Saturday, November 7, 2015

4 Terrific Reasons to Be Bullish on the US Housing Market – And Especially Seattle’s Market


By Ken Urman, Realtor

During the last month, several people have asked me if it is wise to continue investing in the housing market. My response has been a resounding “YES!” Several indicators point to a strong market for the foreseeable future. Our region’s economy is no exception.
The data for the Seattle-Tacoma-Bellevue area is compelling:

1.      Job growth in our area is remarkably strong. According to a report from Bright Media, a staffing agency, the Seattle metro area saw 168.44 new jobs per 10,000 residents. This places us at the top of the list of U.S. metro areas in job growth. The top industries for this area were professional services, health care, tech, financial services, and retail.
2.      According to a recent Gallup poll, the region ranked second in the nation for wage growth. Employees in the Seattle-Tacoma-Bellevue area saw salary increases of $4,320 between 2009 and 2012.
3.     To assess consumer confidence relative to the real estate market, one need merely look at the competition for available real estate inventory during the last year.
4.      Inventory of home available for purchase has been consistently tight. I’ve commented on this issue almost every month for the last year in my monthly market update (published in my monthly newsletter). Our area has abundant pent-up demand.
5.      Housing starts in our area – primarily for single family homes – is somewhat behind the national average.
A recent article published on Forbes.com by PIMCO pointed to “4 Reasons to Stay Invested in U.S. Housing.”http://www.forbes.com/sites/pimco/2015/10/02/4-reasons-to-stay-invested-in-u-s-housing/  retrieved October 6, 2015]  Some of the key points in the article are particularly relevant to our area.
      ·       The nation’s housing market is continuing to grow faster than the economy.

·       Strong job growth and rising consumer confidence will lead to demand for homes, even if mortgage rates rise modestly.

o   The U.S. economy added about 3 million jobs in the private sector during the last year.

o   About 750,000 of those jobs are in the 25 – 34 age cohort, which is near a 15-year high. This is the prime segment for first-time home buyers

o   The unemployment rate dropped by 2.4% in the last two years to 5.1%.

o   The authors expect these factors will lead to increased consumer confidence and a higher demand for homes.

·       Low inventories and rising pent-up demand.

o   Nationwide, home inventories are near 15-year low levels. 

o   In the last year, 1.5 million new households have been formed, yet less than 12 million new housing units have been added.

o   About one-third of people aged 18-34 are living with their parents.

o   This translates to a lot of pent-up demand at a time when the nation has been significantly under-building relative to long term demand.

·       Banks are more willing to lend and demand for credit is expanding.

o   Mortgage origination at all four of the largest U.S. banks rose by double digits.

o   Consumer confidence is rising.

o   A large number of previously foreclosed homeowners could become eligible to buy a home in the next five years.

o   These factors are expected to result in increased supply of credit, which should, in turn, support the U.S. housing market.

·       Relative affordability.  The cost of owning a home is still remarkably low both as compared to the cost of renting and as compared to historical housing affordability.

When all factors are considered, it is clear that the housing market will remain strong in the Seattle-Tacoma-Bellevue area. It is a great time to sell, a great time to buy, and a great time to invest in real estate. If I can be of assistance to you, please give me a call. Let my experience, professionalism, and tenacity help you make the best possible real estate transaction.