Here we are, one-third into 2021, and boy what a ride it has been so far. We all know that 2020 was a unique year full of challenges and change. The pandemic made us pause and reevaluate many aspects of our lives including where and how we live. The impact of the pandemic on the real estate market was significant, as people started to shift their housing priorities during the second half of 2020. Then the calendar turned to 2021 and the frenzy of all market frenzies began.

I had the misguided notion that closing out 2020 was going to lead to more normalcy in our industry as we all yearned to move on to the new year. Boy, was I shocked as Q1 unfolded; 2021 had its own agenda in store! What the new year brought, was its own set of drama as the economy headed towards recovery and the vaccine emerged. The continued historically low interest rates have fueled the housing pivots being made across our region and our country. Lifestyle moves have driven demand, but interest rates along with hearty equity levels have helped financially enable these life-changing moves. Interest rates have hovered around 3% since the beginning of the year. Additionally, 38% of all homeowners own their homes free and clear, and over 50% of homeowners have up to 50% equity.

The work-from-home phenomenon (either permanent or hybrid) has re-shaped the housing market, driving many people to consider the suburbs or rural locations. Eliminating the daily commute into urban work centers has created flexibility for homeowners to live farther away from work and enjoy larger spaces and more affordable housing in comparison to cities like Seattle and Bellevue. In fact, the median home price in Snohomish County is up 15% complete year-over-year in comparison to King County at 10%. This is proof that suburban and rural housing is on the rise.

Demand (defined above) has helped to push price appreciation levels along with a shortage in available inventory. We have functioned in a lower-than-normal inventory market for over six years now. Zero to three months of inventory is defined as a seller’s market, three to six months a balanced market, and over six months a buyer’s market. This figure is established by estimating how long it would take to sell out of homes based on the closing or pending rate if no new homes came to market. In the second half of 2018, we eclipsed three months briefly but have mainly existed under three months for quite a while. In 2021, we have not breached one month, and in many submarkets have only had up to two weeks of available inventory.

2020 left a void of available inventory because we were in quarantine and many people were not comfortable opening their homes up to strangers. Plus, some people needed to pause and see how this was all going to shake out for them. I think the turn of the new year coupled with the vaccine has empowered people to make the moves they have been considering while they won the wait at home. We have a smattering of generations at the helm all wanting to make moves for different reasons. First-time home buyers, retirees, and move-up buyers are all hoping to take advantage of low debt service and pivot to a home with a better fit for their lifestyle goals.

Lifestyle demands, low rates, scarce inventory, and formidable equity have created a very competitive market. Large down payments due to moving equity from one home to the next, along with strict lending requirements have propped up the stability of the housing market. I am often asked if we are headed towards a housing bubble because of the rate of home appreciation, but it is important to understand that home values are supported by strong loan-to-value ratios and scrutinized lending. Unlike the Great Recession of 2008, when predatory lending (that involved low to no down payments and undocumented loans) formed an unstable foundation that eventually crumbled.

The biggest challenge I see in the housing market in our region is affordability. It is expensive to live in the Greater Seattle area, plain and simple. The work-from-home option has provided flexibility to live farther out, which has put upward pressure on prices everywhere. We have had a re-organization of where people live and it has been surprising which communities have become attractive and in-demand. I predict at some point this will settle down as these newly refined housing needs find their place. Additionally, May through August is when we seasonally see more homes come to market. This should hopefully make it a bit easier for buyers to secure a home, and help soften the ramp-up on prices. This has already started to show itself over the last few weeks.

Financial indicators in our region are positive. Only 3.6% of homes in Washington state are in mortgage forbearance (a fraction of where we were at a year ago), tech jobs continue to drive employment, and the overall local economy and home equity are very strong. Your home is intended to be a long-term investment. If price appreciation starts to soften as we climb out of our inventory deficit this will be more sustainable for affordability. Buyers will still be on the road to building wealth with some of the lowest interest rates ever, and we must remember that homeownership is not just an investment but where we live and create memories. Sellers will continue to enjoy large payoffs as long-term equity growth is abundant. Keeping a grounded perspective will be key as the market twists and turns from the extremes. If there is anything I can guarantee it is that the market is always changing and it can change fast.

If you are curious about how today’s market relates to your lifestyle and financial goals, please reach out. I’d love to discuss your needs, curiosities, and concerns as this has been an intense and eventful start to 2021. It is always my goal to help keep my clients informed and empower strong decisions.

June 11th is our annual Windermere Community Service Day; our office will be volunteering alongside the Snohomish Garden Club helping plant nearly an acre of fruits and vegetables that will be harvested for local food banks. This will be our 5th year working on this project that yields thousands of pounds of fresh produce for the food insecure across our region.

Windermere Community Service Day is a 40-year long tradition of giving back to the communities in which we serve, it is a valued part of our Windermere culture. If you would like to donate to help us provide additional veggie starts and supplies, please reach out. I will report back on our project in my next newsletter, letting the planting begin!

Windermere and the Seattle Seahawks partnered for the fifth season to #TackleHomelessness, raising an additional $32,100 for Mary’s Place to support homeless children and families, bringing our total raised to $160,300! Read more on the Windermere blog.

Matthew Gardner is the Chief Economist at Windermere and a sought-after expert on real estate, both locally and across the country. Every quarter, Matthew breaks down the real estate market by region and provides the Gardner Report; you can read this quarter’s full report here.  Additionally, he also provides a monthly video report touching on the latest trends and hot topics concerning the real estate market. Click on the image below to view his latest Monday with Matthew video.

