"How's the market?" is a question we're asked all the time. Now more than ever, the answer to this question is critical and detailed. Our market is experiencing a shift, a slowing down of price growth. This is providing great opportunities for both buyers and sellers.
Let's talk about what the slow down in price appreciation means first. What this means is when we get to the end of the year and average the last 12 months of median price and compare it to the previous 12 months of median price, we will still have a positive growth percentage, but that percentage will be lower than it was earlier in the year. You see, we had a very significant bump in prices in Q1 of 2022 that will level off as we complete 2022. Bear in mind that the long-term annual price appreciation rate is closer to 3-6% when comparing the growth that we've had recently.
Let's break this concept down with some numbers. In Snohomish County, in December 2021 (the end of last year) the median price was $700,000 which was an above-average 35% increase from April 2020 (20 months). That means there was a 35% gain from April Median Sale Price 2020 to December 2021 (20 months: $520,000 to $700,000 = 35%) but then a whopping 19% gain in 4 months, from December 2021 to April 2022 (4 months: $700,000 to $830,000 = 19%). This 4-month stretch of price growth is the root of the unsustainability and one that we will be leveling off of during this shift. It is very unlikely that we will return to prices below the December 2021 level, which was at an above-average growth rate of 35% from April 2020. The (unofficial) median price in May sits at $810,000 indicating the shift to settle somewhere between the April peak and where we landed at the end of last year. We must remember that we were celebrating price growth at the end of 2021!
This is where perspective comes in and where pricing can get a little tricky. Coaching potential sellers as to why it would be unrealistic to expect the peak prices of Q1 2022 requires explaining the market factors that have played into this shift. The combination of the lowest inventory levels and lowest interest rates in history that took place in 01 2022 was the perfect storm that created intense price growth over a short period of time. Now we must navigate the new environment as we chart our real estate goals. Three main factors have led to this much-needed tempering in price growth: inventory, interest rates/inflation, and affordability.
INVENTORY
- Snohomish Co 2021 was an extreme seller's market, never crested over 0.6 months of inventory
- Starting to grow, but still a seller's market
- April 2022 there were 1,503 new listings; almost 3x as many as December 2021
- Starting to reduce the number of multiple offers; more selection means prices don't escalate as quickly
INTEREST RATES/INFLATION
- Interest rates have grown over the last 2 years, even more specifically since the 1st of the year
- Start of 2022 we ere hovering around 3%; currently we are hovering around 5%
- 3-4% rates were a dream, but not a long-term reality
- 30-year average interest rate is 7%; where we are today is GREAT!
AFFORDABILITY
- As price appreciation slows & prices level off with the shift in the market, some buyers will be able to reenter the market and secure their wealth-building asset
Supply chain MYTH
It is true that many items for a home remodel have delays and a few are currently not available at all. Look at your local grocery store, home center or department store. You will see empty spaces on the shelves that never used to be there. This is of course due to production delays from COVID, a shortage of factory workers, and the trucking/transportation backlog.
WHY YOU SHOULD NOT CANCEL YOUR PROJECT DUE TO SUPPLY CHAIN ISSUES:
Mostly, we have found wags around this problem. It all comes down to planning. We have found that the earlier products are selected and approved by homeowners, the sooner we can order and get the products underway. We have put a lot of emphasis on early selection, and even have a full-time staff member in this role. She works with you to get your selections and place the orders as soon as you verify that is, in fact, what you want. She also can help find other suppliers or acceptable alternatives should a product simply not be available.
We also have our very own warehouse in Mukilteo where we routinely accumulate products for each project ahead of when they are needed. We also stock some commonly used products such as can lighting, furnace grilles, tile setting and waterproofing components, etc. The goal being that by the time your project is fully developed and permits are in hand, that the products you selected will be at our warehouse. We simply load them into one of our trucks and bring them to the jobsite to get started. THIS IS THE NORTHLIGHT WAY AROUND THE SUPPLY CHAIN MYTH.
