2022 Real Estate Predictions

Speaker 1: [0:00] Hello, hello, and welcome to another edition of the Awesome in Seattle podcast. This is your host Christian Nossum of the Awesome Nossum Group at Wilson Realty, and today's episode is one of my favorites. It's also one of our most popular, and it is the 2022 Seattle Area Real Estate Predictions episode.

Speaker 2: [0:17] Yeah, it is.

Speaker 1: [0:18] Yeah.

Speaker 3: [0:19] Yeah.

Speaker 1: [0:21] We're gonna be going over- … some national real estate predictions, then we're gonna go into the local Seattle area market predictions for 2022. Uh, we'll talk about home prices, supply, interest rates, and so on. So, um, we're also gonna go over and revisit our predictions from last year to see how close we were, which is always fun. But before we get into that, let me introduce the team. As always, my co-hosts are awesome. They are the, they are the fellow real estate agents here at the Awesome Nossum Group. First up, we have the data guru himself, Mr. Jason Saldarriaga.

Speaker 4: [0:59] Hello, you.

Speaker 1: [1:02] What about us?

Speaker 4: [1:04] Just him.

Speaker 1: [1:05] Just him. Oh, okay. Hi. Uh, we have Les Cutting, the dog whisperer.

Speaker 2: [1:10] Woof, woof, woof. Hello.

Speaker 1: [1:13] We have Reid Watson, a fellow Seattle native.

Speaker 5: [1:17] That's me.

Speaker 1: [1:18] And we have a new, new name to the crew. Um- Melanie Gadabi with- Mel G. Mel G. Whoop-whoop.

Speaker 5: [1:29] Hey. How's it going?

Speaker 1: [1:32] Uh, thank you for joining us on your first podcast. You've been on the team now for a few weeks, but we just- Yeah … haven't had you on the podcast, 'cause we just wanted to, you know, let you ease in a little bit more. But Mel has a few years of real estate experience behind her, um, so we are very, very, very thankful to have her on our team, 'cause it's a, it's a big improvement. I'm excited. So, uh, first off, let's, uh, let's talk about some national stuff. What's going on out there?

Speaker 3: [2:01] So the National Association of Realtors says the median home sales price is expected to rise by 5.7% in 2022. Sounds pretty good.

Speaker 1: [2:15] Yeah.

Speaker 3: [2:15] Fortune.com listed an array of predictions in a recent article. So they had a whole bunch of predictions coming from different places, and those ranged from about 2.9% from Realtor.com to 11% from Zillow. Um, I personally wouldn't trust Zillow's home price predictions- … that much, given how, uh, their whole buying scheme went-

Speaker 1: [2:39] Yeah

Speaker 3: [2:40] this year. But, um, between 2.9 and 11, uh- And

Speaker 1: [2:45] this is still, we're talking national, right?

Speaker 3: [2:47] We're talking national. Absolutely. Okay. So.

Speaker 4: [2:50] That's a close range.

Speaker 3: [2:51] Yeah. I think, I think Zil- Zillow might be an outlier there. Mm. Um, just a guess.

Speaker 4: [2:58] As we talked- I'm predicting 68%. Let's just, like, uh, have, you know-

Speaker 3: [3:00] Yeah.

Speaker 4: [3:00] So from 2.9% to 68.

Speaker 1: [3:05] Um. Someone's gonna be right.

Speaker 3: [3:08] Some- you're bound to be. Mm-hmm. Um, as we talked about in our last episode, the year in review, the CoreLogic Home Price Insight Report showed home prices increased nationwide by 18% from October 2020 to October 2021. So the consensus among experts is that home prices will continue to rise, but not quite at the rate that they did in 2021.

Speaker 2: [3:33] In the year in review episode, I also referenced a New York Time article that reported the s- reported the supply dropped to its lowest level recorded ever in history, uh, in 2021, which was down 23% year over year. We also talked about a lot of factors that go into that statistic. But it's no secret to anyone that's been paying attention to the market that demand was high and supply was low in 2021. This will continue to be the case in 2022, unfortunately. So start planning those strategy sessions with us so we can get you into a house.

