Important Market Considerations for Real Estate Investors.

Seattle and the greater Puget Sound region have been home to some of the hottest real estate and development in the last several years. However, there are some signs of change that real estate investors should be aware of.

Rising Interest Rates
In June, the Federal Reserve Board implemented another rate hike, bringing the Fed Funds Rate to 2.00%. Fed Chairman Jerome Powell has described the case for continuing to raise interest rates as “strong,” citing declining unemployment and increased household spending. With two more rate hikes planned for 2018 and three in 2019, investors should expect rates to continue to rise.

This week the WSJ prime rate hit 5.00%. Higher interest rates may temper property values and further increase construction costs. When in the market for a loan, property owners should be careful with floating rates – which have become more common, especially on construction loans.

Record High Construction Costs
Due in large part to labor shortages and rising lumber prices, construction costs have reached all-time highs. As a result, it is paramount that builders and developers seek multiple competing bids and work to develop conservative construction timelines prior to applying for a construction loan.

Pacific Northwest Home Value Growth Slowing
While the Pacific Northwest residential real estate market remains very hot, growth in home values appears to be slowing. Based on Zillow’s data and projections expect growth rates to drop by around 50% over the next year.

City Median Home Value 1-Year Change 1-Year Forecast
Seattle $767,000 15.4% 8.1%
Bellevue $940,200 16.2% 8.0%
Tacoma $285,600 14.7% 9.2%
Everett $373,100 14.9% 9.0%

Apartment Market Cooling
Our friends at The Seattle Apartment Team have reported a cooling of the local multi-family market and projected slower growth over the coming months as rents have remained stagnant, concessions are up, and vacancy rates have increased – due in part to rising interest rates and construction costs.

Despite these shifting market conditions there are still significant opportunities in both commercial and residential real estate investments across the Pacific Northwest. As private money lenders at Juniper Capital, we examine the entire picture, keeping in mind economic conditions, to provide our clients with the best possible short-term and bridge financing. We specialize in Seattle real estate loans, private construction loans in Seattle, and more. Give us a call today to discuss your next investment opportunity.