Deciding where to invest in real estate isn’t an easy decision. The housing market has been a hot discussion lately, and here in Seattle, real estate trends and residential changes are affecting how investors view the area.
In years past, Seattle stood out amongst other U.S. cities for its soaring home prices. Now, it appears we’ve hit a bit of a threshold – the area’s median price hasn’t changed for a year. Additionally, more and more people are choosing to move to nearby suburbs rather than stay in the immediate city area.
What do these changes mean for you as a potential investor?
The answer depends on your circumstances. To help you understand, we’re going to dive into the top factors affecting the Seattle real estate market and how they impact your investing decisions.
Is the Seattle Real Estate Market Slowing Down?
The short answer to this question is, yes, the current real estate market in Seattle is slowing down. However, we’d be remiss if we didn’t explain why and what this really means, especially for first-time investors.
Source: Norada Real Estate Investments
As the graph above indicates, Seattle’s housing market was rapidly growing from about 2015 to 2018. In recent years, it has slowed down dramatically, causing houses to remain stagnant in value.
Why does this matter to investors?
Well, Seattle’s real estate is expensive. It takes a big chunk of change to purchase a house or invest in commercial real estate. If you want (or need) to see your real estate investment return quickly, this slowdown could be an issue.
This certainly makes Seattle a risky environment for people trying to figure out how to get started in real estate investment. However, if you’re above real estate investment for beginners, consider the big picture of Seattle’s real estate. It’s been one of the most successful long-term real estate locations in the entire country over the past decade, and it’s one of the largest housing markets.
Just because the market has slowed down doesn’t mean you’re facing little to no investment return. The tech landscape is rapidly changing, and with so many job opportunities on the horizon, the forecast for the housing market and real estate in the future is positive.
How Amazon’s HQ2 Has Affected the Seattle Housing Market
One of the first things people think about when they consider Seattle investments is Amazon. For many years, Seattle was the Amazon plant headquarters, and that had a major positive impact on housing prices. Now, things have changed.
With the announcement of the new Amazon headquarters in New York and Virginia, Seattle’s spotlight has weakened. This could be part of the reason why the Seattle housing market has slowed down immensely. There’s been general anxiety amongst investors about what this big change means for Seattle real estate properties, both right now and in the future.
However, some economists and real estate agents have said that the Amazon change is small compared to the negative effect that rising interest rates and high prices have on the buyer’s market. Furthermore, the cities where the new headquarters will be located are just as expensive (if not more expensive) than Seattle, which means the fear of a mass exodus is unlikely.
Some have even proposed that the Amazon announcement could put a little oomph back into the slow housing market. Now that people know about moving to another state to work for Amazon would be just as expensive, there could be less hesitancy about Seattle’s real estate opportunities.
Real Estate Inventory Growth in Seattle
If you’re wondering if there’s room for you in the real estate market, know that there’s certainly been an increase in inventory in the Seattle area. According to Seattle Real Estate News back in February of 2019, sixteen of the counties in the Puget Sound region reported more inventory than they did a year ago.
Many real estate investors have worried recently that the market has peaked, and they want to get rid of their properties before interest rates climb even higher. This hasn’t stopped home buyers from doing their shopping, though. Open houses are experiencing increased traffic and fairly priced homes are selling.
According to NWMLS, there are about 1.7 months of supply across the area. According to Gary O’Leyar, a broker and owner at Berkshire Hathaway HomeServices Signature Properties, that is “still slim compared to the National Association of Realtors’ data showing a national average of 3.9 months of inventory.”
Not sure how to calculate months of inventory real estate? You find the total number of active listings on the market last month, then divide it by the number of sales to determine the number of months of inventory remaining.
The point is, Seattle’s housing market has experienced an increase in inventory, but it still doesn’t rival some other areas of the United States. The market appears to be more balanced than it was recently, but it hasn’t quite reached the level of inventory many real estate experts would like to see.
Is 2019 a Good Time to Invest in the Seattle Housing Market?
If you had asked why you should invest in the Seattle real estate market a couple of years ago, you would have gotten a very different answer than you would today. The Seattle housing market used to have an extremely small inventory with soaring house prices and a solid place as Amazon’s only headquarters.
The sudden stall in housing prices has scared some investors away, but recent trends have indicated that home prices will continue to climb, just at a slower pace. Seattle might no longer be the number one place for real estate investment, but it still numbers in the top 20 real estate prospects to watch in America, according to PWC.
Although we can’t necessarily tell you what the best investment strategy is for your situation, we can share some of the top places to invest in Seattle real estate in 2019. These include the neighborhoods of:
- North Redmond
- South Hollywood Hill
- Southeast Redmond
- Sammamish Plateau
- Union Hill
These neighborhoods are all up-and-coming with great opportunities for real estate investors, as well as people looking to buy houses to live in.
Factors That Will Help You Make the Best Decision
Do your research. The number one piece of advice we give to both real estate investors and Seattle property managers is to spend as much time as possible examining real estate trends, understanding the area, and learning about the financial consequences of your decision. In order to thrive in the Seattle real estate market, you need to know what you’re doing before making any commitments.
Carefully screen your tenants. If you’re going to invest in real estate and then lease it out to others, don’t accept just any tenant that sends you an application. Maintaining the value of your investment goes hand-in-hand with choosing respectful, trustworthy tenants. That’s why we recommend using tools like MyRental and LeaseRunner to check credit scores, criminal records, and general history.
Determine your budget. It doesn’t matter if a piece of property is a good deal or not – if you can’t afford to purchase it, manage it, and do what’s necessary. Before you make any real estate decisions, go over your budget in detail to determine how you will handle all of the expenses. Seek the help of a financial advisor if you feel inexperienced in this area.
Although inventory may be low and the housing market may have slowed to a crawl, Seattle still remains one of the top places to invest in real estate. It’s a city of constant change and evolution, and if the previous years give any indication, it’s that this market will remain profitable and popular. Just make sure to do your homework and understand the area well before diving headfirst into any real estate investments.
Davis Property Management
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