MARKET SPOTLIGHT: Pacific Northwest
for 2018, down 12.8 percent from the previous year and down 24.5 percent from a decade ago. Still, investors who successfully flipped a property paid a median price of $267,000 to purchase the property and sold it for a median $360,000 in 2018, a 34.8 percent gross return on investment. It took an average of 188 days to flip a property in 2018. Total distressed sales — REO sales, short sales and third-party foreclosure auction sales combined — in the Portland metro area were down 23.4 percent on an annual basis for the first quarter of 2019. The median sales price for a home in the Portland metro area was $367,000 in the first quarter, a 2.8 percent increase from a year ago and up 93 percent from the ar- ea’s post-recession bottom price of $190,000 in the first quarter of 2012. In its May 2019 release, the S&P CoreLogic Case-Shiller U.S. Nation- al Home Price NSA Index reported a 2.6 percent yearly increase in home
a median price of $271,000 and sold them for a flipped price of $392,000 for a 44.6 percent gross return on investment. It took an average of 197 days to complete a flip in 2018. Total distressed sales — REO sales, short sales and third-party foreclosure auction sales com- bined — in the Seattle metro area were down 2.8 percent between the first quarter of 2019 and the same quarter last year. The median sales price for a home in the metro area was $437,000 in the first quarter, up 2.8 percent from a year ago and a 94 percent increase from the area’s post-recession bot- tom price of $225,000 reported in the first quarter of 2012. Even with low unemployment, investor Nova Shank, managing broker at Champions Real Estate Services, sees homelessness as a problem that may affect both local investors and those coming into the area from other locations. “Even with the buy and hold strategy I’m seeing people having fantasies of what they want in rental return,” Shank said. “The home- lessness situation is so bad that people can’t afford rent. It’s pushing people out of any affordability. Un- employment is low, but wages are even lower. Wage growth hasn’t im- proved substantially for 30 years.” Prices are down for both condos and single family homes. For inves- tors looking to flip a property, Shank tells them that in this market those properties will sit if they are not fixed up to a livable condition. “I keep telling everybody you have to take care of that stuff before you put it on the market. Nobody has this money. Young kids coming out of col- lege are in debt. They don’t have the money at the end of the month to fix the plumbing. You’re going to have to take care of that if you want the house to sell in a reasonable time.”
“You have to look at land, labor, materials and regulations,” Gardner said. “We’re not going to be expand- ing those boundaries. We’re not digging into agricultural land at all.” In his Q1 2019 edition of The Gardner Report for Western Wash- ington, Gardner’s charts show a 10.6 percent drop in home sales for King County between the first quarter of 2019 and the same quarter last year, and a 0.1 percent decline in annual sales prices for the same period. “Home price gains continue to slow,” said David M. Blitzer, Manag- ing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “The patterns in the last year or more continue: year-over-year price gains in most cities are consistently shrink- ing. Double-digit annual gains have vanished. One year ago, Seattle had a 13 percent gain. In this report Seattle prices are up only 1.6 percent.” With interest rates remaining low, Gardner is forecasting that rates
will not go above five percent until 2021. That, combined with a slower home price appreciation and an in- crease in housing inventory denotes a move toward a more balanced housing market in Seattle. For investors, however, this trend means more competition for avail- able inventory and difficulty finding properties. “Flipping is down. Investors es- sentially have to pay retail. Foreclo- sure activity is very low. There are no cheap deals to buy anymore,” he said. “On the investor side we’re seeing a slowing in all cash pur- chases given the fact of increasing home prices. What we did find is a lot of investors actually selling. They’re trying to time the market.” Flipped properties in the Seat- tle metro area accounted for 4.7 percent of all home sales in 2018, down 15.9 percent from a year ago but up 38.9 percent from 10 years ago, ATTOM reported. Investors pur- chased properties to flip in 2018 at
Still, investors want to be in the Seattle market. Cap rates are staying around four percent while Shank notes that he still gets calls from investors looking for a 10 percent return on multi-family properties. “Around here you’re lucky if you get six percent and super lucky if it’s seven percent,” he said. ATTOM reported that foreclosures in the Seattle metro area were un- changed in the first quarter from the same quarter last year. When it comes to buying at foreclosure auctions how- ever, institutional investors like Vestus are buying in bulk and boxing out smaller investors who can’t compete. “They’re wearing out the market. Everybody’s so fatigued they’ve stopped going to the auction since they can’t beat Vestus. So, they are able to monopolize the auction. They’re wholesaling them on their website after they buy them at auc- tion paying top dollar.” Still, for investors looking for deals in Seattle, there are opportu- nities to be found. “Opportunities are still there but you have to go back to knocking on doors because you’re not going to win at auction. I’m making my own projects,” said Shank who does a lot of direct mail marketing and social media.
prices for the Portland metro area as of March 2019.
SEATTLE: SEEKING BALANCE IN THE MARKET The U.S. Census reported a popu- lation of almost 3.9 million for 2017 in the Seattle metro area, an area that came in at number nine on the U.S. News list of Best Places to Live. Headquarters to both Amazon and Tableau, a software firm just sold to Salesforce for $15.3 billion, Seattle is an area where home prices are higher because incomes are higher, Gardner noted. Unemployment is staying low, down to 3.4 percent as of April 2019. But even with those gains in both population and employment, on the housing front, questions remain about housing affordability in particular due to lack of available land due to King County’s urban growth boundary regulation that limits the land supply, resulting in higher prices for land that is available for development.
Seattle, WA
Joel Cone is a freelance business writer based in Southern Califor- nia. His articles have appeared
in California Real Estate magazine, Real Estate Southern California, OC Metro, GlobeSt.com, Foreclosure News Report, the Los Angeles Daily Journal and the Smarter Investor blog for U.S. News & World Report, as well as many other print and online publications. Contact him at snocone1030@gmail.com.
30 think realty housing news report
august 2019 31
Made with FlippingBook Online newsletter