The lowest inventory on record
The supply of homes for sale is lower than any time on record, suggesting 2022 will be another hot year for real estate values. The problem is an imbalance between supply and demand that has no quick fix. In several cities around the US, local governments are considering less restrictive zoning that would allow more "middle housing" in order to offer affordable housing options not allowed by current zoning laws. These efforts, while worthwhile, will take time.
Meanwhile, buyers are trying to beat rising interest rates and, potentially, higher home prices as we look to spring. All this is taking place in the face of huge losses in the stock market, which had its worst month since March 2020, and significant rate hikes (the 30-year fixed mortgage is averaging 3.55% compared to 2.95% in November).
As Bill McBride writes in nearly every post on his popular blog:
"My view is that if the housing market is slowing, it will show up in inventory (not yet!)."
Early offers
In a seller's market, buyers will use any viable strategy to put a home under contract. Early offers, also known as "bully offers," are rampant in our market. Instead of waiting until the offer review date, buyers are willing to make a higher-than-list-price offer with few or no contingencies in hopes the seller will accept right away rather than waiting 5-7 days before reviewing all offers at once.
This strategy can be successful for buyers who must have a given house (I've used it myself!). Rumor has it this West Seattle home went under contract in just 24 hours because a buyer offered around 40% above the list price. But most sellers will do better by allowing more exposure to their property.
This weekend, I showed a client 5 new listings with offer review dates scheduled for this week and, by this morning, 3 were under contract due to compelling early offers. This is happening everywhere, but is worst in areas that have become more attractive during the pandemic (e.g. 2nd-home markets, suburban areas, rural areas).
This is partly due to the supply-demand imablance and partly because brokers in these communities aren't used to navigating a hot listing! In Seattle, where review dates have been used for years, fewer sellers fall prey to the bully offers because their brokers are more confident about the process--having been through it a time or two!
The 5 homes I showed Saturday AM, updated Monday AM
Stat = status (e.g. active, pending, sold); CDOM = cumulative days on market
The take-away
Sellers: With uncertainty in financial markets and rising interest rates, the selling season is starting early in 2022. If you can, accelerate your listing timeline to capture demand while inventory is low.
Buyers: The coming months will be better. If you can wait until March or April, you're likely to see more new listings and--hopefully--a less frenzied market. But don't get me wrong--it'll be tough out there.
Thanks for reading!
Your pal,
Chad