Increasing home prices lead some to fear a repeat of 2007. Will it happen in Washington State?
Seattle is the Nation's leading growth area due to the significant presence of high tech industry, a lifestyle that many select intentionally and a scenic environment like no other. Is there any reason to fear a housing bubble?
After the financial crisis of 2007 that led to the worst economic downturn since 1929, the term "housing bubble" was introduced. It describes a time of unprecedented growth followed by a sudden halt and collapse of housing-related markets that begin a domino effect on numerous other industries and markets. Seattle is the Nation's leading growth area due to the significant presence of high tech industry, a lifestyle that many select intentionally and a scenic environment like no other. Is there any reason to fear a housing bubble?
The reforms from the 2007 debacle are insurance against a return of that scenario of excessive foreclosures, mortgage defaults and a huge inventory of houses. Lending and credit requirements have made lending a more secure investment and builders have been cautious. The resulting tight inventory and intelligent building plans have built up a solid foundation for the Washington market.
Washington State is forecast for continued growth
Washington State is forecast to see increasing and steady growth as more people relocate here. Financial security for builders and developers is guaranteed by tighter credit and lending regulations, the only real question is how this will affect the cities and towns outside growth areas such as Seattle.
Some experts predict that housing prices will rise by at least 5% while the steady influx of newcomers will increase. The small inventory will keep prices high ensuring a stable and dependable market. Some think that prices could go as high as a 10% increase and demand will also increase.
Fed may hike up interest rates
The Fed has hinted its intentions to raise interest rates at some point which means and increase in mortgage rates; buyers and sellers will be motivated to take advantage of the current rates. Current rates in Washington as of this writing are 4.38% for a 30-year fixed rate mortgage, 3.78% for a 15-year fixed rate mortgage, and 4.28% for a 5/1 adjustable-rate mortgage (ARM).
Millennials in the high tech field will be motivated to buy; and they will have the salaries and lifestyles to match. Nearly 4% of the millennials living in the Seattle area earn more than $350,000 annually. They are well educated and seek the best schools as well as close-by conveniences for social, cultural and consumer purposes. They are very collaborative and Google and Amazon both have a campus-style culture. They also seek outdoor recreation and the region's abundance of opportunities for skiing; hiking and water connected sports lure them here. Realtors and sellers would be wise to consider these characteristics when marketing. They have the finances and employment to keep prices high and maintain market stability and growth. Many will decide that the rent they are paying is the equivalent of a monthly mortgage payment and decide to invest in real estate.
Opportunities for first time home buyers
First-time buyers will also be active and will most likely be eager to take advantage of current lending rates. Depending on their earning power and likely increases in salary, first time buyers will be likely to venture into the market. The new tax cuts are seeing an effect on weekly wages of many workers and combined with the likely increase in lending rates, they are more willing to buy than wait.
Those who decide to rent until financially ready to buy will see a rise in rents and more condos and apartments are in the planning and building stage Many renters will also enter the market as they become more financially ready and inventory becomes available.
Will a bubble burst in Washington State real estate? Maybe not
Will Washington continue to grow and is a bubble a possibility? Washington will continue to grow in population and the "bubble" of 2007 proportions is unlikely due to regulatory safeguards. The innovative and creative high tech products will continue to increase with the added brain power of newcomers and investment. The future looks bright and optimistic for the Washington realty market and the vast majority of experts agree on that.