Seattle 2022: A Tale of Two Housing Markets

Market Updates

How it all started

It’s hard to remember what the start of 2022 was like in our real estate market - homes selling 20-30% over the asking price, offer review dates on every single listing, sellers taking early offers from buyers willing to pay whatever the seller wanted for the home, buyers waiving all contingencies, low appraisal after low appraisal, and many disappointed would-be buyers who couldn’t catch a break simply because they didn’t have enough cash to compete with the winning offers. It was incredibly hard to buy a home, and twice as challenging to do our jobs. Bottom line - it was not sustainable.

Interest rates double, yet home prices finish the year with double digit appreciation in many markets

Artificially low interest rates created this whirlwind of sales activity, and in a span of six months (January 2022-June 2022), we went from 3% interest rates to 7%. This ground sales to an almost immediate halt last summer, and inventory rose from two weeks of availability to two months in a matter of weeks. While we were all begging for more stability in our market, this was too sudden and shocking for home buyers and sellers alike - buyers lost buying power afforded by low interest rates, forcing sellers to lower prices and begin contributing towards buyer closing costs to help offset the buyer’s monthly payment that rose anywhere from $500-$2,000 depending on the price point.

The landscape shifted quickly, and savvy home buyers and sellers did the same. Because of this, our market is still moving at a healthy pace. In Seattle, the year over year (YOY) median sale price for single family homes rose 9.5% in 2022 - up $80K from $845,000 in Dec. 2021 to $925,000 in Dec. 2022. Condo sales were also up 4.9% YOY - up $24K from $490,000 in Dec. 2021 to $514,000 in Dec. 2022.

Here's a closer look at where median home prices landed in neighborhoods throughout Seattle.

The bread and butter of Stoop & Gable's business is Seattle real estate, meaning we sell the most homes in the city of Seattle. We ABSOLUTELY service clients in surrounding areas, but it's wildly time consuming to create these market updates, which is why I focus on Seattle stats for these reports. For this end of year recap, I'm sharing a snapshot of home values throughout King and Snohomish Counties below. We will pick up the Seattle story a little further down, keep reading!

Home prices throughout King County ended the year with strong appreciation overall in both the condo and single family markets. The Eastside has been a powerhouse of appreciation for years, and 2022 was no different. With public transportation infrastructure becoming more robust, as well as a steady work from home culture across many industries, the east side remains a popular area for homeowners seeking more space, award winning school districts, closer proximity to the mountains, and an overall toned down urban lifestyle.

South King County remains the most affordable area in the county for homeownership. It will be interesting to see where home values head in 2023 for this part of the county. I have a hunch that prices won't come down as much as some areas in King County. This feels like a new baseline for this area as homeowners priced out of other parts of the county migrate south, bringing 2019 Seattle home values to places like Kent, Tukwila, and Renton.

Snohomish County also had a robust year of growth with the single family home price up 12.4% from December 2021 with a 2022 year end median sales price of $760,000. Pulling the sales data for Snohomish County was a bit shocking. I've been saying for years that Edmonds is the next destination for Seattleites priced out of North Seattle neighborhoods. Welp, they have arrived and so have home values.

A closer look at the Seattle real estate market in 2022

In November's Market Update, I shared that consumers need to let go of pandemic home values and interest rates, but that doesn't mean that we are heading for massive correction in home values (AKA depreciation). Home prices rose steadily in 2020 and 2021, then exploded in the spring of 2022 when interest rates AND inventory were at their LOWEST. You'll notice that home prices haven't completely fallen off during the second half of 2022. In fact, 2022 Q3 and 4 home prices are following a similar trend to that of Q3 and 4 in 2020 and 2021. While interest rates have put a damper on price escalations, they have not destroyed home values. I firmly believe that values in our area will remain strong in 2023 and that the headlines you're likely reading about a failing housing market is simply a misrepresentation of the typical seasonal slow down in the fall and winter months.

Seattle homeowners are at the top of the market. Historically, it has never been more expensive to buy a home in our area. Prices will likely remain flat in 2023, with a small uptick during the spring market due to the complete lack of inventory of viable homes for sale over the past 4 months.

Pending sales are down 30% YOY, but we are still experiencing an extreme shortage of homes for sale. I call Q 3 and 4 "leftovers season" meaning that much of the fall and winter is a cleanup of unsold inventory leftover from summer. It's usually the less than favorable homes that are available, that sell under the list price, with little competition. There continues to be a low level of new listings coming on the market this month, and I think this will continue through the end of February. March usually provides relief to eager buyers who are ready to purchase - which means buyers will likely be competing against other buyers, and possibly escalating on price and waiving some contingencies to strengthen their offers. My prediction is that price escalations will top out at 10% over the asking price on popular homes this spring.

