Here is my analogy I share with people of how home buyers are navigating through the home hunting process in hopes of finding the right house in the best possible city and neighborhood. Think of an elevator that starts from a high floor level and moves down to an infinite number of lower levels where the higher levels represent more desirable cities and neighborhoods. When a potential buyer gets priced out of the homes located in a more desirable market area, they have little choice but to take the elevator down to the next affordable level. Doing this keeps them close to where they were originally looking, but at a slightly lower cost. If they happen to get priced out of that level, they take the elevator down to the next lower level, so forth and so forth. For example, say a married couple with 2 kids have a purchase limit of $1.4 million and originally wanted to purchase a 300 sf home with 3 bedrooms and 2.5 baths in Bellevue. Nowadays, they may find there are no properties available that meet their requirements in their price range. They decide to start searching for available properties in Redmond, but by the time they do, the prices of homes in Redmond have increased and once again they need to consider looking elsewhere. Say the family then finds a house that fits their needs in Kirkland, offered for $1.1 million. They realize they will have to offer $1.3 million and waive all financial or inspection contingencies to improve their chances of having their offer accepted. As prices continue to increase, due to the result of buyers willing to pay a significant amount above list price, a potential buyer looking in the Kirkland area will eventually be priced out pf that market area and may consider looking for homes in Bothell. This cycle continues until the buyer finds a home that meets their needs, although maybe not in the area they originally planned to be in. The point I want the reader to remember is this, there is and always will be buyers. The only difference is, as home prices increase, the “hunting group” of buyers trying to stay within a particular budget, shifts down a level and the next “hunting group” moves in to take the other’s place.
