Housing Market Update: Hottest January on Record
Pending sales posted their first annual decline since June 2020, stalled due to a lack of supply. Early spring has the potential to be even hotter and more volatile: stock-market declines, mortgage-rate increases, and mounting affordability pressures are escalating the sense of urgency for buyers and as a result the limited inventory of homes are seeing their values skyrocket at unheard of rates.
While dwindling housing inventory continues to be a source of frustration across the country, Washington has been hit harder by the housing crisis than any other state, according to a new study by the Washington State Department of Commerce.
Washington ranks last among 50 states in the ratio of housing units to the number of existing households, the EcoNorthwest study revealed. For every household, Washington has roughly a single unit or less of housing. This equates to 1.05 units of housing per single household in King County and 1.04 in Snohomish, compared to the country’s average ratio of 1.14 units.
Consequently, housing has become less affordable. Western Washington is currently adding 55,000 additional people per year who will need housing and there are less than 4,000 total homes available to purchase through the NWMLS system. Housing scarcity will remain a problem as long as demand outpaces supply, and currently there are no signs of significant relief.
Those are just some of the adjectives being thrown about concerning the local Western Washington housing market.
Just two weeks ago we predicted that January would be a competitive month as buyers rush to find a home before mortgage rates climb—and that's exactly what we're seeing.
A quick search online shows many examples. This Kirkland home sold for $500,000 over asking. This house in Bellevue, listed at $1.5 million, sold for $2.4 million— about $900,000 over asking price.
Prices surged last week 16% over 2021, kicking off what could be the most competitive month in housing history.
When is the best time to list/Sell your home in 2022?
While there will always be variables such as quality of upgrades, location, and market conditions such as lack of inventory we are facing a unique situation in 2022.
1) Interest rates are predicted to increase to 3.7% possible by as early as June.
2) Conforming loans also received a huge increase from the 2021 cap of $776,250 up to $891,250. That’s an increase of $115,000 and adds much more buying power early before the interest rate increases.
3) We are also faced with historically low inventory. In fact, inventory has dropped 90% in the past 10 years, and we currently only have a little over 4,000 homes for sale in all of Western Washington with a population of 5.5 million people. Additionally, we are projected to add upwards of 200,000 more people per year for the next 10 years.
All of this creates a perfect storm for listing early in 2022.
- Frustrated buyers with pent up demand seeing projections of homes increasing another 18 to 20% for 2022.
- Increased buying power of $115,000 for conforming loan limits.
- Pressure to buy NOW while rates remain closer to 3%.