Stepping back from the fierce debate on cottage lots and minimum size, it’s worth looking at the bizarre pressure cooker that is today’s post-bust Seattle housing market. The unemployment rate is dropping. Interest rates are absurdly low (30-year fixed rates are 3.5% as of today). Any halfway-decent house is getting multiple offers. Buyers are primed and ready.
And yet… there’s nothing for anyone to buy. Inventories are at record lows. The excellent SeattleBubble.com puts it into stark relief:
We went from over 12,000 homes on the market in King County in 2008 to about 5,000 today. One reason is that many homeowners are underwater:
King County has “such a short supply that it invites further price increases,” Crellin said. “The Realtors are right. They need inventory.”
So why aren’t more people listing their homes for sale, given the high demand?
Jacobi, Kelman and Crellin all pointed to owners who still wouldn’t be able to ask what they paid for their homes at or near the height of the market.
“They’ve sort of resigned themselves to staying put for awhile,” Crellin said.
One way to resolve this situation would be for the country to experience sustained 3-4% inflation over the next few years, which would slowly but surely put more homeowners above water and make it more palatable for them to sell. But federal policymakers have resisted this approach, and inflation has remained in the 2% range despite the record-low interest rates. The result is a whole lot of money sitting around looking for something to buy and a whole lot of homeowners who aren’t interested in selling or able to do so. Is it any surprise developers are looking for creative ways to build more houses?