Newest data predicts return to balance for Northwest housing market

The latest data and estimates from a handful of Northwest Multiple Listing Service real estate professionals paint a picture of a much friendlier housing market for buyers in 2019.

As 2018 rolled to a close, the housing market in the Northwest saw a noted increase in eager sellers.

“Buyers in December were reaping the benefits of market-weary sellers who were willing to give up part of their bloated home equity to make a deal and move on,” said John Deely, principal managing broker at Coldwell Banker Bain, in the NMLS report.

That was confirmed by members across the NMLS, including Windermere Real Estate President OB Jacobi.

“The year ended with more of a splutter than a bang as home price growth continued to slow in December,” he noted.

That was rounded by a median closing price for houses of just $639,000 in King County, down from the 2018 high for the county of $726,275 back in May.

Ultimately, according to Jacobi, this is “bringing us closer to a more balanced market,” predicting slowed growth for home prices through 2019 (around 5.5 percent he estimates).

The reasoning for this drop can be found in a variety of factors, including unsustainable home price growth, rising interest rates, and a drop in consumer confidence.

The outlook for the year ahead continues to look positive for home-buyers, who may find that acting quickly might serve them best.

“Buyers should act now, act deliberately, act decisively, and act in conjunction with an experienced real estate professional,” advised Dick Beeson, the principal managing broker at RE/MAX Northwest in Gig Harbor.

Among the buyers in the market will be plenty of first-timers, as more millennials get married, have children, and build their respective households.

“Although many of them will face significant obstacles to buying due to student debt, lack of down payments, and Seattle’s high-priced housing, this group is likely to buy more homes in 2019 than any other demographic,” Jacobi predicted.

That being so, pushing out to more remote areas outside of Seattle’s expensive market is starting to drive up prices everywhere. The NMLS’s report noted that demand in those outlying markets has driven up prices in counties like Cowlitz, Lewis, and Thurston 12.4 percent over the last year.

Meanwhile in King County, condo listings have quadrupled in the last 12 months, as buyers look for alternatives to pricier houses.

All this remains consistent with a prediction from Redfin at the end of the 2018, where they expected “demand to cool the most” in 2019 for a handful of major markets across the country, including Seattle, Portland, and San Francisco among others.

~My Northwest Staff

Seattle area’s topsy-turvy home market ends 2018 with Eastside prices falling over the year

Home prices on the Eastside have now dropped on a year-over-year basis. In Seattle, the median house is nearly $100,000 cheaper than last spring. And across King County, the number of condos available for buyers has more than quadrupled in the past year.

The cool-down in the local housing market continued in December, ending a topsy-turvy year for real estate, according to new figures released Monday by the Northwest Multiple Listing Service.

King County’s median single-family home price ticked up just 0.6 percent in December from a year before, and condo costs rose at the same rate — the smallest annual gain since early 2012, when the market was bottoming out.

It’s a huge shift from the prior six years, where the average year-over-year increase was 12 percent, adding as much as $100,000 to the median home in a single year.

On the Eastside, prices fell 3.1 percent from a year before, the first time prices declined on a year-over-year basis since 2012. In the city of Seattle, prices ticked up just 1.9 percent from a year prior, amounting to a slight decrease on an inflation-adjusted basis.

Compared with the record highs reached last spring, prices are down $91,000 in Seattle, to a new median of $739,000, and they’ve fallen $69,000 on the Eastside, to $909,000. Most remarkably, in the last seven months prices have declined more than $170,000 in Queen Anne/Magnolia, the central Seattle area that includes Capitol Hill, and in East Bellevue.

Buyers who once had to make decisions on home purchases in a matter of days now have weeks or months to ponder their options and negotiate, because there are so many more homes to choose from.

The number of single-family homes for sale across the county in December jumped 148 percent from a year prior, the fourth straight month of record-breaking gains in inventory. Condo inventory skyrocketed 314 percent.

There were actually fewer people putting their homes up for sale than this time last year, but buyers continue to disappear from the market, with sales decreasing 19 percent.

