2022 Year in Review

Christian: [0:00] Hello, hello, and welcome to another episode of the Awesome in Seattle podcast. This is your host Christian Nossum of the Awesome Nossum Group at Wilson Realty Exchange, Inc. And before we get started, just wanna say Happy New Year, everybody.

Reed: [0:12] Happy New Year.

Christian: [0:13] Uh, this is our first episode of the year, and if you've been listening to us at all for the last three years, you know what that means, and that means it's time for our annual year in review episode, where we take a look at what happened in this last year in real estate, both in Seattle and nationally. Uh, we will go over interest rates, home prices, the recession, and how much the market changed over the past year, which was a lot, uh, more than it has since we started this podcast. That is 100% true. It's, it's crazy what has been going on this last, this last six months really, a year to- Mm-hmm … nine months or so. What we won't be covering on this episode are what our predictions are for 2023, and we're not gonna do that because that's our next episode. We do that every year- Mm-hmm … as well, where we all kinda put our minds together and say what we see. And we also, on that episode, we will be kind of going over all of the expert, quote, unquote, uh, predictions as well so that, you know, you can get that all in one spot. You don't have to go read all these articles. We'll just kinda combine them all for you and then give you- Yes … give you our insights as well. So that's for our next one. But before we get started, I need to welcome my amazing cohost, the awesome Reed Watson.

Reed: [1:33] That's me. Hello.

Christian: [1:34] Hello, hello. Thank you for joining me on this one.

Reed: [1:37] Thank you for having me.

Christian: [1:39] All right. So this year was a big one, as we just- Mm-hmm … said, and we really kind of struggled on how to best describe this last year. So I think the easiest way to do it is kind of in chronological order, and really go over the events as they happened throughout the year and what effects they had on the market.

Reed: [2:00] Yep.

Christian: [2:01] So let's just, let's just start with that.

Reed: [2:05] Absolutely. So let's, we're gonna start out with what we're gonna call sort of the pandemic market- Mm-hmm … which was from January through about April, and that's just where the market was incredibly strong, uh, similar to what we've s- been seeing since 2020 when COVID set in. So the market was very strong and competitive January through April. We were seeing multiple offers on homes, in a lot of cases, many, many, many offers on homes.

Christian: [2:33] Yeah.

Reed: [2:33] And supply was less than one month. So, homes stayed on the market for about five days, which would have been most likely far less, but in these competitive situations, many sellers were setting offer review dates, and so that artificially inflated that five-day number just a little bit.

Christian: [2:51] Mm-hmm.

Reed: [2:52] And on average, homes in the Seattle area were going for around 109.3% of the asking price, meaning 9.3% over the asking price on average in March.

Christian: [3:05] Yeah, which is crazy that-

Reed: [3:06] Yeah … Speaker: every house, on average, was selling for 9.3% more than what the- Mm-hmm … asking price was. That's crazy. Yeah, and this is probably one of the craziest statistics that we pulled. Prices in February of 2022, the median price was $755,000, and in March, it was 865,000. With a high in May of 875,000. So that's a huge jump-

Christian: [3:34] Yeah … Reed: from February to March. For one month, the median sale price in Seattle for condos and residential homes went up $110,000. In one month.

Reed: [3:45] Yeah.

Christian: [3:46] Insane

Reed: [3:47] And so crazy. We had that high of 875,000 in May. The national record high didn't happen until June, and that high was $413,800 according to the National Association of Realtors. Yeah. And- So that

Christian: [4:04] was nationally, yeah … Reed: absolutely. And a huge part of why this market was so strong, why we're seeing these price increases, was that interest rates were low. During this January through April period, they were generally in the, in the three percents, which compared to where we are at now, is very low, and that was kind of driving the market to be so competitive. Yep. All right, so the next timeframe that we are going to discuss is kind of the April, May, June timeframe, and that is what we're referring to as the mortgage rate shock timeframe. To stimulate the economy in a crisis and spur employment, the Fed increases the amount of money in circulation by purchasing bonds or lowering interest rates to make debt more appealing, and the Fed did this in a big way to counteract the economic fallout from the pandemic in March 2020. Uh, that's where it lowered interest rates to 0% by purchasing billions of dollars worth of bonds every single month. But when the Fed wants to slow the economy to, for example, fight elevated inflation, it aims to reduce the amount of money in circulation by halting its bond purchases and raising interest rates to make debt a little less appealing. Because the Fed was increasing rates, mortgage rates were also increasing, and mortgage rates were in the threes, like Reed talked about-

