Let's first define what a good investor market is. Since you ask about rental rates, I'm assuming you're interested in investing in rental properties. To me, a good market to buy rentals is one where you can buy as low as possible and still have a strong market of renters. We didn't see that here in the last few years (as I suspect was the case around the country) as interest rates were crazy low and practically anyone with a pulse could get a loan.
For the most part, I believe the worst we'll see in the Seattle area is a stall or lull in the market. Price corrections for those sellers still thinking it's 2005. I don't think there will be a crash per say in this region. The job market is booming, Microsoft is hiring, other well paid tech jobs are coming here from Yahoo and Google (to name a couple). Microsoft has secured well over a million sqft of office space in Bellevue (city directly east of Seattle) and taken up a bunch of space in Seattle itself. People are moving here, cause the jobs are still here. Boeing is also doing well (as another example). With all these people still coming in, prices here can't possibly go into a free fall. The demand is still here... just most of them are waiting to see if we bottom out or not. Is it a good market to invest in? ..Sure...if you're in it for the long run. Prices are expensive for rental properties. Multi-family properties around the Univ. of Washington (the big college in the state ...sorry wazzu folks) rarely have a cap rate of 6 or higher, they're generally in the 4's and maybe 5's. The reason being property appreciation is so good.
Now for rental rates... I think rates are going to continually go up for at least the next year or two. The demand for condos have caused many apt buildings are being or have been converted to condos...thus displacing the renters. They gotta go somewhere. Also the tightening of the credit market also prevents some segment of people from buying ..and thus renting. If you like college students as your tenants...there's definitely good opportunities to be found in and around the university. There's lots of possibilities all over the region. Just kinda depends on what your target tenant is.
You won't see that in real estate.... if you want to do it yourself fine, you won't be burning a house down or apt to cause anyone harm but yourself. If you take a look at the market and get scared or think that it will get worseâ€¦, act on your gut feelings and sit there and do nothing while the rest of us buy and sell. Say that Realtors are only out for the money andâ€¦. go it on your ownâ€¦.hey, itâ€™s a free country last time I looked. For those savvy enough to ask for advice from a professional â€¦and not begrudge the fact that the professional actually has the nerve to get paid for it, they move forward, even in hard times. I am working with investors right now, showing homes weekly.
I have actually bought 4 homes this year personally.... and I say that the water is fine, jump right in... my youngest son just bought another home on 3 acres for $169,000 near Puyallup, it was listed on the NWMLS. I am in Escrow with my 5th house (a Duplex) for the year but it wonâ€™t close till next month. Am I waiting for the price to get cheaper? NOPE. They may get a bit cheaper, they may not, but when you can pencil it out in your favor by a large margin then it just takes grit to go on and â€œget â€˜er doneâ€.
Believe in what we as Agents tell you or notâ€¦, its ok either way. If you donâ€™t believe the rosy picture we paint, then just sit there, do nothing till the market swings back. But one thing to remember is thisâ€¦., there is probably no one on this forum that will tell you what to do or recommend a course of action that they wouldnâ€™t do or havenâ€™t done themselves. If it was baloney the rest of us would call them on it in a minute anyway. We do police our own. You will see a bit of what looks like hype anytime sales are involved, with real estate this is no exceptionâ€¦but you must use a measure of self awareness and take a bit of risk. There was a sign on the bumper of a squad car in San Francisco in Height Ashbury in 1968 that I saw that was to the pointâ€¦, it said: â€œIf you donâ€™t like cops, the next time you need help call a hippie!â€ â€“ now that was funny.
The market is tough for some, LOTS of homes sitting on the MLS. But HEYâ€¦ its just an opportunity for those who can see the forest through all the trees.
By the way, side note for agent/friends: I am opening my own Brokerage next week just after xMass.
What the public often sees is not what is really happening. Yah there's tons of houses that are overpriced and are being re-listed over and over again (which by the way is somewhat against NWMLS rules). Yah there's tons of homes dropping their prices. However, most people only see the homes that are still on the market. The homes that are actually selling don't show up on most consumer real estate websites once they've gone pending. So all you see are the homes that are just sitting and sitting. If you look at the inventory of homes closely, ..you'll see that the median prices of the homes that are selling is still creeping upwards.
I just looked at the Year-to-Date figures for single-family homes... King County median sale price is up 7.5% YTD compared to YTD figures for 2006. Snohomish county is up 8.1%. Pierce county is up 4.4%. Time on market has increased to an average of 55 days in King county and 66 days in Snohomish County.
The "correction" you so boldly proclaim that is underway is only applicable to those sellers who are refusing to believe the good 'ol days of 2005 are gone. The homes that are sitting, as you claim, for 6 months or more are the ones that are not priced properly for the current market. Plus...those are the only homes you see on the websites. The ones that are selling are dropping off the sites as they sell. Your blanket claim that the sky is falling is frankly irresponsible.
I do agree with you on the commuting to Olympia bit. However, nobody said anything about commuting from Olympia to Seattle. Rhonda was pointing out that Olympia may have good investment opportunities as opposed to Seattle.
Anyway, ..here's your North Seattle figures. Our NWMLS defines North Seattle's borders as ..I-5 to the West, Lake Washington to the East, NE 145th St (lake city) to the North and Portage Bay/Union Bay (roughly 520) to the South.
In terms of market activity (how many listings have come up), ..2007 and 2006 are really close.