It’s standard now for buyers to put contingencies that, for example, allow them to negotiate the price down if an inspection turns up anything broken. Previously, bidding wars were so heated that buyers had to sign away all their rights to win a home.

It’s been an up-and-down year for real estate here. When 2018 began, prices soared nearly 20 percent in January from the year prior, the most in the country. Those double-digit gains, which were the norm for years, continued through May, before an abrupt shift in the market.

Three other areas have lost more than $110,000 since the spring: Ballard/Greenlake, Shoreline-Richmond Beach and Redmond-Carnation. And in the condo-only market of downtown Seattle, prices decreased about 10 percent in the past year.

On the other end, prices soared 42 percent in Mercer Island over the past year (although there aren’t many sales there this time of year, so volatility is high), and were up 18 percent in Renton-Benson Hill and 10 percent in Kirkland-Bridle Trails.

We’re getting into the slow time of year for the housing market, but this year’s changes have been more significant. In the prior five years, prices rose an average of $3,600 from November to December across King County; this time they declined nearly $5,000.

Most people in the real-estate industry expect the market to stay cool for the next couple of months, since the short, rainy days make this a notoriously slow time for people looking for homes, regardless of how the market is doing. Brokers surveyed by the Northwest Multiple Listing Service expect things to pick back up in the normally frenzied spring market, but few are predicting a return to double-digit price gains.

“The last six to nine months have been a good reality check for buyers, that things can change, and I would be pretty surprised to see the spring market in 2019 bring a lot of [price] escalations and multiple-offer scenarios,” Culbert said.

Prices countywide have now fallen 12 percent since their spring peak, which, outside of the Great Recession housing bust, is the biggest seven-month decline since 2000.

There are several reasons for the fall: Interest rates, though on the decline recently, are up over the past year. Rents have stabilized over the past year, adding less pressure to buy now. Foreign buyer interest has dropped off significantly. And prices have gone so high that they have shrunk the buyer pool, leaving only high-income earners able to compete on most homes.

 “Buyers in December were reaping the benefits of market-weary sellers who were willing to give up part of their bloated home equity to make a deal and move on,” John Deely, principal managing broker at Coldwell Banker Bain in Seattle, said in a statement.

Snohomish County is starting to follow King County’s lead. Inventory in Snohomish has also more than doubled in the past year while prices are up 4.5 percent, the smallest increase in two and a half years. The median house sold for $470,000, down from the record high of $511,000 in the spring.

The same shift still hasn’t really made its way to the rest of the Puget Sound region, however. Prices rose 7.5 percent in Kitsap County and 9.2 percent in Pierce County from a year prior, with a median price of $344,000 in both places. Both counties saw modest 13 to 19 percent growth in inventory.

~Mike Rosenburg, Seattle Times

Air BnB Will Begin Designing Houses in 2019

After launching a home-sharing revolution, Airbnb’s founders started asking themselves, “What’s next?” They successfully created a global network of more than 5 million homes, castles, and treehouses for rent, and their business is worth an estimated $38 billion. But what else could Airbnb become?

It’s a question that led chief product officer and cofounder Joe Gebbia to start Samara, a futures division of Airbnb, in 2016, meant to develop new products and services for the company. Gebbia’s answer to what Airbnb can be next: architect and urban planner. Not just the company that provides the housing–the company that provides the houses.

Today, Samara is announcing a new initiative called Backyard, “an endeavor to design and prototype new ways of building and sharing homes,” according to a press statement, with the first wave of test units going public in 2019. In plain language, that means Airbnb is planning to distribute prototype buildings next year.

The name “Backyard” might imply that Airbnb just wants to build Accessory Dwelling Units (ADUs), those small cottages that sit behind large suburban houses and are often rented on Airbnb. But Backyard is poised to be much larger than ADUs, in Gebbia’s telling. Yes, small prefabricated dwellings could be in the roadmap, but so are green building materials, standalone houses, and multi-unit complexes. Think of Backyard as both a producer and a marketplace for selling major aspects of the home, in any shape it might come in.

