South Sound Housing Market Update and What This Means for You

Current Real Estate Market Update

“The market is crazy right now,” seems to be the first thing out of someone’s mouth whenever someone mentions the current housing market. It’s true-- the median home price in Gig Harbor is up 34% from this time last year. Many homes are flying off the market with multiple offers within 3-4 days. There are a few factors that are fueling this frenzy: 

• Low inventory. In 2020, many sellers postponed selling their house. Whether it was because of job uncertainty, concerns about the virus, or economic volatility, many sellers put off listing their home on the market. In fact, on Jan 31, there were only 17 active listings in the Gig Harbor area - a 59% decrease in home inventory compared to Jan 31 of last year. A low supply of homes coupled with high buyer demand has sent home prices skyrocketing. 

  
  

• Low interest rates equate to more affordability, and have opened the door for many first-time buyers and upsizers. In fact, in a recent survey by realtor.com, more than two-thirds of homebuyers were surprised by how much they could afford --largely due to low interest rates. Interest rates, though still very low, have risen to 3.12% for a 30-year-fixed according to NerdWallet. Only a month ago, the rate was right around 2.81%. The rate increase has put some pressure on buyers--who have already locked in a record-low interest rate--to find a home before their rate expires (typically around 30 to 60 days).

  
  

• Employers have given more work-from-home flexibility to their employees. Because of this, many families are craving more space and are anxious to upsize to a larger house that can offer an additional room for a home office. Work-from-home Seattlites and other former city dwellers are also flocking to the South Sound, as they can trade their condo for a 4-bedroom home with a backyard for the same $800k price tag. 

Are We in a Bubble?

If these numbers are bringing flashbacks of the 2005-2007 era, you are not alone. Many people are wondering if we are in a housing market bubble with a 2008-like housing market crash looming on the horizon. Though it is impossible to predict with certainty what the market will do next, the data is showing that today’s housing market is starkly different from the market in 2010. 

With heavy regulations for banks in regards to home borrowing, homeowners are in a much better financial state compared to the “creative financing” days of the early 2000’s for unqualified buyers. I would be surprised if we saw a wave of foreclosures like we did in 2009. Homeowners who are cash-strapped today are in a far better position now to sell their homes than they were in 2008. A recent study by ATTOM showed that 41% of Washington homeowners have more than 50% equity in their homes. During the 2008 recession, many people were underwater in their homes, owing more to the bank than what their home was worth. Lawrence Yun, Chief Economist at NAR said, “Given the huge price gains recently, I don’t think many homes will have to go to foreclosure…I think homes will just be sold, and there will be cash left over for the seller, even in a distressed situation. So that’s a bit of a silver lining in that we don’t expect a massive sale of distressed properties.”

In 2009, a huge influx of home inventory caused home prices to tumble. The chart below, published by the Northwest MLS, shows just how low inventory is right now compared to 2010. 

If prices were to drop significantly like they did in 2010, we would need to see a flood of homes hit the market. While I think that inventory will start to increase in coming months, I don’t think we will be seeing inventory levels rise anywhere near 2010 levels because there are fewer distressed homeowners. According to Black Knight, a mortgage data research company, Washington currently has the 2nd lowest mortgage forbearance rate in the country, with only 3.7% of Washington homeowners being delinquent on their payments. Also, with the foreclosure moratorium extended until the end of June this year, this gives financially stressed homeowners more time to make up their payments. 

What Does This Mean for Sellers?

If you have been thinking about selling your house, now could be a great time to list. A housing shortage means less homes to compete with, which could mean more showings on your house and possibly higher offer prices. As more people get their COVID vaccine, though, we will likely see an increase in home listings as sellers become more comfortable with the idea of potential buyers walking through their house. We may also see a very slight increase in inventory as we near the foreclosure moratorium expiration date of June 31. Buyer activity may also slow in the later half of the year if mortgage rates continue to rise in response to growing inflation and Treasury rates.

Thinking about listing or just curious about the value of your home? Feel free to shoot me an email or give me a call to schedule a listing consultation and/or home valuation. I promise you won’t be pressured into listing your home, but you will take away with you more information about your home’s worth and what to expect in the selling process. You can also click here for an instant home estimate. 

What Does This Mean for Buyers?

The good news for buyers is that we are likely to see an increase in inventory in the coming months. As more vaccines are distributed, sellers may feel more comfortable listing their homes as the risk of infection subsides and the job market stabilizes in the coming months. While this might not lead to a drastic drop in home prices, I’m hoping this will mean less competition for my buyers. 

Another factor that may come into play for buyer competition is mortgage rates. Rates have been at historic lows since the beginning of the pandemic, but as the economy reopens we might see some increases in mortgage rates in response to inflation. Rates are still really low, though, so I would urge you to lock in a rate now if you can. If you’re ready to start looking at homes, feel free to click here to start browsing homes online. Let me know if any homes catch your eye, and we can schedule a tour. 

The Secret About the South Sound is Out 

Regardless if you are a buyer or seller, keep in mind that this is the South Sound housing market, where demand is insatiable and Tacoma homes are the fastest-selling homes on the market in the nation (see full article here). It’s possible that the high demand for homes in this area will offset the higher mortgage interest rates and rising inventory, and home prices will continue to appreciate. As word gets out about the South Sound, buyer demand will grow along with home prices. Mountain views, more affordable waterfront properties, bigger lot sizes, and amazing community have made the South Sound irresistible to out-of-towners, and I don’t see this trend slowing down anytime soon.

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