Inflated Local Rents, Drive the Purchase Market

As we move into the spring season our local market is primed to out perform the national market due largely to our puffed up rental market. a recent article in the Columbian newspaper showed that average Vancouver, WA 2 bedroom apartment rents were on par with Seattle and noticeably higher than neighboring Portland, OR. What is odd about this factoid, is that both Portland and Seattle have significantly higher median home prices than Vancouver.

Renting in Portland is far less expensive than buying, but in Vancouver it is actually cheaper to BUY than rent and that is rather anomalous for this region. This may be a fleeting moment however as a massive construction boom is underway with more than 7,000 new apartment units scheduled to come online over the next 12-18 months in Vancouver. Portland had a massive construction boom as well bringing some 20,000 units online recently or in the near future.

Over the last 5 years national trends among the millennials was to rent rather than buy and in fact that generation of Americans has had the lowest rate of home ownership in the post war era. That trend seems to be reversing and new reports show millennials are jumping in to the real estate market at rates not seen before.

I still believe 2019 will have modest growth rather than the robust seller's market conditions of 2016 through mid 2018. All things considered, millennials have market making potential just in their shear numbers. They represent 80 million Americans and are now reaching there prime earning years, the next several years should bring reasonable housing demand, but builders need to get ready to change their direction. The trend locally in new construction has been aimed at retiring baby boomers with one level homes. Other builders are still focused on large expensive homes as well and data suggests millennial buyers are not interested in 5 bedroom houses. This younger segment is having fewer children and is driving a bit of an urbanism movement.

Millennials are interested in modern design, energy efficiency and good use of space. The market is healthy and remains mostly neutral with a slight advantage to sellers in the 120% of median an lower market. Sellers of more expensive homes are at a slight disadvantage. 

Vancouver's Aggressive Apartment Construction, What does it Mean?

Vancouver is undergoing a major construction boom on apartments with some 800 units under construction and another 3700 in the pipeline. What does this mean for local real estate? The rental market in the greater Vancouver area has been under severe pressure as neighboring Portland has also had a huge crisis in the apartment market. That city is also pushing a fat pipeline of some 7000 units under construction and 15,000 proposed. The Portland crisis has spilled into neighboring cities like Beaverton, Gresham, and Vancouver driving demand higher here as well.

Rents were out of control for several years recently and that helped push the entry level real estate market to the brink of un-affordability. Now with some of the pressure off the rental market the housing resale market will likely settle in a bit. Frankly this is probably a good thing. As it is now, appraisers are a month out and lending may tighten a bit after the election.

Sellers in the entry level market under median ought to sell now and capitalize on a mini-peak in the sub-median market and get that mid market home while these super low rates are still in play. Renters still can buy a small house for not much more per month than the price of a two bedroom apartment. This is still a good time to buy with these low FHA and VA rates in the low to mid threes.

St. Paddy's is here and so is the Spring Market!

That venerable March holiday that brings out the Irish in all us is just around the Corner. This is a time to start thinking about the Spring real estate bump. St. Patrick's Day is not just a green beer holiday party. it signals the early tingles of Spring. The Vernal Equinox is just a few days after the Celtic Celebration The temperature begins to warm, the rains turn to showers, and the sun decides to hang out for more than a peek-a-boo moment. People start thinking about going outside. Driving the old hot rod or walking in the park. And they start looking at homes.

Here in the Pacific Northwest; the early portion of spring can be a fickle time for weather. It is an ideal time to start your real estate adventure. Listing a home in March can be quite successful as discussed in this post from two weeks ago. For buyer getting the process started early is also a good idea. As the month ends and April begins a surge of new listings will appear on the Market. The buyers that started early have the upper hand over those that dive in late. Either they secured their dream home before the "rush" or they eliminated homes, styles, features and neighborhoods they don't like and can concentrate on what they want and like. These buyers can pull the trigger when the spot the right house.

There is more to Real Estate Spring Fever than just the weather. Spring Fever catches all of us. The home and garden shows start up, the Farmer's Market and a whole slew of spring activities that get people thinking about their own home and perhaps new homes they would like to have. This is a great time to start looking at house to buy and or list a home for sale.

Keeping an Eye on the Market

I wrote this article for the Equity Northwest Properties Blog this morning and decided to re-post it here for you.

There is a huge inventory of homes that were purchased at or near the height of the market from 2004-2008. The average homeowner moves every seven years so many of these homeowners that bought at the peak are getting towards that "time to move" point. The problem is that values for many of them are still not quite high enough to clear the loan obligation. Many of these would be sellers are sitting on the fence patiently waiting for the market to yield the price they need to exit clean.

For Realtors® and sellers this is a 'watch the market' time. We enjoyed a robust 8-12% gain in values over the last twelve months. If this upward pricing trend continues, many homeowners will finally exit the proverbial tunnel and be able to sell their home and clear all liens and fees.

Our local market and many other markets around the nation are seeing tight inventory, especially in the entry level price range. This is driving an increase in price. Low interest rates are also helping to keep demand relatively high. As these 'top of the market' homes become viable to sell again, we will see less of a squeeze on inventory. This can be a bit precarious, too much inventory may cause prices to flatten out if demand does not keep up. So long as interest rates remain at or below 5%, I believe the market will continue its growth, even if inventory levels fatten up. A combination of higher rates in the more normal range of 6-7% and bulkier inventory would likely cause the prices to stop rising or at least severely slow down.

What does all this really mean? For buyers that really want to own, rather than rent, now is truly the time to buy. Rates are low and there is no guarantee they will remain low. Prices are rising but still relatively low. For sellers, things are a little dicey at the moment. Selling now could be the genius move of the decade or it could be one of those "oops" I should have waited situations. No one really knows what this fragile market will do. If you are a owner occupant seller and you actually want to move then selling as soon as possible makes sense. If you are selling based on an investment then you are forced to gamble a bit. Wait or sell? For an investor I would wait a little longer but of course that may or may not pan out. In the end, I believe real estate should be a long term investment and waiting will rarely cost you money, it may just cost you some time.

Sellers and would be sellers should remain 'market engaged'. In other words, pay attention. Things are moving in generally positive directions and the opportunity to sell will present itself soon. Potential sellers should stay in contact with their favorite agent or broker and 'keep and eye on the market'.

Relocating? Rent for a few months first?

Many people find themselves involved in a real estate relocation. Perhaps a job change, promotion, or family related issues. In these situations there are times when the relocation is to an area that is unfamiliar and far away. It can be very difficult to gauge neighborhoods and services in the short visits as buyers look for a new home.

It may serve buyers well to rent a home or apartment for six months to a year keeping the bulk of their items in storage while they learn the area. An advantage to renting is mobility. Once you are ready to move, you give notice, pack up, and leave. Selling a home however is a more enduring process. I believe that it is wise to carefully evaluate the schools, shopping, proximity to work, neighborhood condition and lifestyle, before buying a home. This may take several months to really understand.

Many people however, may be like me. I hate moving. If this is the case, then it becomes paramount for the buyer to consult a true buyer's agent. Many real estate agents don't like showing homes and dealing with the buyer's side of a real estate transaction. Ironically, they are often the first type of agent a prospective buyer meets. The buyer is sitting out in front of a house with the 'Acme Real Estate' company sign and the call the number. That agent may be the classic 'listing' agent.

If buyers are relocating to a 'strange new world' it is advised that they interview a few agents and find one that is willing to spend some time working with them, showing multiple homes in a variety of neighborhoods best suited to their needs. In the end this helps to ensure that best possible purchase and the highest chance of many happy years in their new home.