2022 First Half: The Ramp-Up to a Downshift

​​​​​​​AFTER MONTHS OF MARKET PREP AND CAREFUL POSITIONING, MY QUEEN ANNE LISTING SOLD IN MARCH DURING PEAK MARKET CONDITIONS FOR 20% OVER ASKING ($2,585,00).

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Seattle + Eastside Market Recap

• Rising interest rates, after years of record lows
• A falling stock market, after two years of record returns
• Inflation across multiple purchase categories
• Exhausted buyers!

• The ongoing strength of the tech sector that fuels a big chunk of our local economy. This will likely never go away. Whether the world is doing well or poorly, we will continue turning to tech and online services and platforms, as a global society.
• The relative security of the high-paying jobs required for people to afford our region’s high-priced homes (contrasted with the insecurity of lower-paying jobs held by most renters)
• A pre-existing housing shortage that was 10 years in the making (builders exited the market after the collapse of 2008, and home building slowed to a trickle for nearly a decade while population continued to rise). In fact, if builders pull back now, as interest rates rise and a recession is forecasted, this housing shortage will be exacerbated.
• Locally, our region is increasingly viewed as a relative refuge from climate change, compared to many areas of the country.

The Numbers (Q2 2021 vs. Q2 2020)

Price Trends

Market Times

List to Sale Price Ratios

Inventory and Sales

Micro Markets Matter

Looking Ahead: What Now & What Next?

While the world has too many complex feedback loops to project how things will be with reliable accuracy, here’s my perspective.

Below are the factors I believe will place upward and downward pressure on the market for the rest of this year. Overall, I think the “down” will outweigh the “up” over the next few months, and we will continue to see a cooling of the residential sales market in the Seattle area in the second half of 2022.

Holding the Market Up

• Inventory is still low; just not as low as it has been. We still have a housing shortage across many price points, in many areas. I just looked at inventory numbers comparing now to 10 years ago…we are still 37% below those levels, today. Bringing forward  something I shared in the last market update blog post, The Washington State Department of Commerce commissioned a study that revealed we rank last in the nation in the ratio of housing units to existing households. And the Puget Sound Regional population is expected to grow by an additional 55,000 people per year from now to 2050. With all our water, we also have a shortage of buildable land. Against this big-picture backdrop, demand is likely to remain strong in our region. And here’s a national statistic for context: Freddie Mac estimates that the US is short 3.8 million housing units to keep up with household formation, a deficit that has doubled from 2012 to 2019. In that time, supply worsened in 47 states.
• Stock market gains. You read that right. While recent big losses off stock market highs are pushing the real estate market down, in the bigger picture, many investors still have roughly 20% gains compared to where they started the pandemic. We are richer than we were 2 years ago, even with these recent losses.
• Our tech companies are richer and still hiring. The large tech companies that provide so much fuel to our local economy have grown wealthier as a result of the pandemic; these jobs are not at risk.
• Climate change makes Seattle attractive. As this tragedy unfolds, more people from other regions of the country, and world, will migrate towards the Pacific Northwest’s relatively mild and temperate climate.

Pushing the Market Down

• The big story here is rising interest rates. We knew rate hikes were coming but did not anticipate they would be as dramatic as they have been (from below 3% to hovering around 6% in the space of 6 weeks). And the Fed says more hikes are on the way. This is cooling the market, no question.
• Stock market losses. Everyone who has stocks or stock options is feeling less rich than they were in January.
• Worries about recession. We all hear it every day on the news; inflation is high, stocks are down, interest rates are up, the war in Ukraine and ongoing climate-related disruptions are impacting global markets and we have a Covid-stimulus hangover. Fear makes buyers more cautious, even when they can afford to buy.
• Affordability. Interest rates are one factor in affordability; obviously prices and people’s incomes are others. So far there have been enough well-resourced buyers to keep the pressure on Seattle area markets, even as prices have risen. Spring this year saw more leaps and bounds in price appreciation; so by now it really is time to let a little air out of those tires. But against a backdrop of properties appreciating on average 20%+ in Seattle and up to 40%+ on the Eastside over the past 2 years, if we now have to give back 5% to 10%, property owners (like stock owners) are still sitting on substantial net gains coming out of the pandemic years.a study

What All This Means for YOU!

Sellers

Buyers

Thanks for Reading!