At the beginning of this month The Seattle Times published a story about a 15% year-over-year drop in King County home prices. Although there has been an overall countrywide dip in home values, it doesn’t mean that everyone in King County will experience a full 15% decrease. Citing the Northwest Multiple Listing Service, the article reported that the median price of homes sold last month was $320,000, dropping 15% from October 2010. There are multiple factors that should be taken into account when looking at these statistics, especially the positives for our local area, as well as first-time buyers.
As the article mentions, interest rates are at a historic low, in some cases coming in beneath 4% for a 30-year term loan. Even if they show signs of dipping further, not all buyers can or will wait until rates hit their lowest point. Despite the shaky economy, people carry on with their lives, families expand, and those who have been gainfully employed might wish to purchase a larger (or first) home. As unemployment drops in Washington State the number of buyers on the market is likely to increase. For first-time buyers, low interest rates coupled with a flourishing market of homes for sale below $200,000 make the option of purchasing a home more viable than in previous years. As these first-time buyers enter the market they create a “push-up” effect, and more established buyers often look for larger homes or properties located in more affluent areas such as Bellevue or Mercer Island.
Interestingly, sales volumes in the state were up for the fifth straight month. The key to this statistic is that while the homes that are selling are smaller homes, more of them are being sold each month. The reason for this trend is unclear; perhaps it is first-time buyers, or maybe people are shying away from the erstwhile “McMansion” fads. Either way, the positive is clear: more people are buying homes.
One of the most important facts that the article takes into account is that statistics from a single month do not constitute a trend. The real estate market constantly fluctuates. According to local online real estate brokerage firm Redfin, customers writing offers sharply increased in mid-October, right after interest rates dropped below 4%. These placed offers should bring an uptick to November closings. It should also be noted that King County encompasses a very large region including north and south Seattle, areas that include some of the lowest-priced properties on the market. In higher priced areas in the Seattle area and the Eastside, the decline in home sales prices was far less than 15%, in the single digits, meaning that homes in these areas held their values; a solid fact to consider when making an real estate investment.
We may not be able to ignore the numbers when it comes to home prices and interest rates, but there is more than one way of looking at them. National trends don’t dictate regional numbers, and for first-time buyers low interest rates and home prices are a boon.