The 2022 real estate market started in a sprint! We started this year with the lowest amount of available inventory this market has ever experienced coupled with mortgage interest rates a full point lower than they are now, a robust buyer pool due to a strong job market and work-from-home influenced moves, and the threat of inflation spurring buyers into a frenzy to beat rising rates. The combination of supply and demand and low debt service has created an intense seller-centric environment which resulted in massive home price appreciation from January to March. This is on top of ten years of previous solid price growth; over 50% of homeowners in WA state have at least 50% home equity.
As we head into the spring and summer months, we anticipate (and have begun to see) seasonal increases in inventory, which will provide much-needed relief for buyers. Interest rates have increased as a tool to combat inflation, as was predicted by economic experts across the nation and announced by the Fed. Rates still remain historically low for the time-being and have only departed from the “tell-your-grandkids” levels of between 3.5% to 4.5%. Price growth should start to temper after a feverish Q1 and buyers will enjoy more selection. If you are curious about how your real estate goals match up with the market, please reach out. It is our goal to help keep our clients informed and empower strong decisions.
What We Are Seeing On the Ground
Agents all across Western Washington are already starting to see a slight downward trend in buyer activity as buyer burnout, the end of the current school year, gas price increases, geopolitical uncertainty, and interest rates pushing higher have led to many buyers taking a step back to catch their breath and reassess.
A driving force behind this, mortgage rates, are shooting up at the fastest pace in history, sending the typical monthly mortgage payment for a homebuyer up more than $500 since the beginning of 2022. As rates quickly pass 5%, we expect their impact on buyer demand to change from a motivator—driving a sense of urgency to buy before rates rise further—to a deterrent—causing even more buyers to step back as the cost of homebuying exceeds their budgets. There are a number of early signs that this shift is beginning to take place.
Fewer people are starting online home searches and applying for mortgages than this time last year, and year-to-date growth in home tours remains far below 2021 levels. An increasing share of sellers are also reducing their prices after putting their homes on the market (As of April 22nd, 2022, 489 listings have lowered their asking price in the last 7 days – a number unimaginable just a few months ago). The share of homes that sell quickly (within 14 days) continues to grow, but at a much slower pace than earlier this year. Whereas a home listed in late January to early February would have up to a dozen early offers, we’re now seeing many homes sit on the market, miss their offer review dates, and then lower their list price in response to existing buyers becoming more selective in their process to find a home.
Still, in some places and for certain properties, the market feels red-hot – with these properties selling faster and for more than ever before. That’s primarily because inventory levels remain near record lows with more sellers likely to hold onto their properties this season out of fear of being priced out of their current market and/or to avoid losing their sub-3% interest rate.
Windermere agents say they’re starting to see some sellers put their homes up for sale earlier than planned because they’re worried they’ll miss out on the market’s peak if they wait.
What Does This Mean For Me?
Mortgage rates are not slowing down or showing signs of stopping; the Federal Reserve is expected to meet another 5 to 6 times this year and is anticipated to increase the Fed Funds Rate increments from .25 to .50 while also shrinking its balance sheet of Mortgage-Backed Securities (MBS). Many experts are expecting this move to effectively combat inflation, but also to raise mortgage rates as a result.
As A Seller:
Although the peak of the market is behind us, it is still very much a seller’s market and a great time to accelerate your plans to sell this Spring/Summer before interest rates remove more of your potential buyer pool. As stated, more and more listings are reducing their list price as they find buyers are becoming much more selective about which homes they visit, and by extension, buy; before putting your home on the market you should consider consulting with a professional to find out which repairs and updates will make your home net you the most profit and benefits.
As A Buyer:
As previously discussed, interest rates are not expected to reverse anytime soon – the quicker you can get under contract and lock in a mortgage rate, the better off your budget will be. Now more than ever, it is important to be working with experienced and dedicated professionals, work with a local and responsive lender or mortgage broker, and be constantly in tune with your finances and pre-approval.
Brenden Covington
Trusted Real Estate Advisor
Windermere Real Estate/HLC
13901 NE 175th St, Suite 100 | Woodinville, WA 98072
Cell 206.617.4879 | Email bcovington@windermere.com