Where we are now
2021 came to a close with the lowest home inventory we have ever seen. Historically low interest rates AND the pandemic significantly contributed to this. Working from home has allowed people to reimagine the way they live. We’ve seen population growth with relocations and also many locals searching for larger homes. For the month of December, there were only 208 homes for sale in the entire city of Seattle.
In comparing December 2020 and December 2021, the median home prices and number of homes on the market were as follows:
What to expect moving forward
Interest Rates: Mortgages will Become More Expensive
As I’m sure you have heard, inflation has increased and is expected to continue at this incline until the 4th quarter of 2022. Not only do we have severe supply chain issues, but shortages of both labor and housing. Historically, interest rates increase when we see a rise in the rate of inflation. Interest rates have already increased from the January 2021 low of 2.65%. Most economists predict rates will increase into the high 3 percents. In my observations, this economic news has spurred a rush of buyers this January.
“HOMEOWNERS: If your mortgage rate is in the high 3% or more, and you have not yet refinanced your home, this may be a really good time to contact your lender. If you need a referral of a reputable loan officer, feel free to text or email me.”
In April of 2022, buying a second home or taking out a high balance mortgage will become more expensive as well. Feel free to contact me for more information on the new fees.
“Want a Vacation Home? You should talk to your lender about timing and how the April 2022 changes may affect your plans”
Housing Shortage will Continue: Population and wealth increase faster than homes can be built
Many aren’t selling their homes they currently live in when they purchase a new one. They are holding onto them as rentals.
Western Washington population is growing quickly. Between 2010 and 2020, Washington state has added an average of 272 people per day. King County added an average of 94 people per day, Snohomish County added 32, and Pierce County added 35. The GDP of Washington State is the was the best in the nation, which adds more wealth to the state and creates more jobs
New homes are not being built at the rate to meet demand due to increasing costs to build. We expect this to continue through 2022. Land prices, supply chain issues, labor shortages, permitting costs, interest rate increases, are adding to extended timelines making building more costly and increasing risk. As demand increases, expect additional zoning changes to make it easier to build more homes.
In Summary
In 2022, housing supply won’t be able to keep up with the demand for housing, so median home prices will continue rising. We will continue seeing multiple offers and short market times. However, as homeownership becomes less affordable due to the rising home prices coupled with the increased interest rates, we should see slower price increases.
Other interesting Trends
As in-city homes become less affordable and businesses shift to permanent work from home options, we will continue to see people moving further away from urban centers and see suburban areas grow.
Multi-family residential setups like ADUs, Duplexes, DADUs etc, areon the rise due to both the affordability and lifestyle flexibility they allow.
Vacation/second home purchase trends are expected to continue.
We are seeing People relocate due to political/ideological reasons more than we’ve ever seen. That said, more are moving in than out. We are a growing city experiencing significant population growth.
What this means for sellers: If you want to sell, the current lack of inventory, low interest rates, and crazed demand, makes it the PERFECT time. Although price increases should continue, the crazy multiple offers with unbelievable terms may not. I can help you plan the best timeline to meet your goals.
What this means for buyers: Well, it’s really tough out there for buyers. You need a team of professionals to help guide you and give you the best chance you can get. The good news is, you don’t appear to be buying at the top of the market and interest rates are still low. If you are pre-approved, this is a good time to talk to your lender to find out what an increased interest rate will mean for your monthly payments. You may need to adjust your budget.
Data is from the Northwest Multiple Listing Service and the US census.