The Seattle PI wrote a nice summary of the general local market conditions. Some good county-wide data in there. I thought I’d share what I’m sensing in the downtown condo market.
I’m seeing many buyers – especially first time homeowners – waiting on the sidelines out of concern that prices will fall soon after they buy. At the same time, many of my selling clients are only adjusting prices by a few percent (if at all) or deciding to lease their properties to an increasing pool of renters before putting their units on the market in 2008.
So who is left in the market today?
The most active buyers I’ve seen are experienced investors who are finding choice units at relatively reasonable prices and renting them out the day after closing. The next group of active purchasers seem to be well-heeled cash buyers delighted to have their pick of the litter without too much concern about multiple offers.
Everyone else seems content to play a game of chicken. Most buyers are waiting for major price reductions and most sellers are holding firm (some are making symbolic price reductions of 1-3%) or taking their units off the market in favor of renters. Seems like many owners prefer to try and sell in the spring instead of race to the bottom in the fall.
Another reason we aren’t seeing lots of big markdowns is it seems like many buyers have decided to sit it out till after the new year no matter what the prices are today. Even those listings with more material price reductions remain on the market several weeks later.
At the end of the day, I suspect the long-term investors / primary residence buyers will do well — especially if they pick a great unit / building and get it at a good price (a combination that was unheard of last year). The most impacted will likely be sellers who can’t afford to wait till next year to sell – they may need to make a big whack to the prices if they can’t afford to carry the negative cash flow of renting (assuming they bought so recently with little down payment that they don’t have a lot of equity).
Come next Spring, we’ll see how it actually plays out. I can think of 3 potential outcomes:
(1) pent-up buyer demand from a dormant winter leaps into the market all at once in March making all the buyers wish they had bought while the competition was soft in the winter;
(2) sellers cry "uncle!" and make big time (~10-15%) reductions off of 2007 prices;
(3) the market slowly gets it’s rhythm back and prices end up about where they are today +/- 2-3%.
If I were a betting person, I’d image door number 3 is most likely given the strong underlying strength of the Seattle economy and the owner safety net of a firm rental market.
What do you think?