Seattle is currently experiencing a real estate seller’s market. Limited supply and strong demand have tipped the market in favor of sellers. And it could continue into 2017.
In the spring of 2015, the real estate company Redfin said the Seattle housing market strongly favored sellers over buyers. This was partly because the city had the “lowest supply of homes for sale on record,” according to the company.
Not much has changed since then. Even now, in 2016, Seattle is considered to be a seller’s market. To understand what this means, and how it could affect local home buyers, we must first define the term “seller’s market.”
What Is a Seller’s Market?
In a real estate context, a seller’s market occurs when demand for housing outgrows the available supply. In other words, it happens when there aren’t enough homes listed for sale to satisfy demand. House values tend to rise under such conditions.
The Real Estate Center at Texas A&M University has offered what amounts to a textbook definition of a seller’s market:
“If inventory levels are around 6.5 months, there is a balanced housing market … Actual equilibrium in any local market can differ slightly, usually between five and seven months. When inventory levels fall to less than six months, sellers have more control over price and terms, often resulting in more significant rise in housing prices, also known as a seller’s market.”
Most economists consider a six-month supply of homes to be indicative of a “balanced” real estate market. When supply rises well above that level, it’s considered a buyer’s market. When supply drops significantly below six months, it’s referred to as a seller’s market.
Seattle Real Estate Market Favors Sellers Over Buyers
So where does the Seattle real estate market fit into this definition?
Earlier this month, MarketWatch reported that Seattle had just a 1.8 month supply of homes. You’ll recall from earlier that a six-month supply is considered balanced. So clearly there’s an imbalance here.
The condo market is even tighter. In August 2016, Seattlepi.com wrote: “The [condo] inventory supply rate remained unchanged at 0.8-months of supply, still keeping Seattle in a very tight seller’s market.”
So yes, Seattle is still a seller’s market. There is limited supply in and around the metro area, and this comes at a time when housing demand is on the rise. This is largely why home prices in the metro area have soared over the last couple of years.
This is also why homes in Seattle are selling so quickly. In July, a national housing report by Redfin showed that the Emerald City had one of the fastest real estate markets in the country, when measured by the average number of days on market. According to that report, Seattle had a median of eight days on market and a one-month supply of housing.
Will These Conditions Carry Over Into 2017?
Limited supply. Quick sales. Rising prices. These are all characteristics of a seller’s real estate market. And that’s what we are seeing in Seattle in 2016.
The question is, how long will conditions stay this way? Housing demand is likely to remain constant, or even rise, as we finish 2016 and head into 2017. Meanwhile, there’s not a whole lot of new-home construction occurring in the area. So these lopsided market conditions could carry over into 2017.
In closing, I leave you with this recent quote by Matthew Gardner, the Chief Economist for Windermere Real Estate:
“The region is experiencing positive job growth, and with it, migration to Washington State is running at a very brisk pace … As I look forward, I believe inventory levels will continue to rise modestly, but it will remain a solidly seller’s market for the rest of the year.”
To be continued: In the second part of this series, we will offer some tips for buying a home in a hot seller’s market like Seattle.