“Backyard investigates how buildings could utilize sophisticated manufacturing techniques, smart-home technologies, and gains vast insight from the Airbnb community to thoughtfully respond to changing owner or occupant needs over time,” Gebbia says. “Backyard isn’t a house, it’s an initiative to rethink the home. Homes are complex, and we’re taking a broad approach–not just designing one thing, but a system that can do many things.”

As grandiose as that sounds–and ironic, given that Airbnb itself may be responsible for measurable increases in real estate pricing–there is a real need to rethink housing. The UN predicts the world will construct 2.5 trillion more square feet of buildings worldwide by 2060–which, as Gebbia points out, is the equivalent to another Paris every week. Buildings are environmental nightmares, too, contributing to 39% of CO2 emissions in the U.S.

Gebbia says there is a moral imperative to ensure that new homes are designed well, with a small environmental footprint, and he suggests Backyard is up to the task. But the initiative also represents a significant opportunity for Airbnb to diversify its business. The company is a digital product, after all, ever vulnerable to being replaced by a hungry competitor. Buildings are physical entities. They’re real estate and the world’s infrastructure. A software company that wants to future-proof itself could do worse than investing in buildings.

“Probably” a Backyard prototype. [Photo: Samara]
Airbnb didn’t share many specifics about what it’ll release next year, but my conversation with Gebbia, in addition to some of Fast Company‘s previous coverage of Airbnb’s futures lab, offer some hints.

The spaces will be designed to be shared, from the ground up. What exactly that looks like remains to be seen, but the suggestion is clear: They will be optimal Airbnb rentals to anyone who is interested in hosting, or perhaps even investing in the big business of backyard cottages.

They will also be adaptable. That doesn’t just mean adding a few guest bedrooms and an extra bath to rent out. It means creating spaces that evolve and even reconfigure to the occupants’ changing needs. We’ve seen this sort of approach in MIT’s CityHome project (which later became the company Ori). Ori sells robotic furniture, such as walk-in closets that expand out of flat walls, and beds that can drop down from the ceiling on a whim. It’s telling that Backyard’s project lead, Fedor Novikov, has researched robotic construction for NASA.

The spaces may also support co-living, like at the Yoshino Cedar House. This was the first living space that Airbnb built. Designed by Japanese architect Go Hasegawa, it’s a community center and rental property that Airbnb commissioned to spur tourism in the small town of Yoshino, Japan. The space is not only Dwell bait, with its austere cedar plank construction that sits beside a wide, idyllic stream; it also houses dozens of people under one roof in a grand co-living experiment. “I picture Western guests walking up, stepping inside, and you’re interacting with the community from the minute you arrive. If you want to tour the sake factory, or the chopstick factory, or take a hike, the locals are right there,” Gebbia told us in 2016. By March of 2018, the house had home welcomed 346 guests, and generated $25,000 in bookings along with an estimated $50,000 in local spending.

How much will a Backyard house cost, ballpark? “It’s too early to say,” Gebbia says. But based on both Gebbia’s comments and the looks of Airbnb’s models–which appear to feature modular floor plans and interchangeable roofs–it seems likely that Backyard will be a housing system that can be tailored to particular contexts rather than one, perfect, prefabricated home. And you won’t need to be an Airbnb host to buy into the initiative. “Backyard is about creating new options for people, whether they’re Airbnb hosts or not. We’re interested in making it easier for people to find new places to call home,” Gebbia says.

As for the business plan: Gebbia wants to see Backyard get as big as Airbnb itself. “Airbnb didn’t have five- or 10-year metrics at day zero, we just focused on building something we thought could help solve a problem, while bringing people closer together,” says Gebbia. “We’re optimizing for Backyard’s potential. We’re interested in thoughtfully exploring the opportunity and doing something transformative, similar to how Airbnb did when it started.”

~Mark Wilson, Fast Company