With all of the economic uncertainty surrounding COVID-19, how will it affect Seattle real estate? What headwinds, if any, does the regional residential real estate market face? If you listen to our recent pod cast with Ken Graff, a local realtor who is plugged into the current market environment, the Seattle real estate appears to be quite resilient (at least for now).
To further assess the situation, I also feel it is important to know what people were thinking prior to the global pandemic to understand Seattle housing value. I believe that another great source for this locally is Matthew Gardner, the Chief Economist at Windermere Real Estate, who put out his predictions for the 2020 economy and national housing market in December 2019.
Back then, according to his crystal ball, he suggested the US economy would continue to expand, albeit it at a more modest rate (~2%). Similarly, while new jobs would continue to be added, he believed it would be slower than during the several prior years. His position was consistent with widespread belief that that US economy was likely due for a recession in either 2020 or 2021. However, he thought it would be a modest contraction that wouldn’t really affect housing prices too much as housing prices tend to flatline during recessions, with the exception of the last recession. In terms of existing home sales, home price growth, and new home sales, he projected all would rise in 2020, but slower than in years past. Overall, he felt these indicators suggested that the housing market was trending back to normal, a place it hasn’t been for about 20 years. On a bright note, he forecasted 1st time home buyers would be active in the housing market as they shifted from apartments to houses – with everyone helped by low interest rates, which he saw staying below 4% at least until 2021.1
My, how things have changed. Coronavirus/Covid-19 first started appearing in the greater Seattle area in mid-late February & roared to life over the next few months before starting to level off to where we are now.2 The realities of and the response to this pandemic have left nothing untouched; the human and economic toll has been profound and is far from fully realized. We now find ourselves in mid-May looking at local, federal, and global economies and housing markets that are drastically altered from the end of 2019. All of us have most certainly have had to toss out last year’s crystal balls.
In a quick mid-March video update Gardner noted nationally there could be a 10-15% contraction in home sales, but believed it would be short and sharp, with a quick turnaround. He thought listing inventory could fall in the greater Seattle area as sellers grew cautious about having potentially contagious agents/buyers in their homes. He contrasted this with buyers, while tempted by low interest rates, were balancing that against job security and potentially taking money out the of financial markets to purchase homes.
While he acknowledged the housing market might be choppy for the next few months, he seemed to strike somewhat of an optimistic tone in that in the current crisis, unlike 2008-09 crisis, there is nothing systemically wrong with the housing market. He thought interest rates would stay low, credit quality requirements and down payment requirements would stay high, and while there would not be a lot of new inventory, demand would still be alive.3
On March 26, Governor Inslee issued stay-at-home orders. While not deemed an essential service, real estate guidelines were later issued that supported social distancing and allowed business to go on in a modified fashion. Not surprisingly, in-person meetings and showings have been discouraged while virtual showings, web site viewings, and remote signing of paperwork have surged. Many in the local real estate sector have felt numbers for March, April, and at least thru May will be negatively impacted by this, with slowdowns in activity relative to past years.4,5
And for the most part, this has borne out for data collected thus far. For instance, according to the Windermere WA Real Estate Market Update, home sales were down 27% at the end of Q1 2020 compared with Q4 2019 and the number of homes for sale in the Puget Sound region at the end of Q1 2020 was down 32% from one year ago as well as Q4 2019. At the end of Q1 2020, both pending sales and home-price growth increased from Q4 2019; 0.7% and 0.4%, respectively. While pending sales/closed sales are anticipated to be substantially lower Q2 of this year, downward pricing pressure once the region reopens is expected to be highly unlikely. Indeed, as Gardner indicated, assessing the quantitative impact of pandemic on the housing market is going to need to wait until the health crisis is resolved, “normal” economic activity has been restored, and housing markets have adjusted accordingly.6
However, people have conviction that fundamentals of the Seattle area real estate market are strong, such as Seattle is a desirable place to live, buyers outnumber sellers, and the region has a strong and growing tech ecosystem. 4,5
What are some take-aways, if you have been considering selling or buying? From a seller’s perspective, for-sale housing inventory is currently low and your home could generate a lot of interest. And so far, prices seem to be holding their own. Meanwhile, buyers have the opportunity to secure very low interest rates, although due to increased risk during a time of economic uncertainty may encounter other more conservative lending terms. Also, stay-at-home orders as well as an overall slower housing market may allow buyers to make offers during a slower time in a historically competitive market.
To wrap it up, as Gardner stated in a PNW Reality Group article, “The Puget Sound was in a strong position when COVID-19 hit and will be set to flourish again once this situation has passed.”4
At Sapling Wealth Management, we specialize in individual financial advice and wealth management as well as being an investment adviser for small business 401(k) plans. Part of what we do is help our clients navigate to strategic vendors that can help them with their specific needs, such as realtors and mortgage brokers. If you want to learn more about how buying, selling, or refinancing a home may be able to fit into your wealth management strategy, feel free to give us a call.
- Matthew Gardner’s 2020 Real Estate Forecast. Windermere Real Estate. Posted December 4, 2019. Available at: windermere.com/blogs/windermere/posts/matthew-gardner-s-2020-real-estate-forecast Accessed May 12, 2020
- King County Department of Public Health. Daily COVID-19 outbreak summary. Available at: kingcounty.gov/depts/health/covid-19/data/daily-summary.aspx Accessed May 12, 2020
- Gardner, M. How will the Coronavirus impact the Housing Market? Update March 16, 2020. Posted March 16, 2020. Available at: facebook.com/watch/?v=666282700799454 Accessed May 12, 2020
- Lahti, M. Northwest MLS Report for March shows initial disruptions from coronavirus pandemic. Pacific Northwest Realty Group. April 14, 2020. Available at: pnwr.com/blog/northwest-mls-report-for-march-shows-initial-disruptions-from-coronavirus-pandemic/ Accessed May 12, 2020
- Gruener, P. How might the coronavirus outbreak affect Seattle real estate? Insiders weigh in. Mar 20, 2020. Available at: knkx.org/post/how-might-coronavirus-outbreak-affect-seattle-real-estate-insiders-weigh Accessed May 12, 2020
- The Q1 2020 Western Washington Gardner Report. Windermere Real Estate. Posted April 17, 2020. Available at: windermere.com/blogs/windermere/posts/western-washington-real-estate-market-update–22 Accessed May 12, 2020