January 2022 Market Update - Slower Month!
A frigid first week of January, surges in coronavirus cases, and depleted inventory were among factors brokers cited for last month's slower than year-ago sales.
In newly released statistics for January, the MLS reported 6,350 pending sales of single family homes and condominiums during January, about 1,000 fewer the same month a year ago for a drop of 14%. The year-over-year (YOY) number of closed sales also fell, dropping from 5,896 completed transactions to 5,085 for a decline of nearly 13.8%).
"When there's uncertainty, the default position for most sellers is to stay put, do nothing, and hunker down," suggested Mike Larson, managing broker at Compass Tacoma. He said many things are contributing to sellers' reluctance to put their homes on the market, "most notably, COVID, inflation, the economy, the holidays, and finding a replacement property. Security and certainty are more important than cashing in on record amounts of equity."
Brokers added 5,927 new listings during January, nearly 1,000 fewer than the same month a year ago, but an improvement on December's volume of 4,617. Only five counties reported YOY gains in new listings.
Last month's pending sales outgained new listings to further shrink inventory. At month end the selection included a meager 3,092 active listings, down more than 30% from a year ago. There is about 2.5 weeks of supply (0.61 months) across the 26 counties.
King County had the steepest drop in active listings, shrinking nearly 59% from a year ago, followed by Jefferson County, down 40%, and Snohomish County, down more than 35%.
A comparison of counties in the listing service report shows only about half of them have more than one month of supply, and these areas tend to be in more rural areas. King, Pierce, and Snohomish counties all have less than two weeks of supply. Kitsap County is slightly better with 0.58 months.
"The year started off with more of a whimper than a boom thanks to listing inventory in King, Pierce, and Snohomish counties being lower than any January on record," observed Matthew Gardner, chief economist at Windermere Real Estate.
"The market remains virtually sold out, and there is a significant backlog of buyers looking for a home to purchase," reported J. Lennox Scott, chairman and CEO of John L. Scott Real Estate. With higher mortgage rates expected, he said buyers are more anxious to get a home, even during the inventory shortage.
"Given the market conditions, nearly all homes are going under contract within a week of being listed, and multiple offers are commonplace in price ranges where there is a shortage of available homes for sale," added Scott.
Meredith Hansen, founder and operating principal at Keller Williams Greater Seattle agreed saying, "The market in Seattle continues to be extremely competitive with multiple offers and prices escalating. The imminent rise in interest rates has buyers scrambling to find properties to buy."
Rates are still historically low. Expected increases "may be spooking some buyers, but it's also getting others off the fence."
"Strong activity along the I-5 and I-90 corridors outside of the Seattle area continues with strong double-digit price increases being recorded," noted James Young, director of the Washington Center for Real Estate Research at the University of Washington. He expects strong demand and a search for value outside of Seattle will continue to push up values.
Last month's prices were up nearly 14.9% from a year ago, climbing from $483,250 to $555,000. Five counties reported price gains of 30% or more, led by Okanogan at 46.3%. Other counties with price increases of at least 30% were Chelan, Kittitas, Pacific, and San Juan.
Condominium prices surged nearly 21% area-wide, rising from $359,950 to $435,000, while the number of new listings, active listings, pending sales and closed sales all declined from the same month last year.
Young said the combined price trend and activity levels suggest suburban growth should continue for a while longer as households seek lower costs and a more home-based lifestyle.
"The market is crazy," exclaimed Dick Beeson, managing broker at RE/MAX Northwest Realtors. "We've been experiencing huge increases in median sales prices and a continued lowering of the number of days homes are on the market. The massive reduction in inventory has led to fewer pending sales and super-charged prices. Many properties have literally gained 40%-to-50% appreciation in just the last two years or so - a rate of increase no one can comfortably live with."
Kitsap County was one of the few areas with YOY gains in new listings (up 22.3%) and only single-digit changes in active listings (-6.4%), pending sales (+8.4%) and closed sales (-2.14%). However, like nearly all the counties in the MLS report, prices jumped by double digits (up 20.8%).
"New construction in Kitsap County is roaring ahead to meet buyer and renter demands," stated NWMLS director Frank Leach, broker/owner at RE/MAX Platinum Services. "We are seeing unprecedented construction in all areas of the county in both the residential and commercial arenas. There are more than 670 rental units currently being built in Bremerton and Silverdale alone and building permit activity at the county is at an all-time high at 3,321 units."
Leach said available inventory is being snatched up quickly in a rush to take advantage of low interest rates. He also said they are not expecting a flood of inventory coming from foreclosures in part because of the 12%-to-18% increase in equity over the last 12 months. "Forbearance across the U.S. is below 800,000 units, down from over 4.5 million in 2020," he noted, citing several sources.
Despite the slow start in sales and persistent shortages of inventory, the MLS brokers expect robust activity during 2022.
"The market dipped slightly in January, mainly due to weather and concerns over the latest pandemic variant, but the general feeling is that it's going to be a good year," said John Deely, executive vice president of operations at Coldwell Banker Bain. Commenting on last year's record-setting volume of closings, he believes "rate increases during 2022 combined with the sunset of the pandemic will bring more sellers to the market."
"People waiting longer to sell their home should not expect the same steep price increases we were seeing in 2021," Deely said, adding, "An influx of people coming to the market and a decrease in the buyer pool due to interest rates going up should help to keep prices level."
Dean Rebhuhn, owner of Village Homes and Properties, said rising mortgage rates and the addition of inventory as spring arrives should bring more opportunities for buyers. "I see no buyer hesitation caused by rising interest rates," he commented, adding, "Many buyers are considering homes farther north, south and east with more affordable prices and more selection. Hybrid work-from-home conditions are allowing more flexibility for buyers. Job demand and lifestyle choices continue to drive sales."
Also commenting on the outlook for 2022 was economist Gardner. "One of the biggest questions for 2022 is how the market will be further impacted by the work-from-home paradigm given that many companies have postponed their long-term WFH plans. This is likely holding back sellers during a time when we desperately need additional inventory, as well as buyers who are concerned about rising mortgage rates."
Gardner said he expects more sellers will list their homes and more buyers will start their searches once they know how often they need to commute to work, and this may lead to a busier spring market than expected.
Beeson believes there will not be any substantive market changes, come spring, "except for higher interest rates. That may be. But someone please explain that to a desperate buyer willing to pay more, accept less, and be glad they did."
Leach is optimistic of upticks in activity, dismissing suggestions of a "bubble," saying "We don't see that happening in Kitsap or in the Pacific Northwest." He also advises against postponing purchasing. "If you think you are saving money by waiting, you should run the numbers. Economists and pundits in real estate all say buy now. The anticipated increase in equity across the next two-to-four years will be astonishing."