Article provided by Coeur d’Alene Living Local
By Colin Anderson
2008 was a horrible year for the American economy. Large companies were laying off employees by the thousands leading to unemployment rates higher than they had been since the great depression. Places like Las Vegas, Phoenix and Southern Florida watched their housing markets go belly up and building come to a complete standstill. It was truly one of the most difficult economic crises in our nation’s history. Tax credits and historically low interest rates were offered to right the ship, and though many places never fully recovered, the overall state of the housing market is vastly more stable 10 years later.
There are dozens of factors that have lead to recovery and stabilization, and far fewer people are underwater on their mortgage or facing pre-foreclosure. The hope is that consumer and lender both learned from the experience so as it not to happen again; something only time will tell.
Across the nation, and especially in the Northwest, we watched prices and home values soar in 2017, and many want to know if they’ve missed out on affordable housing, when interest rates will rise or if they should finally put their current home on the market and upgrade. In this outlook, we sought out advice from realtors in both places rural and urban, small and large, in Washington and Idaho. As all markets are different, it is always best to work with a local agent who is most up to date on your community when making the life-altering choice of buying or selling. The following is meant as a general look at market trends, what buyers and sellers are most attracted to and advice from experienced agents. This is not intended as a crystal ball into the future!
As of November 2017, the median home value in the United States is at $203,400, a 6-percent increase from this time a year ago, and a massive increase over a low of $151,000 in 2012. Home buying website Zillow recently polled a group of realtors, economists, lenders and professors who came to a collective agreement of a more modest 3-percent gain in 2018. As home values and listing prices shot up very quickly due to stability in the job market and interest rates under 4 percent, many sought to get in the action because of the fear of rising interest rates. Since many of those buyers have already settled, there is a persistently low inventory, which makes for a competitive market for those looking to purchase a home. In and around Seattle, homes are often gone within 48 hours of being listed, and most agents across the Northwest are predicting a larger value increase.
“The 2017 real estate market was busy, the lack of inventory created multiple offers in many areas,” said Lydia Geline, a Windermere agent who has worked with buyers in both King and Pierce counties. “I see it being the same in 2018 with pricing increasing rapidly because of it.”
While the Seattle-area market is seeing an influx of young buyers, retirees are often seeking a smaller community, which has been a recent boom to the market in North Idaho. “New construction and condominium sales in 2017 filled a large need for the retirement market,” said Jackie Suarez of Century 21 in Sandpoint, Idaho. “While the residential median sales price in Bonner County is 9-percent higher this year to date than 2016, the majority of buyers are taking advantage of low interest rates, making sales contingent on appraisals. Appraisers look to the past for comparable sales data, which may not support agreed-upon sales prices. Pricing is important. Inventory is relatively low, and our job as agents is to help sellers realize the highest possible return while keeping in mind buyers are well-informed and not apt to overspend.”
Coeur d’Alene, Idaho, has seen a consistent spike in out-of-state residents for much of the past two decades. People from larger communities in California, Colorado, Washington and Oregon are drawn to the small-town feel, relative affordability, outdoor recreation and as a safe place to raise a family.
“Since mid-2011, home prices in all of North Idaho are up 67 percent and 83 percent since the bottom,” said Raniel Diaz of Professional Realty Services in Coeur d’Alene, Idaho. This would be our seventh year of beyond healthy growth—an average of 11 percent year over year. The most common question I get on a daily basis is, ‘Are things slowing down?’ Short answer … nope.”
What are buyers looking for?
Each of us is different in our personal tastes, preferences and what is most important in our home. Location, location, location seems to be at the top of everyone’s list, but that, again, is very subjective. One buyer’s dream location is in the heart of the action downtown, another wants peace, serenity and a water view while others seek the comforts of a suburban setting. The so-called fixer-upper effect has helped influence some buyers away from new construction and instead finding an older home for cheaper and bringing it up to date with today’s trends. The myriad of home improvement shows are usually targeted toward young couples or families with small children who might not have the budget for a custom home but can afford some updates if the bones of the house are in good shape. This style of purchase, however, is not as appealing to many with older children or those who are looking to downsize and want something move-in ready and low maintenance.
