COVID's impact on the housing market
Last March, the world shut down as COVID spread across the globe. For a few weeks, the real estate market shut down, the Dow plummeted over 30% and travel was brought to a halt.
But for those lucky enough to own real estate or stocks, markets went on a tear in the subsequent months. In King County, home prices have risen 11.4% year over year and the stock market is setting new records.
A low supply of homes for sale is driving home prices up, and buyers show no signs (yet) that they're giving up. Even as interest rates tick up from their lows in December, they remain near historic low levels.
From January to February this year, the number of homes for sale in Seattle dropped to just over 500 homes. That's 14.5% fewer than the same time last year and listings almost always increase from January-February! Based on the rate at which homes are selling in Seattle, it would take less than one month to sell every home listed.
On the front lines
Our buyers over these past several months have faced significant competition for homes in every price range. More than 10% of homes are selling prior to their advertised offer review dates, and many homes are receiving 10+ offers. This Mercer Island home priced at $2M sold in under 24 hours--rumor has it the buyer offered $2.6M.
In most bidding wars in Seattle and the Eastside, the winning offer has been stripped of every protection available to the buyer, including waived financing and inspection contingencies that leave the buyer's earnest money at risk if they're unable to obtain a mortgage by the closing date. Though this is an uncommon outcome, it's nevertheless unnerving!
A vicious cycle
So why aren't more homes hitting the market? One major reason is that homeowners who would normally list their homes are afraid to become buyers in this same market.
The winners in this market--for now--are those selling homes in expensive coastal markets like California, Washington and New York, where they can sell for a premium price without having to buy in the same market.
Suburbs and vacation towns have seen an enormous boost in demand since the start of the pandemic, as city amenities shut down and companies adopted long-term remote work policies. Sadly, for many locals, the influx of wealth is driving up prices and making it more difficult to buy homes.
When will it end?
No one seems to know how long this can continue! Some are predicting that the market will cool off later this year once more homes hit the market, rates increase, and buyer fatigue sets in. Others think prices will just continue to increase in areas like Seattle, especially as local businesses and offices start to re-open, and kids go back to school.
Thanks so much for reading!
Best,
Chad
P.S. I joined my friends at Spade and Archer Design Agency to launch season 2 of their podcast. It was my first time on a podcast and it was so fun I'm thinking about starting my own so I can be the one asking the questions!
We talked about launching a real estate career during a recession, what I learned working for 6 years at Redfin, and even mused about what we might do if we stopped selling homes. I hope you'll check it out!