Now is a great time for investing in Seattle real estate and many investors are stepping up to the plate. Seattle is rich with short sales and foreclosures and we’ll take a look at which property is statistically better for investing in Seattle real estate.
Investing in Seattle Real Estate
The two properties most real estate investors focus on are Seattle short sales and foreclosures. Both present great investment opportunities with the caveat of potential short falls to include the transaction falling through, unrealized flaws in the home, and a continuing downward trend in the Seattle housing market. Regardless of the risks, many are heavily investing in Seattle real estate and they’re starting with REO homes in Seattle. Since January of 2011, the number of REO homes for sale in Seattle has decreased 50% to a total of 114 homes. Meanwhile, the number of short sales in Seattle has decreased in similar absolute terms by 96 homes. However, these 96 short sales only made up 25% of the original inventory. As someone investing in Seattle real estate, you are at a decision point to show patience with the market or jump in on Seattle foreclosures. Your real estate agent in Seattle should be able to better discuss your individual situation, but foreclosures are still the norm when it comes to investing in Seattle real estate. The question is, for how long and what does the future of short sales in Seattle hold?
Investing in Seattle Real Estate | Foreclosures (REO)
The number of Seattle foreclosures for sale has rapidly declined leading into 2012. Hitting a relative low at 170 in May of 2011, the number of foreclosures in Seattle continued to decline as far as 114 in 2012. By some respects, investors in Seattle are attacking Seattle foreclosures aggressively and buying them as soon as they hit the market. With this mad dash for that great Seattle real estate investment, there are a few foreclosures that the banks seem to be unable to get rid of. This running inventory is clogging up the market and damaging many of the real estate figures propagated across the web.
Investing in Seattle Foreclosures | Timeliness
The fundamental challenge of investing in Seattle real estate is identifying and evaluating the right property before another investor undercuts you. By March of 2011, Seattle investors and other buyers were buying homes at a rate between 70 to 100 foreclosures per month. Thus, the ability for the Seattle housing market to absorb these foreclosures was almost non-existent. People were investing in Seattle real estate as soon as it hit the market and closing before other investors could take notice.
Things to Keep an Eye out for with Seattle Foreclosures
If you’re looking at investing in Seattle real estate, specifically foreclosures, you should keep an eye on average price per square foot. Those who invested in Seattle foreclosures last year invested at a great time but the housing market was continued trending downwards. For instance, the average price per square foot fell from $186 to $111 in November 2011. However, this average price for Seattle homes hit resistance at $111 and bounced upward to $136 per square foot at the beginning of 2012. Investing in this Seattle real estate in the first quarter of 2012 could put you on a glide-path toward the $154 per square foot range leading into the third quarter, similar to what we saw midway through 2011.
Bottoming Out for Foreclosures? Invest in Seattle Real Estate Now?
To outline the statistics a little, the absorption rate for closed sales floated around the 50% mark through the summer of 2011 and reached 57% by 2012. This higher absorption rate is indicative of a buyer’s market and shows the influx of new Seattle foreclosures. This should be expected considering the volume of foreclosures being purchased. Banks are given more flexibility to release Seattle foreclosures they would have otherwise held in order to prevent saturating the housing market. As an investor in Seattle, this provides a mixed sign. First, it’s nice to have new foreclosures continually hitting the market as you’re given the ability to pick and choose through several great investments. The bad news is that banks do not feel as pressured to agree to a lower offer.
CDOM for Investing in Seattle Real Estate
The cumulative days on market provides an idea of the current pressure a seller is under and show be reflective in the sales to list price ratio. As an analyst of the Seattle housing market, the numbers below are a positive sign that foreclosures in Seattle are being quickly purchase upon hitting the market. However, from the standpoint of investing in Seattle real estate, these numbers are not ideal. The low CDOM for most foreclosures will dictate the behavior of the banks and make them less willing to work around price. This is reinforced by the average ratio of sales price to list price which usually sits above 90%. Hence, it will be difficult for someone investing in Seattle real estate to swoop in and steal a home off the bank’s hands for less than 30% – the dream of all Seattle real estate investors.
Investing in Seattle Real Estate | Short Sales
Short sales in Seattle have had a similar fate as Seattle foreclosures. The major difference is price point and the number of short sales in the Seattle housing market. Short sales have flooded the market and provided an opportunity for some Seattle real estate investors to capture a quick steal. However, there appeared to be some resistance at the 231 mark with the number of short sales in Seattle jumping back up to 244. This resistance occurred in tandem with a drop in absorption rate from 13.4% to 9%. Thus, there is potential for Seattle short sales to provide push-back to investors and fight declining prices.
Decrease in Number of Seattle Short Sales
The number of Seattle short sales has declined through 2011. Starting at 356, the number of short sales dropped to 247, a total decrease of 30.6%. In conjunction to this decrease, the percentage of short sales sold in Seattle increased 22.6% from 31 home to 38 homes. This evident shift in interest from Seattle foreclosures to short sales is mirrored in the pool of Seattle investors, as investing in Seattle short sales provides greater flexibility and leverage. The influx of short sales into the Seattle housing market isn’t as great as foreclosures. Many of these short sales are sitting on the NWMLS with no potential buyers. This allows investors in Seattle real estate to drastically underbid the price and test the seller’s willingness to stand firm on price.
Pricing of Short Sales in Seattle for Real Estate Investors
The price per square foot of Seattle short sales dropped over the year from $172 to $194, a decline of 11.4%. This is small compared to the 25.6% decline we saw with Seattle foreclosures over the same time period. Moreover, the price per square foot from January of 2011 to January of 2012 actually increased by 1.8%. As a result, we can assess that sellers are not coming down on price. This is important to know for investing in Seattle real estate as you have expectation management on the threshold of leeway sellers will typically provide. However, these statistics are simply a base line for the Seattle housing market as a whole. You’ll need to work with your real estate agent in Seattle to capture the picture from each specific neighborhood.
CDOM for Investing in Seattle Short Sales
The cumulative days on market for Seattle short sales is much higher than foreclosures. Several months in 2011 saw short sales with over 130 CDOM whereas foreclosures had many months below 100 days. Additionally, the sales versus list price ratio with Seattle short sales is much lower than foreclosures. Short sales in Seattle averaged ratios around the mid to low 80 percentile whereas foreclosures rarely broke below 90%. As a result, short sales appear to have a great potential for someone investing in Seattle real estate to underbid the seller and gain a home at 20% below market value.
Projection for Investing in Seattle Real Estate
Short sales will prove to be better for those investing in Seattle real estate during the third and fourth quarters of 2012. Short sales will continue to hit the market at a rapid pace while the best foreclosures will get plucked away relatively soon. However, in the interim, Seattle foreclosures continue to be the best investment for Seattle real estate investors.