2021: A Year in Review
Published | Written by Sarah McCormick
2021: A Year in Review
2021 was, in many ways, a year of unprecedented events in Seattle’s real estate market.
For one thing, we saw appreciation rates at levels rarely seen in our region – a 23% year-over-year increase according to Case Schiller’s widely followed index, or a more realistic 11% change based on Zillow’s Home Value index for our city. What made our heads spin, as brokers, was that increase was off an already high base – prices increased to an average of $874,877, up from $788,000 in October 2020 and $468,000 five years earlier in 2015.
The other unique characteristic of our market was an extreme lack of inventory. 'Supply' of homes on the market, defined by the number of listings divided by the rate of home sales, was three weeks. A balanced market would have a supply of four to six months of homes on the market. Maybe the demand side was caused by a COVID-19 related “great reshuffling,” whereby people used the new “work from home” model to move further out from cities, move around the country, or to a home with more space for a home office. Perhaps people hunkered down and chose not to sell, thereby restricting supply while the demand side increased. Whatever it was, it was a great year for sellers and a challenging year for even the most qualified buyers.
That doesn’t mean that everything sold in a week with multiple offers – even in a superheated market, there are homes that come out overpriced, that sit on the market for various reasons – usually because they’re overpriced. The seller saw what the neighbor’s house “escalated” to, and they started their pricing at that peak level and didn’t attract the same audience to their auction. Or sometimes a house just has issues, whether style, maintenance, or location-related, and the pricing isn’t adjusted to reflect those deficiencies. Sometimes there’s an opportunity there for a savvy buyer to take advantage of.
But the rule in 2021 was that we prepared our buyers for battle: Get preapproved for financing so you can offer with no contingencies (“all cash” even if they’re getting a loan), waive all inspections (although a seller getting a “preinspection” is more typical now, so there is some objective insight into the property condition); and then pick your maximum escalation, a la eBay-style. Hopefully when the dust settles your number is the highest and you’re the “winner.” It’s a little scary, but with good market knowledge, expert (RPA) representation, and preparation, buyers can be confident in this approach. We win more of these than we lose.
A question we get a lot in this kind of market is: “Is it a good time to buy??” The answer is: “It depends.” If you want to buy a home here, for the right reasons (e.g. you’re going to stay here for at least a few years, you can reasonably afford to finance the house), the answer is yes. I don’t believe the market in Seattle is going to be like what we went through in 2008. The fundamentals here – the net positive migration, the strength of our local employers, the many reasons to love the PNW – all of those support the idea that demand will continue to support our valuations. The other consideration is that to buy today, you need to qualify for the purchase – with an actual down payment, and a rigorous bank vetting process. That wasn’t the case leading up to the Great Recession when you could get a loan just by stating income, with no money down.
Another factor to consider: although Seattle has gotten more expensive, it’s still cheap compared to some other MSA’s – in fact, we’re only the 23rd most expensive region according to Zillow’s Home Value Index. Similar regions that are more expensive, based on a “typical” home price, are:
For people moving from the Bay Area, the price is HALF of what it is there (in most cases well less than half), plus you get the added bonus of NO state income tax (yes, we MAY have a WA capital gains tax starting in 2022 but that remains to be legislated). So although it’s expensive relative to what we’re used to, Seattle still packs a bang for its real estate buck.
San Jose, CA
San Francisco, CA
Los Angeles-Long Beach-Anaheim, CA
San Diego, CA
Glenwood Springs, CO
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