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Is the Real Estate market improving and are builders really building again?

December 19, 2012

Yes and yes.

Recently I was talking with an investor. A very successful investor who from 2009-2011 spent a lot of time and money investing in builders and contractors.

Why?

Because everyone else was selling and selling very low.

He told me that he stopped buying a year ago and that over the past several months has been making money on the investments.

Why?

Builders are building again.

National reports are echoing that same sentiment. According to MSNBC applications for building permits are the highest they’ve been in 4 1/2 years. And though housing starts slowed last month (largely due to Tropical Storm Sandy) they had also reached 4 years highs in October.

Builders don’t build unless there is a market for their product.

Locally all you have to do in Seattle is turn your head and you’ll see new homes being built or a crane moving building materials around. These are all pointers that there is a market for new homes, which means there is a market.

In Seattle proper, we went from a balanced market with an absorbtion rate for sold properties in the 20s% for several months (Under 20% absorption rate Buyer’s market, 20-40% balanced market, above 40% Seller’s market) and in March of last year it bumped into the 40s% and has only grown since (58.5% for November). Take a look at the year over year stat comparison below:

nov over nov seattle metro

Numbers compiled from NWMLS reflect Seattle Metropolitan Area

As you can see, demand has increased and inventory has decreased. In short, it’s a Seller’s market.

So with low inventory, high demand and continued low interest rates can we expect builders to keep building and the real estate market to improve in 2013? As the Magic 8 Ball says, “All signs point to yes.”

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