Speaker 4: [4:05] Hopefully.

Speaker 2: [4:05] With that being said, Realtor.com predicts the national inventory will increase a bit in 2022- Saying that the number of homes for sale is expected to go up by .3%.

Speaker 4: [4:18] Wow. Wow, .3%. Wowee. That's, yeah, okay, so they're gonna be flat. Thank you, realtor.com, that $10 million study they paid for. Yeah, it, it, uh, that's a huge thing is we n- really need to figure out this inventory issue.

Speaker 5: [4:40] Yeah. Mm-hmm. Yep, it definitely is an issue.

Speaker 4: [4:42] Don't, don't get me started.

Speaker 3: [4:44] You could sell your house, Jason.

Speaker 4: [4:46] Oh, maybe, maybe.

Speaker 5: [4:50] All right, let's talk interest rates, which is a big topic. In 2021, mortgage rates hit a record low of 2.65%, and inflation was the highest it's, it's been in four decades, which is wild. The Fed recently announced that it plans to raise short-term interest rates three times in 2022.

Speaker 1: [5:15] Three times.

Speaker 5: [5:17] Three times. So mortgage rates aren't tied directly to the Fed fund rate, but they do tend to increase at the same time, so they're, they're correlated. Expert predictions differ on how much mortgage interest rates will most likely continue to rise, but the bottom for 2022 is buyers will have access to comparatively low rates. We are starting the year at around 3%, and economists are predicting we will end up between 3.6 and 4%.

Speaker 4: [5:49] Yeah, and if you take a step back and look at where those rates, the 3.6 and 4%, like the predicted rates at the end of the year, what those look like in the grand scheme of things, those are still really low. Um, just not as low as we've seen in the last couple years, which have been historically low.

Speaker 1: [6:07] Mm-hmm.

Speaker 4: [6:08] Right. So yeah, if you look, uh, you know, the '80s we had- 18%. It was, ugh, man

Speaker 1: [6:14] It was insane. Oof. Yeah.

Speaker 4: [6:16] Good old days. In my, in my day. Back in my

Speaker 1: [6:19] day.

Speaker 4: [6:21] Um, anyways, uh, I do wanna mention really quick, so real estate can be something that kind of hedges against inflation. When inflation is high, like it is currently, real estate, um, can make that work in your favor. Especially if you can, uh, buy a rental property, now might be a good time to, to jump on that bandwagon.

Speaker 1: [6:46] Mm-hmm.

Speaker 4: [6:47] As the value of property goes up due to inflation, landlords, potentially you listener, you can charge more for rent. So owning real estate, it's just a, a surefire way to hedge against inflation. You see a lot of people with significant assets, um, allocating a lot towards real estate recently with low interest rates and incre- increasing inflation.

Speaker 1: [7:12] Yep, and they're, they're taking out loans for that real estate. They're not paying cash necessarily. Um, a lot of times they're using those loans, and as inflation increases, the loans, they're staying the same if it's a 30-year fixed loan or a 15-year fixed rate. Um, it's a-

Speaker 4: [7:28] Exactly … Speaker: it's a great way to, uh… It's, it's also kind of what the government does. They have inflation sometimes work against them, or for them I should say, because they are decreasing how much they owe in all their loans that they have. Let's move into the local Seattle area market. What are the experts, quote-unquote, and the media saying about what to expect in the Seattle area real estate market in 2022?

Speaker 3: [7:55] Well, there's always a limited supply of homes in Seattle, because we are on an

Speaker 1: [8:01] Isthmus

Speaker 4: [8:03] An

Speaker 3: [8:03] insulin?

Speaker 1: [8:05] Love it. I was waiting for Jason, but

Speaker 4: [8:06] he didn't jump in. I know.

Speaker 3: [8:07] Jason, the geography or geology major- Geography. Geography … geography major always reminds us that we are on an isthmus, a body, a piece of land surrounded on two sides by a body of water, so it's hard to expand and get that sprawl like they might have in Austin or Phoenix. Yes, I am directly quoting Jason if you are a regular listener- of the

Speaker 2: [8:29] podcast.

