Reasons Why Now Is A Great Time To Buy! (Part III)

Don Davis Ph:360 652-9994 email: dond@htlnw.com

The Housing Market

Washington State has a Growth Management Act (GMA) that restricts the amount of new housing for any county depending of projected growth.  This is why we have never seen 600 or 800 home developments like in California or Las Vegas or Arizona.  The county will only issue permits to developers based on the projected growth in that area in a certain period.  This is why we were not overbuilt when the slowdown occurred.  Several years ago, in the height of the boom, developers did pay too much for land, but the demand existed at the time. 

 The cost of the land is the biggest variable in the price of a house.  If it costs $100 per square foot to build a house, it doesn’t matter where it is located.  A 2000 sq ft home would cost $200,000 to build regardless if that house is in Edmonds or Arlington.  The difference is the price of the lot that house sits on.  If the lot cost $150,000 then that house would be a $350,000 home if the lot cost $50,000 then it would be a $250,000 home for the same house.  This is also why a housing market would bottom out.  The cost to replace or build a new home can only go so low.  If existing homes sell for substantially less than it would cost to build a new one, no on would ever build another new home. One of the biggest reasons that few new homes are not being built right now is the fact that most of the banks the builders would get their financing from are under cease and desist orders from the FDIC.  If the builder can’t get funding to build, then nothing gets built.  Once the inventory of homes decreases and the prices once again appreciate, the banks will free up capital and the builders will get back to work.

What makes the Puget Sound region so unique is that we can really only go north, south and up (high-rises) to build new homes (east is mountains and west is water).  There is virtually no buildable land left in most of King, North Pierce and South Snohomish Counties.  Essentially if any new homes are going to be built the developers need to go to south Pierce or North Snohomish County.

 Unfortunately the news media doesn’t report any detail about our own housing market.  This seems really stupid to me.  We have local newspapers, TV and radio stations and they seem to cite the worst statistics available for the housing market.  They will report on national statistics and default rates.  I defy you to send me a detailed report from the news sources that cite our own local market statistics.  It is not newsworthy.  They aren’t going to be able to sensationalize this market because there is nothing to sensationalize.  While we have seen a modest decline in home prices from the unrealistic highs in late 2007, we have plugged along this year selling down the inventory from an almost nine months supply to almost a four month supply.  At this rate by this time next year we should be under two months supply with few new homes being constructed.  What does 2011 hold in store?  We just might be out of home to sell.  If you own a home you will be very happy, if you are trying to buy a home then you might be kicking yourself that you didn’t buy when the availability and the prices were within your reach.

 If you have ever though about buying a home, you might look hard at doing it soon.  Home prices are low and inventories are high, meaning you have a great selection to choose from.  Interest rates are currently at historic lows.  There is up to $8,000 tax credit.  When any of these things change it could cost you substantially more to buy a home.

Below is a TEN year history of home sales for Snohomish, King Pierce and Kitsap County collectively

While all the news medias would want you to believe that all is doom and gloom, we have outsold last year and are about average for the decade.

source: NWMLS