So, is the Seattle Housing market slowing down? The short answer is “heck no.” But let’s dive in and take a closer look.
Human beings are really bad at understanding big numbers. It’s just how our brains are wired. When you hear an astronomer talk about tens of billions of stars, or the richest person in the world having over 100 billion dollars, it’s very difficult to understand exactly what that means for me and you.
Thinking about a housing market for the 13th largest metro area in the United States is very similar. How should we think about the state of a market?
For housing in general, economists have created a simple heuristic: Months of Inventory.
Think about it as a sea-saw between a Buyer’s Market and a Seller’s Market.
The formula is pretty straightforward: if there were zero new listings coming on the market, assuming the current level of demand, how long would it take before there were no more houses left to sell?
A “Balanced Market” would be 3-4 months. Meaning there’s no advantage to be a buyer or a seller. If inventory is above 4, that’s considered a “Buyer’s Market.” If it’s below 3, then you’re in a “Seller’s Market.”
When you think about it for a minute, this is a very helpful way to frame up an entire market. It makes sense. If there’s hundreds of houses available, buyers will have a lot of homes to look at, they can take their time, and most likely find multiple properties that would work for their needs.
In this scenario, the buyer might actually offer less than the asking price with a contract that has all kinds of protections built in because there are several other homes in back up positions. Sellers would feel pressure to take this offer because their home may have been on the market for months and they also realize there are many choices for buyers. The more months of inventory, the more the sea-saw is tilted towards buyers.
The opposite is true when months of inventory goes down. In a Seller’s Market, it’s the Buyers that need to compete to “win” the house. In this case, you begin to see offers that are above the asking price and waive protections for the buyers. Buyers will tilt the table toward the seller because they realize there is competition for this home.
So where do we stand right now in the Pacific Northwest? As I write this, the current inventory is at 0.8 Months. That’s right, ZERO POINT EIGHT months. That is historically low.
It is a Seller’s Market with a capital S. In our weekly meeting with the most successful agents in town, we are hearing about homes that have received 50 offers. Offers coming in that are all cash, no contingencies, and over 20% more than the asking price. It’s extremely competitive for buyers right now.
It is possible to zoom in on a specific neighborhood and see if the velocity of that smaller area is higher or lower that market average.
If you’d would like to know what’s happening in your neck of the woods, let’s do a Ron & Don Sit Down.
If you’re a buyer, let’s Sit Down and come up with a strategy that will get you into your next home.
You can always email me for our Buyer’s Playbook or Seller’s Playbook that goes more in depth in the process for buying or selling. Ron@windermere.com