With an eye toward giving home buyers and sellers a jump on the new year, the W Report sat down with a number of local Windermere leaders to get their take on what 2022 has in store for the King County real estate market.
Every expert we spoke to sees the continuation of one major phenomenon of 2021 — not enough housing supply to meet demand. At the same time, there is shared optimism about increased loan limits and new types of homes being added to Seattle’s residential mix. Overall, our experts see opportunities for both buyers and sellers in 2022.
“We’re looking at a robust year, pretty much from the get-go,” says Patrick Chinn, owner of Windermere Real Estate Midtown. “I expect Q1 to pick up right where we left off, as the pent-up buyer demand remains high. Our brokers have sellers prepping their homes now and waiting to list their homes after the holidays.”
Even stagers, Chinn says, are pre-booked for the new year — some into March.
Laura Smith, co-owner and designated broker of Windermere Real Estate Co., also sees buyers lining up to quickly jump into the 2022 market.
“Our mortgage partners are reporting a pretty hefty rise in pre-approvals heading into the new year,” she says, pointing out that a recent increase to the loan limit on conventional mortgages should provide buyers additional hope and momentum. “This is a silver lining in a competitive market,” Smith says.
Most of the experts predict mortgage rates in 2022 will stay low by historical standards, but may begin a slow rise. On the Eastside, Joe Deasy is co-owner and designated broker of Windermere East Inc., where median home prices saw meteoric appreciation in 2021.
Deasy is watching how rates might impact price growth in 2022. “If interest rates go up a half point or more,” he says, “that will impact price appreciation.”
Location, Location, Location Inventory, Inventory, Inventory
The supply and demand equation is the key housing metric on all our experts’ minds.
Joe Deasy is confident that 2021’s inventory shortfall will continue in the year ahead. “We see more of the same: low inventory running up against lots of buyer activity. This should lead to further price appreciation, barring any major rate increases or global upheavals,” he says.
On the Eastside, housing demand continued unabated in 2021 and Deasy predicts this trend will persist in the new year.
“Facebook plans to add 8,700 more employees to Bellevue’s Spring District,” he says, “let alone the ongoing Eastside expansion of Amazon, Google and Microsoft. This job growth will increase the need for housing.”
Laura Smith sees 2022 starting with a challenging supply dynamic. “There’s an increase in pre-approvals, meaning new buyers, heading into the new year. But at the same time title orders, equating to new sellers, are down right now, like a typical December. So already there’s an exacerbation of the demand versus supply imbalance,” she says.
According to Matt Deasy, president and co-owner of Windermere East Inc., there aren’t enough new construction homes in the pipeline to ease the Eastside’s inventory bottleneck. “There are no new Redmond Ridges coming online,” he says, “so momentum is most likely to come primarily from sellers moving to lower priced markets.”
Asked what he’d considered a positive metric for supply dynamics, Matt Deasy replies “I’d be thrilled if the marketplace saw a 10% bump in available inventory.”
Will Up-Zoning Help?
Across the lake in Seattle, Windermere leaders are watching to see if the city’s up-zoning plan will allow not just for greater density, but also for much-needed inventory.
“I’m watching what happens with the condo-izing of city parcels,” says Windermere Mount Baker owner Joe Easterday. “There are quite a few lots that are in the permitting stage for this type of redevelopment, so a lot should start coming out of the ground through this process.”
But how much this will adjust the current low inventory levels remains to be seen. According to Easterday, the story is still unfolding as to how up-zoning single family parcels will impact both the quantity and type of housing stock in Seattle.
“What type of product will be added into the mix?” he asks. “Will it be more townhomes, or smaller cottages, and will it create a greater supply of moderately priced homes?”
Patrick Chinn thinks up-zoning will lead to a “…loosening of the product mix that will improve inventory priced under $1 million. We will start to see more DADUs*, duplexes and attached townhomes constructed on single lots.”
Laura Smith debates how much Seattle’s density plan will benefit supply. “We will need more than 2022 to learn how the city’s up-zoning solves either the inventory crunch or current affordability issues,” she says.
Smith points out that the up-zoning trend may fill a gap for median home shoppers but not necessarily for the average first-time buyer.
“The cost of new construction is going up, so starter prices for new homes, even smaller ones, are high,” she says. “So I don’t really see a pressure release valve with regard to current market dynamics.”
Smith observes that this dynamic — oversized demand meeting too little supply — continues to boost sellers with well-prepared and well-priced homes.
“If you’re thinking of selling, you haven’t missed the bus,” Smith says. “That window for success is still wide open.”
*DADU = Detached Accessory Dwelling Unit
Condo Living Is Looking Up
Our experts see condominiums as one area of potential opportunity in 2022 for King County home shoppers, given lower prices and in Seattle’s case, somewhat higher inventory than the residential market offers. There’s agreement that the condo market took a popularity hit during the pandemic and also that this trend created some opportunity for buyers priced out of or unwilling to compete in the residential market.
“Condo prices stagnated a bit during the first part of the pandemic,” says Patrick Chinn. “Prices have remained close to 2019 levels, which has stimulated demand this year and should continue in 2022.”
Joe Easterday points out that recent sales trends in the Seattle condo market — with 45% year-over-year growth in closed sales through November and the most pending transactions in a single year ever — make it “steady and strong” right now.
“I don’t see that shifting dramatically in the new year,” Easterday says.
Matt Deasy sees the Eastside condo market as an integral part of our local real estate landscape in 2022. “It’s the only price option for a large segment of buyers,” he says.
Deasy also predicts that in the coming year increased Eastside commuter traffic will focus more buyer searches on the urban core neighborhoods where commute times are lower and condos prevail.
But there’s a hitch. Both Matt Deasy and Easterday caution that because condo inventory has fallen dramatically in the past year, 2022 will be starting with a significantly reduced supply. (In the past year the supply of Eastside condos fell from 1.2 months to the current 0.2 months while Seattle’s supply fell from 4.6 months to 1.3 months). As in the residential market, buyers are likely to have to compete for condos in 2022.
Even with this reduced inventory, however, the rising popularity of condos and other developments hints at a new shift in the post-pandemic buyer mindset.
Chinn says that buyers are more optimistic about living in multi-family environments and are ready to interact again. “Uncertainty has left the equation,” he says, “and there are still great buys in that market.”
In need of more real estate insight? Look for a new Windermere Insights article next month. Our experts will explore what home buyers and sellers may need in order to be successful in 2022. In the meantime, the W Report wishes you happy holidays a very happy New Year!