If you have any questions or curiosity about the current real estate market that you would like to discuss, please reach out. Are you curious about the value of your home, are you contemplating a move, or considering a new purchase? I can help! It is always my goal to help empower my clients to make strong financial decisions and to help them understand how real estate can positively affect their lifestyle.

Thank you to everyone who came through our shredding event this year!  The results from the food drive were overwhelming. Through all of your generous giving, we collected 2,290 pounds of food and $7,080 in cash!  Concern For Neighbors Food Bank was thrilled to pick up so much tangible love and help. They will use the funds to purchase food to provide to the community in need over the next several weeks.

If you’d like to donate, please visit their website (above) to see their COVID-19 schedule and how you can help.

Over the last 6 years, the median price for a single-family home in King County has grown by 65%, and in Snohomish County 69%. Above are examples of actual homes sold in late 2015 to early 2016 that also sold in early 2021. Note, they were not remodeled or significantly improved in between sales. These examples show the growth in home values that we have experienced over the last three years due to our thriving local economy. I pulled these examples to show you actual pound-for-pound market data versus the statistical percentages I often quote in these market updates. I thought these examples were pretty telling and quite exciting.

This phenomenon has been driven by interest rates being under 5% for the last five years and under 4% for the last 2 years. In addition to low debt service, the tech-influenced job market has kept the local economy humming. Couple all of this with the convergence of Millennials breaking into the market as first-timers or moving up, Gen-Xers moving up, and Baby Boomers cashing out to the right-size house in our area or relocating altogether, and demand is high. This high demand has put pressure on available inventory, driving up price appreciation.

The more recent influence on home values is the effect of the work-from-home lifestyle on housing. Many companies have announced that post-pandemic they plan to let their employees permanently work from home or do so in a hybrid model. This has changed the preference to be closer to the in-city job centers to avoid a long commute. Now, more and more people are attracted to the suburbs and in some cases more rural settings in order to enjoy larger interior and exterior spaces. According to Matthew Gardner, Windermere’s Chief Economist, over 30% of all homeowners in America have over 50% equity. These moves to the suburbs are also propped up on liquidating their equity elsewhere and utilizing it to make a large down payment on the next purchase. Check-out Matthew’s latest video update here.

I see this as a re-organization of lifestyle propped up by strong equity growth, low debt service, and the flexibility to live further from one’s job. Homes in-city are still experiencing favorable appreciation with the median price up 7% year-over-year in Seattle proper, but there is stronger year-over-year growth in suburban locations. For example, in Lynnwood the median price is up 11% year-over-year. Where this has been a challenge is the typical suburban buyer is now competing with far more buyers for these coveted locations. The former suburban buyer accepted a longer commute for a less expensive home. With commute times a lesser concern, now we have a larger audience vying for homes outside the in-city core, making the suburbs more expensive.

The large price gains might seem familiar to the gains of the previous up market of 2004-2007 that resulted in a bubble, but this environment is much different, which is why we are not headed toward a housing collapse. Previous lending practices allowed people to get into homes with risky debt-to-income ratios, minimal down payments, low credit scores, and undocumented incomes. A large part of why the housing bubble burst 14 years ago was due to people getting into mortgages that were not sustainable, which led to the eventual fall of sub-prime lending and the bubble bursting.

It is supply and demand that is creating these huge gains in prices, not predatory lending. We are starting to see an uptick in homes coming to market which is both seasonal and catch-up from the pause the pandemic created last spring. With the vaccine becoming more and more available, more home sellers will become more comfortable bringing their homes to market. The shake-out of the work-from-home shift will eventually temper as some will choose to stay closer in-city and some employers may revert back to in-person work forces. The suburbs are not for everyone, but for now the puzzle of how housing and lifestyle relate to one another is being re-built.

We are anticipating an increase in inventory as we head into spring and summer which will temper price growth and simmer the frenzy. Many folks who have been waiting out the pandemic to make a move based on retirement or upgrading homes are well-positioned to enter the market. If you are one of those people, I hope these examples provide insight on the increase in home values and how they might pertain to your goals.

Potential buyers might shy away from the market due to affordability. While it is expensive to buy a home in the Greater Seattle area, the people that have become homeowners over the last six years have built some amazing wealth. Interest rates remain low, helping to absorb the cost of a home in our area. Last month, I wrote an article about wanting to sell but needing to also buy, which helped layout some strategies to successfully participate in today’s market. If you or anyone you know is considering making a purchase, it is worth the read.

As we head into the active spring and summer months, if you’d like me to provide you a complimentary Comparable Market Analysis (CMA) on your home so you have a better understanding of your home’s value, I’d be happy to do that. This would be an important component in charting your 2021 financial goals. Please reach out, it is my goal to help keep my clients informed and empower strong decisions.

4211 Alderwood Mall Blvd, Lynnwood

We are partnering with Confidential Data Disposal for our 10th year; providing you with a safe, eco-friendly way to reduce your paper trail and help prevent identity theft.

Bring your sensitive documents to be professionally destroyed on-site. Limit 10 file boxes per visitor.

We will also be collecting donations to benefit Concern for Neighbors food bank. Donations are not required but are appreciated.
Hope to see you there!

**This is a Paper-Only event. No x-rays, electronics, recyclables, or any other materials.