate giants in our area continue to hire at a record pace. Higher paying jobs, low unemployment and rapid population growth has made Seattle one of the fastest growing metropolitan areas in the country with an ever increasing demand for housing.
Two big drivers for the conversation of real estate for 2017 are interest rates and inventory. Mortgage rates have risen rapidly since the election, and unfortunately, I do not see a turnaround in this trend. That being said, they will remain very affordable when compared to historic averages. We expect to see the yield on 30-year mortgages rise to around 4.7% by the end of 2017. For those who have grown accustomed to interest rates being at historic lows, this might seem high, but it’s all relative. This may weigh down the dramatic inflation we have seen in housing prices but most likely will not decrease demand in the near term.
The similarities between 2016 and 2015 real estate market year-end numbers are striking. In both years, the market struggled with a lack of inventory and strong demand, while the market trends (that actually began in 2013) continued to respond to this condition. While it makes some people nervous to be in this rarefied air, with the uncertainty that can accompany it, we don’t foresee any specific event that will change our market trajectory in 2017.
The number of homes available for sale continues to be at record lows for our area. Restrictions have prevented builders from being excited about condominium development and the topography of the greater Seattle area makes it tremendously difficult for builders to find large pieces of land for new neighborhoods. In short, we don’t have enough homes to put people in and finding ways to meet the demand via new construction is severely limited.
Rental rates continue to rise as well, making homeownership attractive to those who can qualify for the loans, however competition in the housing market is forcing many people to continue to rent and is subsequently forcing rents higher. This is another contributing factor as to why so many of those cranes you see in the downtown core of Seattle are for apartments – not condominiums. The time to buy and own rental properties has never looked better in Puget Sound.
Will 2017 go down the same growth-oriented path as 2015 and 2016? Obviously, we can’t predict unforeseen events, but the economic outlook for our region is very positive. Here are some predictions:
- Housing prices will continue to rise, although we will not see as dramatic an increase as we have seen in recent years.
- Rental rates will also increase. This along with housing price increases will force housing to be a larger portion of monthly expenses than in 2016.
- Interest rates will continue to rise, although they will remain at historic lows.
- New construction will continue but not at a pace that can keep up with demand.
- Unemployment will remain very low.
National and/or global predictions offer little insight for homeowners because the information is too broad. Being your real estate advisor means providing relevant information about the market value of your home regardless of your intent to buy or sell in the near future. If you have any questions that I can be of assistance with, please do not hesitate to contact me.
Robert B Johnson