The higher real estate prices moved in Puget Sound these past couple of years, the more concerns grew that we were climbing closer to the peak of our market. Last June, those concerns materialized. Here are just some of the possible factors that catalyzed our region toward a sense of balance…yes, that’s market balance:
- Maybe it was the perceived risk from sellers that rising interest rates would eat too far into a buyer’s potential purchasing power, so many sellers, who’d been sitting on the sidelines, rushed to list their homes for sale.
- Maybe it was fear that the area’s largest employers would cease expansion in Seattle due to the head-tax debacle, which would consequently reduce buyer demand, so sellers rushed to get on the market.
- Maybe baby boomers, looking to retire, had had enough of Seattle’s growing traffic and/or endless construction disruptions and decided now was as good a time as any to sell and move on. According to The Economist, those leaving the area are resettling in dramatically less expensive places like Missoula or Boise.
- Or, maybe a segment of the buyer pool dried up a bit because foreign currencies have fallen in value against the dollar due to unsettled trade policies, making the U.S. real estate market generally unpredictable.
- Perhaps it’s because there’s a surplus of new apartments being built around Puget Sound forcing rent prices to retreat, making it more economical for potential homebuyers to rent a little while longer.
- If a potential buyer consulted with a tax accountant about this year’s changes to our tax laws with regard to deductions traditionally afforded to homeowners versus an individual’s standard deduction, s/he may have discovered that the new $12,000 standard deduction ($24,000 if married), removes most, if not all, of the tax benefits in mortgage interest and property tax deductions from the long-standing lure of owning a moderately priced home. While it’s nothing to sneeze at, equity appreciation may be the only financial incentive relevant to many buyers; but, if equity appreciation is stagnant or on the decline in the short-term, what would entice potential buyers to move forward?
Most likely, some combination of these catalysts, along with an uncertain political backdrop, have contributed to a dramatic rise in inventory where sellers flocked to the market faster than in any one month during the previous decade, and buyers, who continue to shop for a home, now have a great deal of choice, time and purchasing leverage that they’ve not previously had in their pockets.
Seattle shifted from undoubtedly the most competitive real estate market in the entire country to longer days on market, price reductions, inspection contingencies and an upward trend toward overall buyer-leverage at the negotiating table…and this shift toward balance…yes, balance…seemed to happen (almost) overnight.