The Metrostudy report from the November 12, 2015 3Q Seattle Briefing includes some interesting assessments of the city’s housing market. Taking into consideration national and local economic trends, as well as Puget Sound housing and lot sales in quarter two, the report assesses the market looking forward. Juniper Capital is happy to share these main points with investors, so they can make good decisions about investments. It is our goal to share quality business advice and data to help you achieve and maintain success.
Interest rates are still very low, but they have begun to tick up on speculation that the Federal Reserve may begin tightening monetary policy soon. Any substantial increase in interest rates will impact ability to afford a home, although higher prices have been more active in that regard likely. Affordability is still relatively good for existing homes, but for new homes it’s sliding down due to rising prices. In addition, the definition of “entry level” is being re‐defined. The requirements of higher credit scores and larger down payments, combined with weak appraisals, are still suppressing housing demand for first time home buyers. Builders need to address the lower-end or risk losing millennials to long‐term renting.
Looking Forward, real Gross Domestic Product numbers looked better in the second quarter than the first, but the outlook for growth remains moderate for the remainder of the year. The national employment situation is steady, and very good locally, with broad private sector gains across almost all sectors. This benefits housing. However, the labor force participation rate is still very low from a historical perspective, and the quality of jobs being created is not excellent.
Builders still have a shortage of supply in highly desirable areas, where inventory seems adequate absorptions are slow. The new housing market was down 6% in 2014, in part due to supply and Qualitative Mortgage, but 2015 is doing better in terms of new home sales, with much stronger job growth in the tech sector.
The report expects nationwide Total Housing Starts to gain 10.1% this year and 11.8% in 2016. For Single Family, the 2015 figure is +9.6% and a faster 15.5% pace is expected for next year. Locally another 5% to 8% gain sales is expected. If it weren’t an election year, growth would be higher. Low Oil Prices should also give a strong multiplier on consumer expenditures, but it’s unclear whether it will be sufficient to impact home buying trends.
Juniper Capital specializes in real estate investments with private money loans in Washington and across the Pacific Northwest.