The End is Near!

I would like to state, for the record, we are nearing the end of the recession in Redmond real estate.  For all we know, the bottom may have come and gone, because you never know when the bottom occurred until it is past. We will continue to hear about falling prices nationally, and in areas of Washington, but real estate is all about location, and Redmond appears to be a location where the worst is behind us.

The peak of the market in Washington was the spring of 2007. The market was beginning to slow by the summer, and when lenders turned off the easy money spigots in August of that year, the crash was underway. Depending on what area you look at, prices are down as much as 30 percent from the peak. Some properties in overheated markets, that are now bank owned, are selling for almost half what they sold for at the peak.

Generally speaking, neighborhoods closer to the employment centers of Seattle and the Eastside have fared much better than North and South King, Snohomish and Pierce Counties, which is why Redmond has performed better than most and is poised to recover.

I’m calling this the bottom for a couple reasons: one related to data and one related to a buyer behavior that seems to be taking hold in the market. The median price in the Redmond area has increased for three consecutive months. Pending sales are increasing and there appears to be some depth to the market that hasn’t been there for quite some time. By depth, I mean sales at a lot of different price points.

Sales activity is still greatest at the lower price ranges, but higher-priced homes are starting to move which explains why the median price is inching upward. As for the change in buyer behavior, simply put, buyers want to buy. A short sale is clouded with such uncertainty, that buyers would rather put an offer on a property that they can close on in a reasonable amount of time. They don’t want to put an offer on a home, wait 60-90 days for an answer, which could be no, and then wait another 30-60 days to close. Bank-owned properties are “as-is," as in, not move-in ready. Non-distressed properties that are clean and well-priced are getting a lot of activity, with some sellers even entertaining multiple offers.

I did mention that we’re nearing the end of the slump and that we’re poised for a recovery. I did not say we can expect prices to rapidly reverse course and all that lost equity will miraculously reappear. There are still a lot of structural problems in our market. Short sales still have to sell, and we’re about half way through the foreclosure problem. Until they are gone, short sales and foreclosures will exert downward pressure on prices.

The good news is that investors are coming into the market to absorb the problem properties. Housing affordability, which compares prices relative to incomes, is at the highest (most affordable) level since tracking began in 1970. Yes, the end of the slump is near. It may be some time before we see 2007 prices, but I can honestly say the glass is now half full.