Not so fast. Four reasons why Seattle is not in a bubble.
Reason 4 and Conclusion
Inventroy is Contrained
People aren’t moving and builders are struggling to find opportunity. The lack of inventory means folks who may want to move worry that they won’t have a new home to move into once theirs is sold. The classic chicken and egg dilemma. All the while, here in Seattle, builders are struggling to make projects pencil. The rising cost of land, cost of materials, shortage of labor and increasing regulations make it extremely difficult for builders to create new inventory. Builders simply can’t keep up with the growth of demand. Our local leaders have lots of ideas but few solutions that will make any short term impact. It all comes down to the basics of supply and demand. The medium and small sized builders who contribute to creating the supply that would help alleviate pressure on home prices are struggling. Until we have more housing the demand will continue to cause existing home prices to climb.
To Fear or Not To Fear
Well it depends on what you’re scared of. If you’re looking to buy a home in Seattle then expect that it will continue to be a challenge. However, I believe you should go forth feeling pretty good about the future value of your home over the long term. Seattle’s economy is strong and diverse. Many believe it would take something on the national or international level to knock it off course. Even so, Seattle weathered the last recession better than almost anywhere in the country. If you currently own a home in Seattle then I think losing any sleep over the potential of a bubble may be wasted energy for now. Rather, sit back and enjoy the market conditions that are padding your equity.
As we like to say in the real estate industry, non of us have a crystal ball. However, all the points made by our Chief Economist Matthew Gardner point to the same conclusion. The conclusion is that the home values we see now are most likely built out of brick as opposed to straw. Its going to take one heck of big bad wolf to blow it over.