Seattle Real Estate Market in August: End of Summer Sale

I spent quite some time in shopping last Friday in downtown Seattle. Many stores were having huge sales for the Labor Day weekend with additional discounts on summer products that were already reduced in price and I bought a bunch of stuff, including a pair of winter boots, a pair wide pants, a off-the-shoulder top and two scarves. :) After I came home, I checked and tried on every single item again, paired them with other clothes and shoes that I already have.They were great in term of look and quality. Moreover, the prices were great. According to the receipts, I saved $561.79 compared to the retail prices. Usually, I do not buy more than a couple of items because, these days, it is not easy to find clothes and shoes that I really like in a price range that is reasonable. They are either expensive with good quality or cheap with not-so-good quality. However, this last weekend, there were so many good stuff available in the sale sections and their price tags were most affordable for this year.
Why talking so much about my shopping bliss? Because, as analyzing the August data, I found the Seattle residential market is ready for the greatest home buying experience of the year: the available inventory is at its highest point in years and the actual sales prices has finally gone down to a meaningful extent. So, for this month’s market report, I will explain why I strongly feet that now is the best time to buy a home by 1) summarizing market trends in August, 2018 and 2) exploring seasonal market change patterns in Seattle in the last five years (2013–2018) to understand the implications of new findings from August data.
1. What happened in August?
It is not a news anymore that the market is cooling down in Seattle but it seems that the degree of cooling down was most significant in August. First, the median price for single family houses in Seattle sold in August dropped to $779,000 from $820,000 in July, first time under $800,000 since January (Table 1). The median price began to decline in May and continued declining through July. Yet the total decrease for three months was only by $20,000 from its peak in April while it increased by $74,000 from January to April. The rate of decrease was less than 1% for May and June and 1.2% for July, compared to the previous month. This was why I concluded that the media buzz around “market cooling-down” didn’t really convert to any tangible benefit for the buyers in the last report. However, the real change has finally come: the median price decreased significantly in August, by $41,000 in dollar value and 5% in percentage.
Moreover, 70 % of all single-family residential houses were sold less than or equal to the listing from, more than doubled from 33 % in March (Table 2).
The most important change that took place in August is that the market share of more affordable houses under $600,000 increased substantially from 15.1% to 22.3% (Table 3). Until July, we saw gradual eroding of houses under $600,000 from the market but this trend has finally shifted in August. It implies the big waves that pushed up the housing price constantly has finally calmed down (at least for now). Yes, the market is cooled down, officially.

2. Market slow-down and seasonal changes
In the previous reports, I repeatedly argued that the current slow-down is a correction of a too crazy market rather than a symptom of a fundamental change that would lead to a market failure or crash. The main reason was that there was little actual evidence that the sales price was going down despite of increase in the inventory and many price drops in the listings. However, now we know that this has changed. Then, should change my argument in the presence of the new evidence? To answer this question, I looked into bigger sets of data. Basically, I wanted to examine whether the considerable decrease in the median sales price in August is so unusual that it deserves an unusual attention from us or it is a part of regular pattern over a longer period of time. This investigation, using MWMLS monthly data in sales price, number of new listings, number of homes for sale in the last 5 years, produced a couple of very interesting and insightful outcomes.
1) The current median price decline seems within the normal range of annual market changes.
Real estate market is largely affected by season: low in activity in the winter and high in the summer. Seattle market also shows the highest median price for Summer (June and July) and the lowest for Winter (October through December) in 2013–2017 (Figure 1). In this analysis looking at longer period of time, the median price decline in the past August does not stand out as extraordinary. One might point out that the drop is a bit sharp for this August but we also experienced similar drop in August, 2014. In fact, median price for this August is higher than the same month last year ($710,500) and it is even higher than July, 2017, the month with highest median sale price. Thus, I still hold onto my argument that the market will stabilize (not crash) until the end of the year and have a good chance that it will go up again in the next year.

2) There is something about September.
I also found out that September is the best month to buy a house. Wait a minute, didn’t we just talk about the fact that October through November shows the lowest median price each year? Should we not wait until it hits the bottom? Yes, it is logical to wait more if you only care for the price. Here, I like to take you to the story of my Labor Day weekend shopping again just for a little bit. The reason why I bought so much was not only because the prices were reduced but also there were so many to choose from. It is not difficult to find a hugely-discounted merchandise in a store but those deals are often limited to a few uninteresting items. Likewise, you have to consider how big the selection pool is for a good buy. It is especially true for a home purchase that you cannot buy one just because it is cheap.
Then, which month has the highest number of homes available? There is a very clear pattern in the rise-and-fall of inventory within a year: the housing stock increases from January and peaks in September and, then, decreases through December (Figure 2). This cycle is caused by the fact that most new listings are in the summer (May through September) when kids are off school and they it is possible to stay away from a house for showing and they decreases substantially afterwards with the least number of new listings in December (Figure 3). Combining the listings carried over from active summer months and its own high number of new listing, September shows the highest number of houses available for sale. So, if you wish to find a house that you really like for a better price, September is the best time.


Are you convinced to buy a home this September after reading this article? Hurry, it might not last very long. :)
- Click on my profile pic to see my previous reports.
- Need an agent to work for you? Please contact me at kim.mikyung@outlook.com