Speaker 3: [8:30] And on top of that, people are continually relocating to Seattle a lot of the time for work. So at the same time, more people are working remotely, just by relocating here as well. Uh, they're no longer commuting, and they're looking for more space at a better price, maybe more outdoor space as well. So they're moving to the suburbs, and that trend is definitely predicted to continue in 2022. Inventory in the city and the suburbs is going to continue to be low for the foreseeable future, and the market is just predicted to remain very competitive. Seattle has a track record for being one of the nation's best long-term real estate markets for investment, and with the market as it is, it just seems like that's gonna continue to be the case, which is good news for those who own homes in the Seattle area, and means a good time to buy if you haven't already.

Speaker 1: [9:26] Yep, and if you wanna figure out how to be competitive in this competitive market and get your offer accepted- Strategy session … you need to attend one of our classes. Or just come to one of our classes, beersandhomebuying.com. That's beer, as in the drink, beers, with an S, and homebuying.com.

Speaker 2: [9:42] We're gonna keep up with the shameless plugs throughout this whole episode.

Speaker 1: [9:44] Exactly,

Speaker 2: [9:46] exactly. But to piggyback off of what Reed said, when you look at the Seattle area y- uh, over the last five years, Seattle has consistently outpaced the nation's home prices. From June 2016 to 2021, the national median home price went up 44.9%, and homes in the Seattle area appreciated 68.8%. So over the last five years, Seattle home prices increased almost 25% more than the national average. That includes King County, Pierce County, and Snohomish Counties.

Speaker 1: [10:15] Wow.

Speaker 2: [10:16] Yeah.

Speaker 4: [10:17] In terms of population changes, we've definitely seen some interesting trends, and being kind of at the beginning of a decade, we have a lot of data that is, uh, pretty accurate, because stuff like the census is, uh, more recent than if it was mid-decade. Since 2010, the population of Seattle has grown by, I mean, up to 21% by some calculations, especially if you include 2021. This is kind of crazy, and you can add me to the mix. I moved here in 2010. 21% growth makes Seattle one of the fastest-growing major cities in the US. The few that are- Bigger, um, in terms of that growth would be Orlando and the Texas Triangle, my hometown of Austin being one of those.

Speaker 1: [11:04] Mm-hmm.

Speaker 4: [11:05] And I have a feeling that'll continue, especially looking at what Tesla's doing down there. You know, looking back, the pandemic has affected so much, and real estate is just no different. Pandemic impacted mortgage rates, market dynamics as a whole, where people were buying, uh, our day-to-day job commute. This all relates. And so it's interesting seeing this more recent impact of the pandemic. If you take a step back and look at longer term trends, though, Seattle has been pretty phenomenal for a l- long time. We weathered the last recession really incredibly well, the 2008 Great Recession, and, um, we've seen just year-over-year growth in terms of population and home price appreciation, and there's no It, it's very unlikely, um, that Seattle's gonna cool off anytime soon. Um, and if you look at the, what the experts are saying, they're pretty much in agreement with that.

Speaker 1: [12:10] Yep.

Speaker 5: [12:11] Experts are not predicting a record-breaking year like we saw in 2021, but they agree that home values will continue to consistently increase for both in the city and the suburbs. For the Seattle-Tacoma-Bellevue metro area, Zillow is predicting, and once again Zillow, is predicting- 14.7 appreciation by November 2022. According to realtor.com predictions, home prices in the city of Seattle will, will increase by 7.5% in 2022, putting us in the top 10 cities for home value appreciation, which is wild and incredible.

Speaker 1: [12:49] Mm-hmm, and kind of, kinda where we've been for the last- Yeah … few years, right there in the top 10, if not number one, two, or three. We're, we're right up there in that top 10, so-

Speaker 5: [12:58] Mm-hmm … Speaker: gonna continue that for- It's definitely a trend … another year most likely. Right.

