The Seattle Real Estate Market Much to the chagrin of buyers waiting for Spring 2015 to buy, inventory fell further this past week. Mostly due to aged listings taking price breaks to finally sell, but also partially due to the lack of new inventory hitting the market. I posted the “Characteristics per Quartile” picture below. You will see that this past week Seattle saw 81 new listings come to market. Contrast that to the week of June 16, 2014 where 320 new listings hit the market, and it makes sense why inventory is falling so quickly. Though price per sq foot is as low as it’s been in the past 8 months, the primary reason for that is again: Aged listings taking price breaks so that the sellers can FINALLY sell them. For new desirable listings, the market is very much a sellers market, where buyers have very little leverage to negotiate. I had a client this past week list their house, and within two days and NO open houses, it was sold. Bottom line, look forward to another strong sellers market in 2015 where competition and escalation clauses will be the norm. Onto Interest Rates... ICYMI – Your 401k had a heyday last week. From Wednesday through Friday, the S&P rose from 1,973 to 2,077 – a 5.27% gain in three days. Not unheard of, but a pretty dang good few days nonetheless. Normally when that happens, money comes out of the bond market, and goes into the stock market, causing interest rates to rise. We did see a little drop in the mortgage bond, but not an extreme drop…thus interest rates are relatively unchanged. So what happened last week? Well, overall interest rates are trending lower as oil trends lower. For many of the same reasons deflation is bad for an economy, so are lower oil prices. Primarily because you get companies (or Countries like Russia or Venezuela) that build their businesses based on a certain level of income derived from a forecasted price per barrel. Companies and countries alike will take on debt to grow their businesses or economies based on those forecasts. The problem macro-economically speaking is that when oil falls far below those forecasts, you get companies and countries that can no longer make their debt payments. Revenues have fallen too far, and companies will be forced to go bankrupt, and countries will be forced into default. The risk of catastrophic economic consequences due to low oil prices has investors fleeing worldwide stock markets, and flocking to safe investments like US mortgage bonds, thus lowering the mortgage interest rates prospective US homeowners will have to pay. Case in point: Russia. Did you see that they raised their Federal Funds Rate from 10.5% to 17% overnight? For comparison: The US Fed has been deliberating when to raise its interest rates from 0% to .25% for the past year. Interest rates have been trending lower over the past couple months, but spiked briefly last week when the Fed basically announced that because of the worldwide risks due to low oil, and the absence of inflation in the US Economy (Inflation fell last week per the Consumer Price Index to 1.7%...drifting further away from the Feds target of 2% inflation due to low oil prices) they are going to keep interest rates low for a “considerable time”. The news was SO bond friendly, that it actually hurt bonds for a couple days because a whole ton of money came out of the bond market and went into the stock market. I would suspect that since the underlying reasons for why bonds are trending lower and lower is oil, that so long as oil keeps trending lower, interest rates will overall continue lower as well. Brent Oil is at $60.73 per barrel as of 7:28am 12/22/14…and falling because Saudi Arabia indicated it could increase its output to gain market share. In June, oil was at $115 per barrel. Did you Know An individual that has earned income up to the maximum Social Security wage base each year who then waits to take his/her Social Security retirement benefit at age 70 will receive 77% more income per month than if he/she had taken a retirement benefit early at age 62. (Source: Social Security).
Posted on: Mon, 22 Dec 2014 15:47:30 +0000
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