“Flip homes are becoming harder to come by without the right connections as the normal buyer would rather invest and stay versus invest and profit which will drive the margin out of a fixer,” said Diaz. Buyers are still looking for open-floor plans, nice kitchens, main-floor master bedrooms and large garages as a general rule of thumb. “
“Many clients are targeting a move-in ready, high-quality home with new or updated kitchens and baths, low-maintenance exteriors and easy access. Guest quarters or room for extended family factor in as well,” said Suarez.
The same holds true south of Seattle around Tacoma and Gig Harbor, according to Geline. “Home buyers usually want move-in ready, remodeled or newly built home. It’s is rare to find buyers that want to do any work, unless they can’t find a home in their price range.”
While there are probably a few remodel projects out there, generally speaking, most buyers are looking for the work to be done already. For those who are considering selling, fresh paint is an easy way to brighten a dated home as well as spending a few hundred dollars on updated fixtures. Buyers tend to gravitate toward an updated kitchen as being high on the priority list, and while spending $20,000 or more on a kitchen you don’t plan on using for long might sound crazy, it will likely make your home much more appealing to buyers and fetch back a higher return.
To buy or to build?
This age-old question continues to come up no matter the market condition. Am I better off building exactly what I want from scratch? Or will I find something suitable on the market so I don’t have to wait? According to Geline, a typically new home build in Gig Harbor takes about six to nine months to build or nine to 12 months to build a custom home. “Buyers like the option of picking out the elevation, flooring, cabinets, etc. The drawback to building a home from scratch is you may have to sell your current home to purchase the new one. Timing of this can require the buyer to have to move into a temporary home [until] their new home is complete.”
Suarez also sees both pros and cons of building during the current housing market. “You get the floor plan and location you want, customizable for individual needs, and in many cases in the current market, instant equity when you close as overall home prices increase during the construction period. Drawbacks include the current shortage of highly qualified tradespeople in the industry. Many builders are challenged to find additional crews. Permitting with local municipalities is taking longer than expected.”
Diaz echoes Suarez’ concerns about the lack of quality labor available in North Idaho and also sees builders being more selective on which projects they choose. “Cost per square foot to build a custom home has increased dramatically, and it’s surprising those who might have built in the past.”
Should I keep my current home as a rental?
While the housing market is tight, renters are finding a major housing crunch of their own. Across the Inland Northwest, apartment complexes are going up and filling up before they are even completed. In Spokane, the current occupancy rate is above 98 percent, and renters on average are paying nearly one third of their income toward their rent. If you have the means to hold onto your current property and utilize it as either a short- or long-term rental unit, your investment can bring out bigger payouts in the long run, however, there are potential risks you incur as well.
Andrew Weed and his wife Lindsey decided to leave their Missoula home for a year and explore different communities in Oregon and Washington, while Lindsey worked as a traveling physical therapist and Andrew as a lead cameraman for a production company. They rented their home to Andrew’s company for seven months, and, in the previous five, have listed it as a short-term vacation rental. “We found that the people who stayed there for just a day or two didn’t leave the home a mess or create many problems. However, the longer-term renter didn’t show the same respect to our home,” said Andrew. It’s true you roll the dice with renting your home, but having others pay your mortgage while gaining value in your home is typically one of the most sound investments; just beware of additional costs that go along with it. “We lost almost all of our profit to cleaning fees, having to pay more than $200 each time someone rented. If we could do the fixes and cleaning ourselves, we would have seen much more profit,” said Andrew.
While national forecasters believe there will be only small growth in prices for 2018, professionals in the Northwest aren’t seeing too many signs of the market slowing down. One factor that could could cause a slow down is the Federal Reserve raising interest rates, which, in all likelihood, will happen at least once if not more in 2018. A rise in rates would likely slow home values down, especially if there’s an uptick in available inventory.
Whether it’s a downtown condo, lakefront playground, first home or last home, finding the right one is a difficult process. Work with a local agent that knows your specific market, what you’re looking for, what you can afford, and where you will be most happy. A home is one of the biggest decisions in our lives and one that should be thoroughly vetted. With a stable economy, now might just be right for you to make the move.