A big question us Realtors get from our clients.
Homes are currently selling for more than they ever have in the Seattle real estate market, and each month keeps going up in price. We are beating records folks, every month. As far as year-over-year increases in value goes, March hit a 12.3% increase in sales price compared to last year. Second place was Portland, OR sitting at a 9.2% increase. We are the hottest real estate market in the country. So the question remains..
Why aren't that many people selling?
Homeowners can't afford their neighbors house!
It's really a simple answer. The cost of living has gone up for two main reasons: foreign investors, and people relocating here for their high-up tech job. Both of these groups are generally wealthier than the average resident in our area. The foreign investors are cashing in on the fact that companies like Amazon, Alibaba, and Facebook are creating more and more jobs here every day. The relocation buyer is willing to bid extremely high on a home against you because they have to move here. They need the home more than you do - their job is now in a different state! They don't care if they have to bid $40,000 higher than you on a home. They are competing with other relocation buyers that have the same motivations as them. This in turn is causing many neighborhoods to skyrocket in price, because if one home sells for a high price, it becomes a new comparable when a neighbor with a similar home wants to sell.
For those of you that own a home, I'm guessing you would love to sell to cash out on the equity you have gained over the years if you could find a nice place to move. I have a client that has gained 200K in equity since last year in Kirkland. Crazy right?
The problem is, many people can't even buy into their own neighborhood anymore. Lets say your home could sell for $450,000 now, and you originally bought it for $200,000. Sounds like it's time to sell and take advantage right? There is one problem. You have the same job since you moved into your home, and you make the same amount of money. You can only afford a $200,000 house right now. Yes, you could use money from the sale of your home to put a larger down payment, but your monthly income couldn't support the mortgage payment on a home like yours in the same area. You might not even be able to get approved for the home you live in right now! Even if someone wanted to sell to cash out, they would have to settle for a further commute and move farther away. Many families want to stay in their area because of the school district, low crime rate, and overall quality of living. This is why we have a low inventory of homes on the market. Is there a bright spot to sell in this market?
The Cash-Out + Rent Strategy
If you still want to sell and take advantage of your gained equity but don't want to get into these crazy bidding wars, the best option for most is to sell and rent until the market cools down (unless you can afford the area you want to live in). Yes, the market could continue to go up. Unless these jobs suddenly leave here, we shouldn't see any big changes anytime soon. No real estate agent or economist knows for sure what will happen. If you look at history though, the market over time will continue to go up and down, gradually moving up when you look at the big picture - always. Your home is like a giant stock. It's for you to decide if the gained equity makes it worth it to sell now. If you have a good strategy, it could be a very rewarding move. We haven't seen large increases in value this quickly - ever. So if you are in a good position to sell with considerable equity, you are making the right move - as long as you are putting your money in the right place immediately after.
How do I know when the best time to sell is?
That's the thing. Like stocks, you will never know the exact best time. If you want my best advice: Sell when the inventory of homes are low. The less homes that are on the market, the more you will get for your home. When buyers have more options, you get less offers. And when there are less homes on the market, even if your home needs fixes, buyers will more than likely overlook those issues because of their lack of options. If you've been thinking about selling, make your moving strategy now. Don't wait for more homes to come on the market. You will lose your leverage.
If you ever have any questions about the real estate market or need help buying or selling, I'd love to help you! Give me a call sometime. ~ Kevin, 206-734-1053