Speaker 1: [13:03] Another trend that seems to be continuing into 2022 is the rise in the construction of ADUs/DADUs. So we've talked about these a lot on this podcast, so if you don't know what a DADU is, definitely check out DADU Issues, one of our first episodes. One of my favorite titles still ever. Well done, Jason. A, an ADU is an accessory dwelling unit, or a DADU a detached accessory dwelling unit. So a DADU is similar to, like, a backyard cottage. That's how most people think of them or call them. And an ADU is kinda like, uh, some call them a mother-in-law apartment or, like, you know, a small apartment within your home. So that trend is continuing to increase, where we're having more and more of those built. A November Realtor Magazine article lists Seattle as one of the top cities where ADUs are rising in popularity, and it's easy to see why people are building attached or detached units. For one thing, it in- it can increase the home value by up to 35%. That's what's happening on a lot of these, or in a lot of these cities. Um, this study on Real- or yeah, Realtor Magazine actually went through and- Looked at everything. Um, Portland, LA, and Seattle were some of the top ADU or DADU, uh, markets for value appreciation. Uh, secondly, if the dwelling is rented out, it creates another source of income. That's what house hacking is. If you wanna know more about that, we have a whole nother episode about that. And finally, it makes the property more desirable when it comes time to sell because you have multiple ways that you can use that property. Just because you have an ADU or another, you know, apartment within your home, doesn't mean that you have to use it as that. It could just be a second kitchen, um, and you still have that guest room or bathroom or whatever else would be in there that you could use if you didn't wanna use it as an apartment. If you wanted to see what was kinda being built in Seattle, a, a great website that you can always check out to look at building permits is called seattleinprogress.com. Uh, we've actually had, back in our old Seattle Real Estate radio days, we interviewed the owner of that, and, uh, it's a pretty cool website. So you can actually just hover over any map icon and see what the actual permits are, what they're actually applying for, what they applied for, not just applying, but also applied and got either denied or approved. Um, and this helps you really get an idea of what is being built in the city or in your neighborhood. Uh, this is only Seattle specific, so if you're outside the city you can't really do much on there. But I was looking at it recently, and it is … You know, you start hovering over some of these icons and seeing what people are applying for, and single family homes with an ADU and a DADU on one single family home lot is a pretty popular construction permit right now in the city, which is very, very interesting. Um, one thing about this, again, we've talked about this a lot, but you are able to potentially sell each of those units off so you don't have to rent them, which is also pretty interesting. All right. So let's get into my favorite part of the show, the Awesome Nossum Group predictions for the Seattle area real estate market for 2022.

Speaker 4: [16:38] And before we do that, let's look back at last year. So if you go back, we have this podcast still posted. Feel free to listen to it if you're interested.

Speaker 1: [16:48] Mm-hmm.

Speaker 4: [16:48] Um, we all, like we will in a bit, predict what home prices will do for the following 12 months. And last year we said we expected 2021 prices To increase in the following ways, uh, amounts. I said, Jason, me, I predicted 7.5%, Les said 8%, and Christian said 9%. We were all a bit low, but if you, uh, look at certain areas of Seattle, I think Seattle proper, especially downtown Seattle, we were very spot on.

Speaker 1: [17:22] Mm-hmm.

Speaker 4: [17:23] Um, Case Shiller, which is a home price index, and it's more about home price versus sales price, that increased about 22% year over year for Seattle. Yeah. We had kind of incredible appreciation. I don't think anybody was predicting it that high. I- if I recall, I didn't listen to it that recently, but I think there were a few predictions at, like, 12 to 15% of a few experts. Mm-hmm. But I don't recall 22 or anything like that.

Speaker 1: [17:55] I don't think

Speaker 4: [17:56] anyone was

Speaker 1: [17:56] expecting what it did, yeah.

Speaker 4: [17:58] That'd be- And if I'm wrong, let us know because-

Speaker 1: [17:59] Yeah, that'd be, that'd be pretty hard for someone to say, "I think 22%." That'd just be like, "What? You're crazy." And then it actually happened, but-

Speaker 4: [18:06] Exactly … Speaker: I highly doubt anyone said that. And I think, uh, something to keep in mind if, if y'all, the listeners, go on Google and look into this, there is a difference between sales price and Home price, right? So sales price, if you look at that data, that can be impacted or that is based directly on what the market is actively selling. Um, and so for example, if inflation is going up, interest rates are historically low, you might see a lot of people with a lot of assets purchase certain types of property. That might end up skewing the results to higher end properties or lower end if they were, as a whole, investing in, you know, one bedroom units of some sort. Whereas an index like Case-Shiller tries to normalize the data to give a broader picture of what prices as a whole, not the market dynamics in terms of sales, just what home prices as a whole in the area are doing.

