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King County Market Report: Is it time to sell?

We're heading into the end of 2015 and, if you're thinking about selling your King County home, now is the time to do it.

Houses are selling within days, inventory is at an 10 year low, and there are plenty of summer-season buyers still in the market as they weren't able to secure a deal.

While nobody can predict the future, my take on the market is that prices are going to continue to rise, here's why.

The rush of new residents moving to the Greater Seattle Area will continue to push inventory levels down and prices up. But just how hot are things really getting and are there any signs that things are going to be slowing down?

Well, I didn't know, so I pulled some sales data for King County from the past fifteen years to find out.

First thing I wanted to know was where the market is relative to the 2008 crash. Below is a graph showing the average sales price for all King County homes since 2000. The market peaked in 2007, at an average price just over $565k, and was at it's lowest in 2011 when prices dropped to an average of $422k.

Then, in the summer of 2014, we surpassed the highest average price point from the pre-crash real estate frenzy. We're currently sitting at an average price of $586k which is 3.76% higher than the 2007 peak. As we can see in the graph below, those who bought in 2011 when the market was at it lowest, are currently enjoying a 38.8% boost in home value. For some, that'll equate to over $160,000 in equity over a 4 year period.

With this info it's clear values have definitely bounced back but, what clues, if any, do we have telling us they'll stay there? Anyone speculating on the market knows that the double digit growth rates we're seeing are not sustainable and things are inevitably going to slow down. But, to get a better understanding of where the market is heading, we need to look at what is fueling this sharp spike in home values. The bidding wars.

Its the old law of supply and demand. As more buyers enter the market, prices are bid up and, in real estate, this is when people start acting a little crazy. Buyers begin waiving contingencies and submit offers tens of thousands dollars over asking price so they can ensure their offer is chosen. Even then, they don't always win. Some buyers have submitted 10+ offers on homes and were outbid each time.

Part of the reason this is happening is because of the population growth. Between 2000 and 2014 King County experienced 19.61% increase in population while the rest of the country only increased by 13% on average. Once we learn that we're outpacing the country in populations growth by 50.85% we can begin to understand why the real estate market has gotten so competitive.

Next, lets look at inventory levels. King County is currently hovering around six weeks of inventory which is extremely low. Generally speaking, six months is considered a balanced market. This data is extremely indicative of the current market realities and, as you can see on the graph below, we haven't seen inventory levels this low in the past decade. Six weeks of inventory means that, if no more houses were listed as of today, we wouldn't have any remaining homes for sale at end of that time period.

However, I wanted to dig a litter further and see if the low levels of inventory could also be due to less sellers putting their homes on market. It turns out the total number of units sold in King County this year is about 21.67% less than the pre-crash peak in 2005 as depicted below.

This tells me is that King County home owners aren't interested in moving, weren't prepared to sell once prices did rebound, or they're holding out because they expect values to keep rising. However, with inventory levels this low, I would expect more people will sell in 2016.

Which is why it is my opinion that if you're thinking about selling, now is the time to do it. These price and inventory trends resemble what we were saw at the 2005 peak before the big crash. While this does tell me that the market is due for a correction, it certainly won't be a bubble-bursting event. Simply because of the amount of people moving to the area due to the surging job market. Instead I would expect values to continue rising but at a much slower pace.

Using these statistics its safe to say that 2016 is going to be a very strong year for the Pacific Northwest real estate market.

But , sellers do need to beware. Just because the market is hot and buyers are in a frenzy trying to lock up their dream homes doesn't mean you can set the asking price at whatever you want. The goal is to price it as close to the market value but not over.

Over pricing your home means it will sit on the market longer than it needs and, statistically speaking, if this happens, you're not going to get as much money for your home. In real estate, we call this the kiss of death. You want to drive as much traffic to your listing as soon as it hits the market and, if you're at an unreasonable price, buyers (or their agents) will know and pass on the viewing.

If you want a better understanding the selling process and how to accurately price your home, check out my All Inclusive Guide to Selling Your Home for the Best Price and Terms. It's designed to teach you all that you need to know to maximize the net proceeds on the sale of your home.

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