20 Dec 2018 Market Review: Digging Into the Numbers
On Thursday James Dainard hosted a 2018 Market Recap and Projections for the 2019 Market in the Seattle area. In case you missed it, you will find a link to a recording of the webinar here. Our team pulled statistics from Jan. 1st 2018 to Nov. 30th 2018 to demonstrate the transition from a peak market to a good market. The values can be seen broken down below:
During our 30 Q&A with James, one of our viewers asked; “Is the percent of amount sold, the original list price? Or the price at the time of sale?”
The numbers are based on the original list price vs. final selling price and we’ll take you inside the process and breakdown of how we reached our market conclusions and assessment for 2018 to give you the most accurate representation of what is happening right now.
Crunching the Numbers
The percentage of sold price is based from the original list price. For the last 5 months ending 11/30/18; the average sale price is just under 2% below the original list price. In a balanced market, houses generally sell on average for about 95% of original list price. This data confirms we’re still trending toward a sellers’ market. The current market supply remains at 1-2 months: still only half the amount of a balanced market at 4-5 month’s supply, so the market remains healthy.
It’s important to note that our data is based on single-family detached homes built in 2015 and earlier. The data set is pulled from the NWMLS from Jan. 1, 2018 to Nov. 30, 2018. We used this specific data as it best fits our investor profile. Houses built after 2015 were omitted from the data as newer homes typically sell for 15-20% over resale housing stock and hence tend to skew the data.
When the market began to stabilize toward a more balanced market, this caused concern as people had become accustomed to the “new normal”. Our market continues to head toward a more balanced market, but we’re still well below historic levels of normal inventory which is a positive sign for investors as it indicates stable investment opportunities. Investors in skyrocketing markets can make a lot of money quickly, but those same markets can be much less reliable.
The data from the last two quarters in King County show a quick change in pricing. Houses were selling for 97.6% of original list price. At the time, it felt like a rapid loss, however, there were many factor sat play; interest rates increased to 4.7% and rate locks had expired. This placed an entire buyer pool into a different price bracket. Buyer fatigue settled in as we turned the corner on the third quarter of 2018. Buying a home had become a bidding war,waving inspections, and making concessions just to get a foot in the door. Buyers began to push back, realizing that skyrocketing prices had pushed prices above the actual value of the investment. Just like the stock market,when a stock reaches a peak above the actual market value, it has a correction period bringing it back to its actual value. The same concept applies to the last two quarters in King, Pierce, and Snohomish counties.
Current Market Condition
The current correction in relation to market value has brought us to a current state that is closer to actual value. King County houses have been selling at 97.6% of original list price, in conjunction with a more balanced market, when homes sell closer to 95% of original list price. Days on market are up only eight days and inventory levels are now at two months – half of the four-month supply that categorizes a balanced market.
It is important to remember these data sets are based on averages. Your investment will not always fit within this average. The past month at Heaton Dainard we had one property sell in just six days, we had another property that closed after 96 days on the market.
Heaton Dainard Conclusion
To summarize 2018, it was a unique time filled with highs, but the actual data indicates very few lows. As an investor, it’s imperative that you are mindful of the difference between losing money on an investment, and not making as much as you were hoping to. It’s important to keep numbers and data in perspective. For example, a 200% increase in inventory from January, sounds like a reason to panic; but inventory in January was 0.7 months, a 200% increase 0.7 months of supply puts the market at two months, half of what a balanced market should be.
Heading into 2019: it remains a great time to invest in real estate. If you have any questions about our current market, or you’re looking to get started, contact us today!