2021 is shaping up to be a big year in Seattle-area real estate.
2020 Market Recap Looking at the King and Snohomish County housing statistics for 2020, you would not think there was a heated presidential election and pandemic. Housing in the Seattle area was robust. Every neighborhood in those two counties appreciated in value. The highest appreciating neighborhoods being Maple Valley in King County at 13.4% and Mill Creek/Mukilteo in Snohomish County at 15.6% Given the consistent appreciation that the core Seattle and Bellevue neighborhoods have experienced, it only makes sense that more affordable neighborhoods that are further out see the demand. When the average salary does not rise with the level of appreciation, prices can only go up so much before buyers start looking elsewhere to make their dollar stretch further relative to square footage, lot size, and type of home. In my opinion, COVID 19 certainly accelerated some timelines of Buyers, but the mass exodus that the media has portrayed at times is not the case. There is still steady growth within in the city.
2021 Market Outlook
Looking at how 2020 ended is a good place to start as we predict the 2021 housing market. Seasonality aside, the inventory for King and Snohomish County at the end of December 2020 hit its lowest point since December 2017, at .6 months of housing inventory. .6 months of inventory means that if no homes were to come on the market, all the homes would theoretically sell within 18-days, and there would be no housing inventory. Inventory at or below .6 months has only been reached one other time since 2006 (since the NWMLS started to record the data) in December 2017.
It is a classic supply and demand situation. Given the current housing supply going into 2021, it will be a seller's market in 2021. Inventory is so constrained that I expect to see the outlook for this year to look much like late 2017 and the beginning of 2018, where the market was extremely competitive for buyers. This culminating in a situation where prices will likely rise quickly month over month and you could find yourself paying 5-10% more in September vs the start of the year, for the same property. Interest Rates Inventory aside, another major driver for home purchases and market activity is mortgage interest rates. 30-year mortgage interest rates are at the lowest point that they have ever been. Ever.
In December 2020, we hit 2.67%, the lowest 30-year rate we've ever seen. Rates recently "peaked" (around 4.9%) at the end of 2018 when the Fed raised rates but then scaled them back at the start of 2019. Then COVID 19 hit and the Fed has scaled rates back even more as a means to keep the economy going. Some rough math to explain how much impact rates have on buyers' monthly costs. Purchase Price: $600,000 Downpayment: 10% or $60,000 Insurance: $800/per year Property Tax: $3,500/per year Mortgage Insurance: none for this example Interest Rate: 2.67% Total Monthly Cost: $2,540 Now let's run the same example: the only difference being a 3.75% interest rate instead of 2.67%. The total monthly cost for the higher rate would be $2,859. That is nearly $319 per month, or $3,828 a year. This ultimately comes down to the fact that money becomes cheaper to borrow with a lower interest rate; therefore, property becomes more affordable to prospective buyers. This, in turn, also pushes overall prices up as more of the buyer's monthly payment can be allocated to the principal loan amount and not interest. My Experience so far in 2021 In 2020, my clients were very successful in beating out other offers in competitive situations. I expect to experience much of the same in 2021. Nearly all my buyer clients have encountered competitive situations while on their search. The "offer review date" return in early 2020 has stayed through the New Year, indicating that sellers are confident about their property getting multiple offers. This has particularly been the case on the Eastside, around Bellevue, Kirkland, and Redmond, where the competition has been high for over a year now. All of these factors are an indication of how the Spring market will look this year.
Condo Comeback? I expect there to be a condo comeback in mid-late 2021 into 2022 as life gets "back to normal." While condos have not appreciated at the rate of single-family homes this last year, given the immense appreciation single-family housing has seen, combined with some level of normalcy downtown, buyers will once again flock towards the downtown lifestyle. As activities pick up downtown, people get their vaccines, and traffic goes back to what it was pre-virus that allure of walkability to a vibrate downtown culture will reappear. If you are interested in being in a downtown condo, you have a short pocket of time left to get a really good value. How will COVID 19 affect the market? At the end of the day, everyone needs a roof over their head. COVID 19 certainly caused unpredictable ripples in the market initially, but at this point, I do not see COVID 19 being a major factor in Seattle housing. Those ripples have since subsided. Of course, things can change rapidly, and no one can predict what will happen, but as vaccines continue to be distributed, I am optimistic that COVID 19 will start to have less and less impact on our lives and the market this year.
What this means for you!
AS A BUYER, there are several positive aspects about being active in this market. The first point is that with interest rates so low, it is a huge advantage allowing you to potentially buy much nicer property versus when rates were over 1+% higher. While it is a competitive market and prices are looking like they are rising this year, if you can get into a home early on in the year, you will ride the wave of appreciation throughout the rest of the year and gain equity quickly. If you struggle to compete, are not represented well, and not educated about the market, it will make getting into a home a challenge. Patience and persistence will lead you to success; buyers have to keep a sharp eye on the market and move quickly! AS A SELLER, with housing inventory at a record low point and demand ramping up as we get into springtime, now is the time to prep your home for the market. If you can market your home, price, and present your home well, as a seller, you can capitalize on your equity by selling and trying to push your sales price in a competitive market in favor of you.
Call or Email me at 425.299.7557 - cyrusfiene@cbbain.com