As we say farewell to the madness that was 2014 in the real estate market, many clients, buyers especially, are eager to see what 2015 will have in store for them. While the tone for 2015 may feel oddly familiar to what we’ve experienced over the past 12 months, we will likely start to see some shifts that will help us move towards a balanced market. Here are some common themes that we’re seeing across a variety of outlets and sources:
Low Inventory Across Seattle
Throughout much of 2014, inventory levels in all Seattle neighborhoods were drastically lower than buyer’s feverish demand – which meant that buyers were bringing their A-Game to the negotiation table. This resulted in contingencies being waived (including inspections) and prices being driven up above the seller’s original asking price.
This chart shows the months of inventory based on closed sales of single family homes in Seattle that are not distressed or bank-owned as of November 2014.
In 2015, the number of homes available for sale will likely continue to be outpaced by buyer demand, with inventory levels hovering around 1.4-1.8 months of available inventory. This is good news for sellers in most neighborhoods; however, we have started to see a shift towards a more balanced market in neighborhoods like Broadmoor, where there were over 5 months of inventory available in November.
Home Values to Rise – But at a Slower Pace
In 2014, Seattle homeowners saw an increase of 6.1% on average in home values. According to Zillow, we can expect to see a continued increase in home values in 2015 but the rate will be slightly slower with an appreciation 2.5% by the end of 2015 [1] .
Keep in mind this rate will vary by neighborhood so if you are interested in tracking home values for a particular area, be sure to check out our Market Snapshot service.
Interest Rates Will Increase
As a nation we are starting to benefit from improved economic conditions and lower energy costs. Because of these factors and the Feds subsequent response, we will start to see interest rates move towards 5% [2] in the coming months.
Mortgages Will be Easier to Attain
With a decrease in the number of refinance loan applications, lenders are starting to loosen the reins for buyers seeking new mortgages including approving borrowers with lower credit scores and higher debt-to-income ratios [3] .
Home Starts to Rise
New construction will continue to ramp up in 2015 and is projected to rise by 20 percent in 2015 from 2014. This should help boost total home sales by about 5 percent, reaching the best sales pace in eight years [4].
Furthermore, in recent years we’ve seen builders focus on high end homes to appeal to the all-cash buyer, however as we start to see an increase in Millennials relocating to the Seattle area for jobs at companies like Amazon and Microsoft, there will be a shift in builders’ attitudes as well – resulting in a higher number of moderately priced new construction options coming available.
We work with a number of builders throughout Seattle and stay up to speed with upcoming projects. If you are interested in purchasing new construction homes in Seattle, we can help you find the right property, oftentimes before a home nears completion or hits the market – giving you a competitive advantage as a buyer.
Rent Increases Will Drive More Buyers
Rents are poised to continue to increase yet again; this time by 3.5% in 2015 which means more long-term renters may find themselves attracted to the stability of a fixed mortgage. Combine this with less strict lending guidelines and historically low (albeit rising) interest rates, the buyer pool is likely to increase in 2015 [5].
Sources:
[2] http://www.homebuyinginstitute.com/news/housing-predictions-and-trends-572/
[3] http://www.homebuyinginstitute.com/news/housing-predictions-and-trends-572/
[4] http://realtormag.realtor.org/daily-news/2014/11/18/5-real-estate-predictions-for-2015