What picture comes to mind when we suggest that 2022 was a roller coaster of a year for the Downtown Seattle Condo market.
Here’s what it looked like:
The simplest understand this chart is to think of the light green bars as SUPPLY, and the red line as DEMAND.
In 2022, we saw some pretty wild gyrations of both Supply and Demand.
Remember in the end of December 2021?
- Mortgage interest rates (30 year fixed) were in the low 3% range
- Despite holidays… December 2021 was an active month with 45 Pended sales (that is real-time Buyer Demand). Wow!
As 2022 unfolded, interest rates were on an upward trend some ups and downs along the way, but when the peaks occurred in these cycles in 2022 (for 30 year fixed):
Condo buyers seemingly were willing to go along with the rise of interest rates, to a certain point.
Looking at the red line above, March was the peak of Buyer Demand. As interest rates continued up, Buyer Demand went down. As interest rates continued up, inventory (number of condos on the market for sale) started to pile up.
As inventory went up, and Buyer demand went down, the “Days on the Market” followed suit. Condos were sitting on the market longer, and the average Sale Price to Original Listing Price percentage was falling.
The market advantage was shifting to favor BUYERS.
Why did the market all of the sudden start favoring buyers, despite the higher mortgage rates? Buyers all of the sudden had the advantage because:
There were fewer (other) buyers to compete with,
- Offer prices were not escalating above asking price (as often)
- Buyers were not being pressured to waive all contingencies
- Buyers now had the opportunity to negotiate more on elements of their offers
But what about the higher interest rates?
In addition to the above advantages, some motivated sellers were (and still are) offering buyer- incentives in the form of interest rate buy-downs (credits to decrease buyer’s interest rates).
The smart buyers understood that as the above market factors now favored them, projections of lower interest rates in 2023 would mean the temporary-ness of high interest rates now could be offset with refinancing their loans to lower interest rates in 2023.
After November’s peak mortgage rates in the low 7%’s, rates did in fact start coming down, modestly. By the end of December 2022, 30 year fixed mortgage rates were around 6.4%.
So, how did 2022’s Downtown Seattle condo market stack up against past years? We looked back 15 years to see:
2022 in Summary: (December 2021 / December 2022)
Inventory: + 19%
Buyer Demand: -51%
Interest Rates: +106% (30 yr)
Looking ahead into 2023
It’s probably fair to say that we are all aware of the many factors influencing our current global economy, which have trickle down effects into our local and regional economies:
Global factors:
- War in Ukraine
- Inflation and Interest rates (undeniably linked)
- Looming concerns of a recession
Regional/Local factors:
- Sizable employee layoffs in the tech sector
- Housing affordability
What the economic forecasters who are involved with the real estate industry and the mortgage financial markets seem to be eyeing are:
- When/if inflation continues to ease, when will mortgage interest rates fall?
- If mortgage interest rates do fall, when will that likely happen?, and
- What range will new lows of mortgage interest rates fall into?
Short of our own crystal ball, we have to rely upon the common denominators which keep coming up in conversations:
- Interest rates are expected to fall into the 5%-ish range
- This is likely to occur later in Q2 (they never fall as fast as they go up…it seems)
Here’s what we anticipate on the heels of falling mortgage interest rates coinciding with our annual spring real estate market:
- Buyer demand will go up; in some high-demand areas, exponentially
- Home values will remain relatively constant, except where forced up by competing buyers.
- Most or all of the “Buyer Advantages” above, will evaporate in the face of increased demand for still relatively limited inventory.
- As the aforementioned buyer advantages disappear, hindsight will reveal just how valuable those advantages were to buyers in late 2022 and early 2023.
- Inventory will rise, but modestly, leaving us still behind the supply curve in our local and PNW regional housing market.
For condo Sellers:
For owners thinking of selling their condo in this 2023 spring market, preparation will be key to help your condo look its best online and in person. The best prepared homes/condos, priced strategically, always sell fastest for their greatest value potential.
We recommend Sellers consider:
- Have a Seller’s procured inspection right away to assess what needs repair or replacement.
- Hire a full-time professional condo specialist agent, or appraiser, to help you strategically align with market expectations… for timing, price and presentation.
- Make needed repairs, upgrades, replacements well ahead of time (supply chain issues still are at play)
- Make a list of all updates, replacements and upgrades you will be including in your sale, which can be included in the marketing.
For condo Buyers:
For Buyers thinking of buying a condo in this spring 2023 market, the very best first-step is to consult with a full-time, seasoned mortgage specialist to understand what your current buying power is (get pre-approved), and learn what, if any, factors you can influence now to get approved for a lower interest rate (greater buying power), or specialized loan program (less down payment).
Additionally, for Buyers, we recommend:
- Hold off on any large purchases until after consulting with a full-time full-time, seasoned mortgage specialist (to not sabotage your loan qualifications)
- Meet with a full-time professional condo specialist agent to learn about the full condo purchase process.
- Make a list of all of the “Must-Have” criteria for your condo (e.g.: location, amenities, #bedrooms,#bathrooms, deck/patio/outdoor space, pet needs and permissions, parking, security…) and “Would Like-to-Have” criteria (heating type, finishes, fireplace/s, elevation = ground floor or top floor, corner/end unit, building type concrete/steel, green, net zero…)
For both Buyers and Sellers, again, we have to underscore the huge advantage of being prepared well in advance. As we have seen in the past, when our real estate market heats up, it takes off fast. Being prepared in advance gives you easily a four week advantage on your competition, which can equate into huge financial advantages for both Buyers and Sellers.
We offer free initial Seller and Buyer consultations, which offers the advantage of getting answers to burning questions you already have, and maybe some answers to questions you did not even know to ask. Also… it’s a great opportunity to get a second opinion from another vantage point of experience and expertise.
If we can be of help in your Buying or Selling process, we welcome your call/text/email anytime.
