The End Of The $500K House In Seattle


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It feels like it wasn’t that long ago that agents were saying $400K is the new $300K in regard to the price band where most home buyers were shopping, now we’re hearing $600K, sometimes even $700K is the new $500K. Just like there were no $300K homes left back then, now there are no more $500K homes left.

The Seattle Times recently reported that “Seattle tops the nation in home-price growth for first time in 9 years” and went on to say that the median price of a King County single-family home sold in October jumped 15 percent over a year ago to $550,000. By definition, that means half the homes sold were above $550K and the other half were below, but this number is for all of King County which includes some cheaper rural areas as well as more expensive east side communities.

The story from the field is that there are no more sub-$500K homes in North Seattle. Sure a quick search shows that there are currently seven listed, but three of them are tear downs or fixers and the remainder will likely sell for well above $500K.

This week we saw these two recent sub-$500K listings close for about $100K more than their list price. One was a 730sf East Ballard home and the other was a 2-bedroom Crown Hill home.
From an analytical standpoint, these homes are not currently worth the amount paid; however, to a desperate buyer who wants a yard and can’t afford to spend over $700K it’s a small premium to pay to end their home search hope they can jump on the appreciation wave until they’re above water. While it’s common to see this sort of excessive bidding in the spring when there’s more competition from buyers, we don’t expect to see it in December. Especially since all the homes listed already have the spring’s bidding wars factored into the price.

Overpaying seems crazy and irrational, but we think there’s some reasonable support for this. First the number of single-family homes in Seattle is decreasing everyday to make way for town homes and condos. As the supply of single-family homes decreases, their value should increase. As Seattle becomes more dense, the zoning will change for these properties to support more units further increasing their value. Second, the opportunity cost of waiting is too high. If you are confident values are going to continue to increase and would you rather overpay today and be done with your home search or wait until next year to find your dream house only to be unable to afford it because prices have increased and the competition bids the price up past your limit. Finally and most importantly, as crazy as these prices seem it takes at least two potential buyers to bid prices up. The fact is with all the information easily accessible combined with so many buyers seeing all the homes, the Seattle market is incredibly efficient and the sales prices reflect the reality of the situation–there are no more single-family homes for under $500K.

Here’s some more detail on the two homes that closed this week:

610-nw-47th-st

610 NW 47th St
Seattle, WA 98107
MLS# 1046989
2 Beds, 1 Bath, 730 Sq. Ft.
Listed: $469,000
Sold: $570,000
Premium: $101K, 22% over list price

8519-12th-ave-nw

8519 12th Ave NW
Seattle, WA 98117
MLS# 1048830
2 Beds, 1 Baths, 2,160 Sq. Ft.
Listed $439,900
Sold $526,000
Premium: $86K, 20% over list price


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