To say these are crazy times is certainly an understatement. Many of us have wondered how crazy things could get since Covid arrived. So many directions to go on this but we’ll stick with the real estate world. Certainly declining inventory of homes for sale has occurred. Buyer demand hitting near all time highs has too. Job growth–for many; wage growth–also for many; government handouts of money–again for many; combined with a desire or need for a different home has just added crazy amounts of fuel to the fire of the already on-fire marketplace. We now add in fears of war, inflation, of stock market corrections–already happening, pushing many investors and people looking for new homes to jump after many or any opportunities in the local marketplace. Our February statistics will be out soon but they will likely show 70+% of home sales being at or above their asking price and I’d bet the median over asking price for most homes will be above20% for much of our region.
Juxtapose those statements with what may be a temporary or not so temporary breath in the market in the last 10 days and it’s very difficult to advise Buyers or Sellers on what is going on in the market. You make an offer 30% over asking price with no contingencies in one week and lose. The next week you win with a full price offer and little to no competition in the same area and price range. Change your location or price range and the sands are still shifting and conditions are completely different. WOW. It is exhausting and infuriating for home buyers, sellers and agents alike. There is no one winning strategy and certainly no logic to what it takes to win in these crazy times.
Here’s what we know. Several layers of uncertainty are impacting the market in different directions at the same time. War in Ukraine obviously has us all worried and wondering where this path goes and how quickly can this turn our world upside down. Stock market worries have some investors jumping back to buy real estate–especially in strong job and job-growth markets, like the greater Seattle area. Inflation has spooked the Fed and their raising of rates is now the expected for the balance of the year. But…other investors are looking for security and US Mortgage Backed Securities are seen as a very safe investment and we’re now seeing drops in interest rates as more investors look toward these for security. It is not abnormal to see interest rates drop when the Fed is raising interest rates at the same time. It might seem counter intuitive but again, not abnormal and these are crazy times.
Local businesses are staring to announce and ask their employees to start coming back to the office and there are millions of square feet of new office building being built in our region, set to open in the next 2-3 years and beyond. This will mean more job growth, new inward migration, more demand and….yes, most likely continued price hikes on home values. I have no expectation of prices spiking like we saw in 2021 for the region as a whole, but Seattle, as an example, has only had a 10% price growth over the last 3 years while the Eastside has had 66.5% growth in that same time frame; Snohomish County is up 57%. Seattle is making up for some of that so far this year, prices likely up 20% so far this year. It’s likely this will moderate through the year for Seattle and the rest of the region, but upward pressure will remain; even in the face of so much uncertainty.
Many ask, are we crazy to be bidding up so high on so many houses? This can’t continue, it has to crash and then what? I answer, these are great questions and reasonable sentiments to hold, however the bigger pictures still show expected price growth of close to 10% for this year and likely moderating closer to a long-term norm of 6%/year growth thereafter. So, if you really want or need to buy a home and you expect you’ll stay in that home for 3-5 to 7+ years, much shorter than the norms these days, then you’ll be missing out on great appreciation on your home if you aren’t in the market now. I think most agents are somewhat hoping for some breath moments in the market, like we’re seeing in the last 10 or so days. We are continuing to see increasing new on market listings, so our reservoir of homes to sell may finally start to raise. Don’t get too optimistic on this raise though. We had near record levels of new on market listings last year–it’s the only way we could have had near record levels of sales, but our reservoir only depleted. There’s optimism for some filling of this reservoir in 2022.
Buyers, take heed. The market conditions are improving with choices but our reservoir is still so low that when the right home choice(s) show up for you, you do have to be ready to act and still be bold with your offer. We are by no means entering market conditions that will have sellers making any significant concessions. Getting the home you want, in the location you want, at a price you can afford–that is a win and I don’t see that definition changing in any dramatic sense for the balance of this year. So, as crazy as things are, it seems they’re pretty well the same and norm of the last few years. Let’s hope the war in Ukraine can be resolved soon, so we can all breath a little easier and that layer of uncertainty can dissipate.
Buyers and Sellers, please recognize that you really do need an experienced agent to help you determine what the best potential strategies are and help present you, your home or your offer to the market. There are too many variables for those outside the market to understand. Seek advice and guidance on how to define and find your win in these crazy times.