Year-to Date (which this report I'm quoting off of is till end of November) for 2007 has seen 1851 listings in north seattle. Same period for 2006 had 1822. Pretty darn close. November 2007 has exactly 100 more listings on the market than November 2006 ...that's the languishing you see ...tons and tons more homes sitting. Median price for just the month of November 2007 is 496,000 while November 2006 was 499,950. So a small dip...about 0.8% drop. However, for the year, median price is $525,000 while last year it was $499,997.
Average time on market has increased by 10 days when comparing november 2007 to november 2006 (63 vs 53 days) ... and has increased a week when looking at Year-to-date figures.
Please tell me what site you use that does show pending properties. I just pulled up a pending property that's been pending for a month now near my house and checked it against windermere.com, johnlscott.com, cbbain.com, redfin.com, ziprealty.com, ....and none of them could show me the pending property. You're not confusing STI and pending are you? STI will show on consumer sites. Pending does not. That's my understanding and belief (until proven wrong).
Properties that are perpetually on the market and then end up being rented are quite often ones that the seller is hoping to get a huge price for. If they can't get it, they'll put a stop-gap solution in place ...renting..and wait out the market till they can get what they want. I'm not recommending this approach ..it works for some ..and not for others. Too many sellers are off their rocker in terms of what they think their house "deserves." One house in my general area sold in May for $475k. The exact same floorplan house came on the market 2 months later wanting $585K. ..$110K more for the exact same house in relatively same condition on the same street. Sorry..there's nothing you can do to that house short of burying $100k in cash in the backyard to make the latter house worth that much more. That house has been re-listed and price dropped over and over and ....as you see often ...it's now for rent. Seller apparently refuses to believe or accept that the market value is lower than their price. Then you have the more reasonable sellers who know they can't keep assuming their property is appreciating at 20% a year and they price their house accordingly and they sell.
I'm not saying by any means that the market is happy, rosy...it's not. However it's not the doomsday scenario that many in the media like to portray. It's not the mess that most parts of the country is experiencing. Our area in general has definitely slowed down ..it's taking a breather and the crazy sellers out there that refuse to accept this fact will suffer.
I have been focusing on the North Seattle area and am seeing properties languish. Properties have been sitting for so long that the MLS listings have expired. The properties are then relisted with a reduced price. After months of this many of these properties are appearing on sites such as Craigslist as FOR RENT.
I don't know that I would phrase it the same way that Olaf did but the market is not as rosy as these Real Estate Pro's would proclaim. Just remember that these guys make money when you buy or sell so take what they say with a grain of salt and look at the market for yourself.
Thanks to our Pacific Rim location and our deep natural harbor, a spectacular level of deep-draft tonnage passes through our ports every day. With the continued explosion of trade, and Panama's inability to finance an increase in canal capacity, the demand on northwestern ports will continue to grow.
While this is mainly a transportation infrastructure problem, it clearly has major ramifications for real estate. For example, due to terrorism's disruptions of global just-in-time manufacturing and the seasonal nature of trade, the need for additional warehousing and other infrastructure space has become critical. We are already seeing significant demand for additional warehousing space in our region. Where are we going to accommodate this growing demand? Thanks John; http://www.djc.com/news/re/11172346.html
Four major demographic factors are causing population growth to be a significant issue for Puget Sound:
*Enhanced trans-Pacific and Latin American immigration
*The huge baby-boom cohort coupled with our growing aging population
*A rapid rise in single-person households, particularly in urban areas
*The nation's population is shifting toward the coasts
"Real estate and infrastructure has not kept pace with this population growth. Witness the demand for housing and our overtaxed highways, which are just the tip of the population iceberg. When you couple an ever-increasing population with a real estate supply that is constrained both by geography and by regulation, it becomes obvious that we will require a vastly different decision making paradigm and a greater level of creativity than we've exhibited in the past....". - Business Journal quote.
Anyway.... I personally bought 4 homes this year. My two sons bought several homes each this year....so, just wait and see if the market really goes down or, buy now and when it goes up as it always does, you can prosper with the rest of us. :)
Also: Don't let anyone tell you people "commute to work" from Olympia to Seattle. That's a ninety-minute drive when rush hour goes smoothly -- which it rarely does. The transportation infrastructure in this region is collapsing under its own weight, and anybody who has to commute is living a miserable life.
I know Olympia is not Seattle, but it's cheaper here and lots of people live here and drive there to work.
Here is my 2 cents worth.
Samuel is right on when he said, "Seattle is no longer a place to come looking for a "quick gain" from your investments." James also had some great in depth details about Seattle. My experience has been that some Seattle area investors, who have been around and are savvy, are looking just South of Seattle and areas that commuters will travel 30-45 minutes from to get into the city...for better deals. They are now building a new commuter light rail system to go to outlying areas.
James is also right about the job market here. Just remember thatâ€¦ 1. the seller pays the RE fee andâ€¦ 2. not all Agents have personally flipped a house, nor are familiar with the rental market in particular and some have not dealt with investment strategy on a personal basis, but most are of course glad to help a client do so. Sharpen your pencil and pick a good agent.
Have a great experience in the Emerald City and beyond...!
With that said...Seattle is no longer a place to come looking for a "quick gain" from your investments. In this market as long as you are knowledgeable in where and what you are buying you can still find several good investments and can easily rent them out.
I personally feel bad for renters as it is now extremely difficult to find affordable rental properties as rents have sky rocketed...thankfully if a buyer can qualify this is a much better time to be buying than renting...now to just find more qualified buyers...