I attended Seattle King County Realtors’ Broker Summit in Bellevue today, with several hundred other real estate brokers and managers, where the keynote speaker was Lawrence Yun, chief economist for the National Association of Realtors. Yun said there will likely be some recovery in the housing market in late 2009 and that there will be not big drop in Seattle’s home prices like those seen in other areas such as Orange County, California. He believes this is because our prices didn’t rise as in other markets largely due to the impact of our dot.com crash in 2001.
Yun also said that the recently passed $787 billion stimulus package, including an $8,000 credit to first-time home buyers, is likely to boost the housing market by creating an additional 900,000 new home sales across the country this year. These sales will not only come from the first time buyers themselves, but also as a result of the compounding effect caused when those sellers become buyers themselves. The accompanying increase in conforming loan limits, now $567,500 in King County, will also contribute to the boost in home sales in 2009.
Yun’s underlying message was that with economic indicators pointing in conflicting directions, this year will be all about consumer confidence. He made the argument that by all accounting-based principles, the real estate sector should be showing greater strength than it currently is. Our current low interest rates have made monthly payments comparatively more affordable than ever before at a time when there are incredible bargains to be found. It is consumer confidence, or the lack thereof, that continues to keep buyers on the sidelines. He stated that ultimately it will take consumers return to confidence—through economic stimulus, compelling interest rates or the desire not to be left behind as activity increases to propel us through this.
Job stability and real concerns about the economy have permeated our thoughts. The economy is in tough shape to be sure. But consumer confidence is the key to the beginning of recovery. Yun says economists estimate that if a 10% of the workforce became unemployed (much higher than the current 7.6% national unemployment) another 20% would have concerns about job stability, leaving 70% feeling reasonably secure about their job stability in the future. Yun also made the argument that further decreases in real estate prices would cause significant collateral damage and lead to even greater weakness in our financial sectors and the economy as a whole. What happens in our economy this year will be dependent upon whether or not consumers feel safe in re-entering the real estate market.
He said that by all indicators, the Seattle area and Washington State overall, with its strong interstate immigration, highly educated work force with compelling employment opportunities and low foreclosure rates will be one of the best real estate markets to own property in over the next decade. One has to believe that there will soon come a time when we look back and say, “I wish I would have bought back when rates were low and prices were unbelievable”.
Yun said that sales activity is beginning to pick up across the nation already as a result of the stimulus package. He predicts that, allowing time for buyers to begin their home search and ultimately close on a property, monthly reports over the next few months will begin to show steady and larger increases in home sales. Assuming all this to be true, prices will stabilize as more and more buyers snatch up available inventory. Again, it does seem to boil down to being all about consumer confidence.