Buyers Looking Outside King County
A recent Seattle Times article pointed out that a growing number of first time home buyers are looking for their ideal home, farther outside central Puget Sound. The driving force behind this growing trend is scarce inventory and climbing prices in and around King county.
According to the Northwest Multiple Listing Service (April report delivered in May), inventory remains well below the supply needed for a balanced market. What does this mean you ask?
Supply in real estate is measured by ‘month’s supply of inventory’. For example, if there are 100 houses for sale and fifty sold last month, we would have a two-month supply. If there are 100 houses for sale and ten sold last month, we would have a ten-month supply. A normal market calls for 5-6 month’s supply. The chart below (from the National Association of Realtors – NAR) is a good general guideline for house price movements based supply:
According to the Northwest MLS, across the 23-county market area, there is 1.85 months of supply, a slight improvement from March when there was 1.79 months of supply, but down from the year-ago level of 2.36 months of supply. King County continues to have the scarcest inventory, with only about 1.1 months of supply.
An additional sign of scarcity, of note to investors, was shared by Dick Beeson, principal managing broker at RE/MAX and one of the current directors of Northwest MLS. He noted the number of bank-owned properties sold in King County dropped from a high of almost 14 percent of all homes sold in 2011 to under 3 percent so far this year.
The current market has a number of influences driving supply to be below current demand:
• High rental rates have directed much of the current construction to apartments rather than condos or single family homes.
• Conversely, rising rents are compelling some renters to explore buying.
• Strong job market attracting new residents.
• Interest rates are still low, so many buyers are still trying to get into a home sooner rather than later.
• Sellers aren’t willing to take profits because they are afraid they couldn’t afford another house here.
Ominously, the more affordable Snohomish and Pierce counties also face a historically low inventory level, according to a Seattle Times analysis of data from the Northwest Multiple Listing Service.
Svenja Gudell, Zillow’s chief economist, said in a statement that the low supply creates “some challenges for home buyers, particularly first-time and lower-income buyers, struggling to find a home that fits both their needs and budget.
“You see Seattle fatigue, where you have buyers who have been outbid many times or have seen homes go well above asking prices,” said Stacie Gall, a Redfin agent based in Bainbridge Island
“A lot of people are willing to move out of their comfort zone and are finding that Seattle and the East side are becoming too expensive,” said Shane Raff, a real-estate agent with John L. Scott. “People are just getting priced out of the market …”
With all these factors weighing on the process, finding affordable options has home buyers are looking outside King County. In some cases, significantly farther. The list of cities some might call suburbs is now stretching to places like Bonney Lake, Poulsbo and Cle Elum. It’s really simple math, when you look at a map, the bigger you draw a circle around Seattle, the more options you will find. More home buyers are willing to trade longer commutes to buy a house they can afford or for more space and features.
Is this a harbinger for real estate investors? Are there more deals to be found by looking farther outside Seattle? Between Q1 2015 and Q1 2016, Veristone has seen a 28% increase in the number of deals funded outside of King County. As demand grows in these areas, there will certainly be opportunities for selling a well-executed fix and flip. Veristone recognizes this potential and is ready support you as your boundaries grow. In fact, with offices in Portland and Boise we can support a substantial Northwest strategy. Call us today and let’s talk about growing your geographic market and get you pre-qualified. There is no boundary line for a good deal.
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Veristone does not finance owner-occupied properties.