February 2020 | The market is hot. What should you do?

The market is hot. What should you do?

Amid volatility in the US stock market, the housing market in Seattle is on fire again. Bidding war stories are reminiscent of 2017. This 2-bedroom house in West Seattle (I know it says 3, but look closely!) received 16 offers and sold for well over $1M. This one in Alki had 15 offers. In times like these, it's important for home buyers to focus on quality.

Warren Buffett famously said, "It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."

Housing is no different. In a hot market, it's easy to lose sight of the fundamentals the make a property good. To me, a good property has the following qualities:

  • Location: this one has to be first. A property in a quiet, convenient location near amenities (e.g. restaurants, parks, schools, transit) will help ensure a durable investment. In Seattle, a good location means you're close to a job center (ideally your job!); most people aren't willing to drive more than 30 minutes to work, which explains why homes in Wallingford are so much more expensive than homes in Snoqualmie.

  • Quality construction: pay attention to the materials used to build the home and consider whom it was built for; look past the countertops and stainless steel, and consider how well the home has been maintained.

  • Lot value: an investor once told me he tries to buy homes for which the lot is worth more than the home. This offers a sort of insurance in the event of a natural disaster because the lot will maintain its value despite age or obsolescence. Betty DeLaurenti, who used to be the queen of Mercer Island real estate, told me when I first got my license: "Dirt is gold."

  • Layout: the reason mid-century homes are so popular today is that they were the first generation of homes that incorporated a modern layout with open spaces and a broader house footprint. Most households with kids prefer 3 bedrooms on one level, which was reserved for only "fancy" houses until the 1950s. Today, no builder would dream of putting a kid's bedroom in a basement or a master bedroom two floors away from the additional bedrooms. Layout is important because it's really expensive to change.

If you're a buyer, commit to these fundamentals and stay patient. You'll experience more regret over buying the wrong home than you will about paying too much for the right one. If you're planning to sell a home, this is a great time to do it. Don't wait until the traditional spring selling season. In Seattle, there are 30% fewer homes for sale today than there were at this time last year.