Speaker 1: [19:06] Well, let's get to it. First, before I do, I'm gonna revisit what Mel said earlier. Realtor.com predicted a 7.5% appreciation in Seattle in 2022. Zillow, everyone's favorite and most accurate of all time, uh, predictor- … of values, has the Seattle/Tacoma/Bellevue metro area at 14.7% increase by November 2022. So team, what are you guys each saying? I'm gonna name you off one at a time. You just spout out your number. You don't have to ex- explain at all, just what are you saying? So we'll start with the numbers guy. Jason, what do you think?

Speaker 4: [19:41] Well, accounting for inflation is gonna make this hard, so we're not going to account… I feel like I'm gonna learn from last year and I'm gonna regret doing this. Let's, I'm gonna say 12%.

Speaker 1: [19:51] 22% from Jason. Got it. 12.

Speaker 4: [19:54] Watch it be 22%.

Speaker 1: [19:58] 12% from Jason. All right. That was much higher than I expected you to say, but good to know. Uh, Les, what do you think?

Speaker 2: [20:04] I'm gonna go with a healthy 11.5%.

Speaker 1: [20:07] Wow. Okay. Price

Speaker 2: [20:09] is right rules.

Speaker 1: [20:11] 12, 12.01%, Bob. Mm-hmm. Mel, what do you think?

Speaker 5: [20:16] I'm gonna go for, think I'm gonna do 12 as well.

Speaker 1: [20:20] Wow. Everyone's betting on this market still. Reid, what do you think?

Speaker 3: [20:25] 10%.

Speaker 1: [20:26] Ooh. All right. Well, I guess I'm the last one.

Speaker 3: [20:29] Mm-hmm.

Speaker 1: [20:31] I thought you guys were all gonna go slightly lower than that, so this is really surprising to me. I'm gonna stick with the same thing I said last year. I'm gonna stick with 9%. Mm-hmm. I believe it probably is gonna go more than that, but I wanna be right, so I'm gonna go lower than everyone else, so. Yeah. I, I'm, I'm very excited to see. I'm, I, uh, just so any listeners out there, I truly believe this market will go, and I put my money where, where my mouth is, and I bought more than one home this last year, so in the Seattle area. So I fully believe it will continue to appreciate. All right. What do you guys think the hottest or most competitive part of the Seattle metro area is going to be in 2022? We'll go in the same order. Jason?

Speaker 4: [21:12] I think the trends will continue. We, uh, see across the board the market doing well, whether that be condos in the heart of downtown and, uh, estates out in the peripheral. But, um, I think we will see most cost, uh, price appreciation occurring on the peripheral areas. Mm-hmm. That's my- Can you

Speaker 1: [21:37] be more specific?

Speaker 4: [21:38] So you want a specific, uh-

Speaker 1: [21:40] Well-

Speaker 4: [21:40] Yeah … Speaker: it's b- more than peripheral. Yeah. I think- That could be like

Speaker 1: [21:43] anything … yeah.

Speaker 4: [21:44] It would, I'm gonna hedge my bets around where light rail is really popping up. So-

Speaker 1: [21:50] Smart … Speaker 4: um, Lynnwood and, uh, even, uh, we might see Tacoma kind of, uh, catch up a bit, like they did in, um, what was it? 2000, uh, 2020. Yep. Okay. Uh, Les, I believe you were next.

Speaker 2: [22:03] I'm gonna go ahead and say Black Diamond, Maple Valley area.

Speaker 1: [22:07] Ooh. You're probably right.

Speaker 5: [22:08] You're probably

Speaker 1: [22:08] right. That's a good- I think you're- It's a super good guess. Yeah.

Speaker 2: [22:11] Yeah.

