Current homeowners are staying put—leaving fewer options for first-time buyers
Low inventory was the theme of last year’s Seattle real estate news, and so far this year, inventory has been even more sparse. The latest data from Northwest Multiple Listing Service (NWMLS) shows less than a month of inventory available in King County during February—as opposed to about a month that time last year.
It’s a statewide, and nationwide, problem, but it’s especially pronounced in Seattle; according to a report released by Remax earlier this week, the Seattle metro area is tied only with Denver for lowest housing inventory and has one of the fastest markets in the country, driving up competition and prices for would-be buyers.
But why is inventory staying so low—and getting lower?
According to a survey by Equation Research on behalf of home financing company Valueinsured, with real estate prices at a record high—Seattle homes are routinely seeing year-over-year increases in the double-digits—current homeowners are unsure of their prospects after selling. 65 percent of Seattle homeowners who would be open to selling are choosing to hold off because they don’t want to buy their next home in this market.
Those same homeowners wouldn’t blame potential buyers for not wanting to buy in the current market. 67 percent of surveyed homeowners said that people who buy in their neighborhood right now are “overpaying.”
It speaks to a general air of uncertainty around Seattle’s home prices; 30 percent of homeowners surveyed said they are “not confident” that their current home, or any home bought today, will be worth more by the end of 2019. 48 percent of Seattle residents don’t consider the current market healthy.
“Experienced homeowners and buyers know we are at the top and are sitting out to avoid buying,” said Valueinsured’s CEO Joe Melendez in a statement on the survey. “Inventory is, therefore, pushed way down, inflating prices for those who are willing to buy high. But for the most part, there are not enough people who are willing to buy high. That’s why sales volume is down. It is not a sustainable picture.”
Overall, Seattle residents were “more pessimistic” than the rest of the United States, with 76 percent believing they could “witness another 2008-style housing crisis again in their lifetime.” (There are huge differences between the market then and the market now, although the prices do gate many out of homeownership.) That increased among millennial, interested first-time buyers to 85 percent.
A more negative outlook among people who aren’t yet homeowners shouldn’t be a shocker; those who already own a home tend to be in a much better economic position than those who don’t. According to data from the Harvard Joint Center for Housing Studies, 45.4 percent of Seattle-area renters were cost-burdened in 2015—meaning their housing costs make up more than 30 percent of their income—as opposed to 25.4 percent of homeowners. That same data found that median owner income in the metro is $96,400, compared to $50,000 for renters.
That means, despite a general uneasiness around the market, current homeowners tend to feel a little more secure in owning a home. Despite many not being willing to move, a whopping 82 percent of current homeowners said they could afford a down payment on their next home, as opposed to 25 percent of first-time, millennial buyers. Among senior homeowners—65-plus and planning on downsizing—20 percent plan to buy a new home without a mortgage.
Regardless, with the coming of spring, inventory could improve when the March numbers roll in. “The arrival of daylight savings triggers a burst in new listings,” said J. Lennox Scott, chairman and CEO of John L. Scott Real Estate, in a statement with the NWMLS numbers. “More listings lead to more sales.”
An inventory crunch, as many argue, isn’t the only thing driving up home prices in Seattle, and it’s not like we’re adding new homes for sale at the same rate as we’re bringing rental homes on the market—or new people to the region—anyway. But shrinking inventory certainly isn’t helping.