The year over year numbers from 2021 to 2022 is like comparing apples to watermelons. We will likely never experience a real estate market like 2021 and spring 2022 ever again. When comparing the number of new listings and total number of homes for sale over a three year period, it's clear that our market is in step with 2019 and early 2020 trends, which is hopefully where we are heading in the months ahead - a more balanced market.

How are we advising our Sellers right now?

Here are the three things we are telling our 2023 Sellers:

Don't Skip Preparation
Buyers are more picky than ever right now, and they often get to renegotiate with you during the inspection contingency. You want to mitigate any potential issues or asks from a Buyer, and that can easily be done with the right amount of preparation. Most Sellers budget around $10,000+ for home repairs and upgrades prior to listing their home for sale. You'd be surprised how quickly this adds up. Paint alone will run over $5K for a full interior paint job, excluding trim and doors.
If you want top dollar, your home needs to be dialed in and move-in ready. This doesn't mean you need to completely remodel your home! But, it does mean that if something is broken, it needs to be fixed. Garage door opener on the fritz? Get it repaired. That 15 year old water heater? It's time to upgrade. The lovely carpet you installed 10 years ago that your dogs love to lounge on? It's time for replacement. Busted gutter on the back of the house? I think you get the picture.
List your home when the time is right for you.
Timing is everything, but you can't time the market. If we could, our jobs would be so easy! Historically, March-May tend to be the best months of the year for home sales in our area. If you're planning to sell, this is when we recommend doing so. But, list your home for sale when the time is right for you, not the market. Rushing to get your home listed and skipping on preparation as mentioned above will likely result in a longer market period for your home and a lower sales price.
Getting started on home projects sooner rather than later is a smart idea. Most contractors and service providers have LOTS of availability right now, it's time to start gathering bids and making a plan.
Make a plan with your Realtor sooner rather than later.
Selling your home is a calculated move both financially and physically, and it's usually something you only do a few times in your lifetime. Us on the other hand? We do this 10-20 times per year. We are legitimate experts who understand the numbers and where the market is moving. Lean on your Realtor for advice on when to list your home and how much your home is worth in its current state and how much it might be worth if you put a little money into the preparation. Lean on them for vendor recommendations for that pesky garage door opener, or movers who will help you downsize, pack, AND move. Real estate agents get a bad rap sometimes for being smarmy salespeople, but I find that most of us are natural helpers and connectors - WE LOVE HELPING OUR PEOPLE REMOVE STRESS FROM THIS PROCESS. It's the number one thing all realtors mention in their about me pages.

How are we advising our Buyers right now?

Here are the three things we are telling our 2023 Buyers:

Consider an adjustable rate mortgage.
Deciding what loan product to use isn't easy, but an excellent loan officer/mortgage broker will educate you on all viable options within your qualification. An adjustable rate mortgage (ARM) allows you to purchase your home at an interest rate that is typically 1-2 points lower than a conventional 30 year interest rate, and over the course of 5-7 years, that rate increases until it catches up to the prime lending rate (which is usually higher than a conventional 30 year interest rate). Interest rates are expected to drop back into the 4% range in a few years, and at that time you will refinance into a conventional 30 year loan with a fixed lower interest rate for the entire duration of the loan period (30 years, or whenever you sell your home).
Be realistic during inspection.
All homes have issues, even new construction homes. An inspection contingency isn't an opportunity to renegotiate the contract with the seller and ask for every item to be repaired. Rather, it's an opportunity to get to know the home, identify current or potential risks, assess if you truly want to buy the home, and negotiate reasonable items and repairs with the seller if red flags present themselves. Most sellers are agreeable to reasonable requests made during inspection, but it can be a tedious process to reach a mutual agreement on what is or isn't reasonable.
Don't settle.
Buying a home is a big deal, and it's time consuming, expensive, and exhausting! At a time when inventory is so limited, it can be easy to compromise on location, style, or condition of the home just to expedite the process. Don't do this. Be patient, stay focused on the items that matter most, which are usually things you can't change about the property (i.e. location, style, size of the yard, parking). There will be more properties for sale soon - we hope! The right home will become available when you least expect it, we promise it will be worth the wait.
It's also important to remain proactive in your home search. Due to the limited inventory the past few months, the AMAZING homes are snatched up quickly. So, if there's a home you're interested in seeing, let your agent know ASAP. We'd hate for you to miss an opportunity because you think the market is "slow."

As always, we're here for you beyond the blog and look forward to answer all your specific real estate questions. Cheers to 2023, and a more balanced real estate market across the Puget Sound.