Speaker 1: [22:12] I

Speaker 2: [22:12] think you're gonna win.

Speaker 1: [22:13] All right. Mel, what do you think?

Speaker 5: [22:15] I'm gonna stick with the, the east side, so I'm gonna continue to see Redmond, Bellevue, Kirkland-

Speaker 1: [22:22] Mm-hmm … Speaker 5: just grow and appreciate. Yep. Okay. Reid, what do you think?

Speaker 3: [22:27] Ooh, it's tough. Jason kind of already went for the whole light rail area here. Um-

Speaker 1: [22:33] Mm-hmm. I mean, that's a totally solid bet. But absolutely. We've been preaching that for a while, so.

Speaker 3: [22:38] I'm gonna say, I, I mean, similar to what Les said, but yeah, areas like we saw Kent appreciate hugely last year, Newcastle, uh, parts of Issaquah. I'm gonna go for some of those areas.

Speaker 1: [22:52] All right. Those very good guesses as well. None of us know anything, so we're all just going off of our educated guesses here.

Speaker 3: [22:59] Yep.

Speaker 1: [23:00] What am I gonna say? Geez. I honestly don't have a plan here. I'm just gonna go with my gut. Um, so North Seattle in general is always competitive and popular. Uh, the issue is prices are already so high, it's hard for them to go up that much more. But I'm gonna stick with the North Seattle area, just because that's my, uh, that's where I was born and where I live. So I'm gonna stick there- Nice … and hope that's where my investments continue to increase, so. Uh, I'm also gonna add in North Beacon Hill, 'cause I love that area, and I think that'll also just continue.

Speaker 3: [23:36] Oh, yeah. Uh,

Speaker 1: [23:36] because it's just such a good central location. You got the light rail there. You're close to I-5 and I-90. I'm a little surprised no one said West Seattle. Geez, come on, guys. Oh, wait, the bridge still doesn't work. Once that bridge opens up, though, uh, I do see and predict, and I don't know about you guys, but I think that West Seattle area is going to become hot yet again. Yeah. So 2022 might be a good time to start investing there while the market is down a little still. Just as a, uh, heads-up, try and get there before everyone else wants to get there.

Speaker 4: [24:09] And the, well, the other thing is they're having a lot of design discussions around what the light rail route will be.

Speaker 1: [24:15] Mm-hmm.

Speaker 4: [24:16] So for West Seattle and Ballard, so, um-

Speaker 1: [24:18] Yep, pay attention … Speaker 4: that, yep, that is a… You know, we had these discussions for the North Link and whatnot, what, 2010, 2013 or '12, that era, that period. Mm-hmm,

Speaker 4: [24:29] yep. And, uh, you saw a lot of, uh, price fluctuations because of those discussions. People kind of jumped early because they saw where things were headed.

Speaker 1: [24:40] Mm-hmm.

Speaker 4: [24:41] They made a good decision there.

Speaker 1: [24:42] Yep, definitely. All right, well, I think you guys did a great job. Well done. If we had an applause button, I'd be pushing it right now, but we don't. If you want to understand what happened in 2021, just listen back one episode and look at our year in review so you can better understand what happened, which kind of goes hand-in-hand, which, with what we just spoke about today, which is what we think's gonna happen in 2022. So thank you again for joining us on this episode of the Awesome in Seattle podcast. Like we said earlier, if you are at all thinking about buying, heading to our free, no pressure, one-hour-long home buyer class called beersandhomebuying.com. They are in person and virtual. Again, totally free, only an hour. There's zero pressure. If it's in person, there is, uh, definitely drinks available. Um, and if they're virtual, you have to provide your own. Sorry about that, but how it is. So if you ever wanna reach out, you can always schedule a free strategy session with us. This is just where we answer your questions one-on-one, totally private. Again, there's no cost. There's no pressure. We don't make anyone sign a contract to work with us until they decide they want to, so. And as a buyer, we don't actually make you sign a contract, only sellers. So we are, really, we try to make it, uh, as easy and simple to work with us as possible. So that's it for this episode. We'll see you again in two weeks for our next episode. Thanks, everybody. Bye.