Reed: [5:23] Mm-hmm

Christian: [5:23] right before this shift happened. But when in a, within a four-week time period, they increased the most they have in 40 years, and they more than doubled in that four-week timeframe. And the impact on the housing market wasn't immediate, but did start to happen in April. We noticed things not selling as quickly, and this is odd, because traditionally the spring is the most competitive season. So to see a slowdown then was very atypical. As the news spread about rates, buyers began to pull back when they realized that what they used to be able to afford just wasn't true anymore, and we really saw a different market start to take shape in May and June By June, the months of supply was up to 1.4 months supply, and the percentage over the asking price was actually just breaking right at 100%, whereas in May it had been at 107.6%.

Reed: [6:20] Mm-hmm.

Christian: [6:20] So it really started to pull back. Buyers started to, uh, not make as many competitive offers because they didn't necessarily mean to, need to, and, uh, and we definitely started to feel this. And we started writing… So every month on Instagram we show stats.

Reed: [6:38] Mm-hmm.

Christian: [6:39] And we have a little, you know, like, our own opinion on what we're seeing. And in April, I look back at this, and even though the stats weren't showing it yet, we were s- feeling it and seeing it on, on the ground, because the stats are always at least 30 days, sometimes about 60 days behind. And so we were really starting to see this happening in April. Um, and, and we talked about it right there on our Instagram post, so.

Reed: [7:04] Yeah. And then July through October, we really did start to see the market shift due to these higher interest rates, and shift to be at least more in the favor of buyers. So rates just increased so quickly that it really did shock the market, and there weren't as many buyers or sellers July through October. And we saw days on the market go from just six days in July to 14 days in September.

Christian: [7:31] Yeah.

Reed: [7:31] And a lot of, almost all listings sort of dropped that offer review date as well during this, this shift in the market. Median price also went down from 850,000 in July to 800,000 in September with sellers becoming a bit more realistic and just being a little bit more willing to negotiate on price, having seen that the market has, has shifted a little bit out of their favor. Buyers just had way more power than they've had in years, and we were able to do inspection periods, get credits for buyers, keep in contingencies that were needing to be waived during the competitive market, and just have a more buyer-friendly contract, uh, when it came down to the terms of, of the contract. So that was definitely a very noticeable shift, uh, as somebody who works a lot with buyers.

Christian: [8:22] Mm-hmm.

Reed: [8:23] And the amount of transactions was lower than previous years, but since we're still lacking so much supply, it wasn't down all that much, but, but lower than it has been previously in these sort of fall months.

Christian: [8:35] Yep And that kind of brings us to the kinda October to end of the year timeframe. And that's really when things started to even out. That's kinda what we referred to this timeframe as.

Reed: [8:49] Yeah.

Christian: [8:50] Um, in October, November, that's when mortgage rates hit the highest. They were over 7%. Um, they kinda would, you know, they'd jump every single day. They'd move around, and there were a few times where they were definitely over 7%. Um, they also went down into the sixes, but they were generally, like, at least 6.5 to 7% in, you know, October, November.

Reed: [9:14] Mm-hmm.

Christian: [9:15] They started to trickle down even lower by the end of December. Um, but this was really where sellers understood that they needed to be willing to negotiate with buyers. If they wanted to sell their house, they needed to be more open-minded a- and price their house correctly from the get-go. Um, they needed to make the house look as nice as possible, which they always should have been doing, but many sellers- Yeah … were just kind of putting any and everything out there on the market to get it sold. Mm-hmm. And often buyers were overlooking things, and they were willing to pay for that. But that just wasn't the case anymore at this point. The house- Yeah … needed to look good, needed to be priced right in order for it to sell at all. Um, this is where we started to see days on market really tick up, and the median sale price drop to around 800,000.

Reed: [10:08] Yeah.

Christian: [10:09] This was also where lenders started offering interest rate programs, something like the 2-1 buydown, which episode 83 we went super deep, in-depth on this, on what a 2-1 buydown is. I'll give you a super quick synopsis just so you understand what we're talking about so you can kinda wrap your head around what happened at this time. But because interest rates were so high, buyers… M- I mean, when interest rates are higher, your monthly payment is higher. Yeah. And what you can afford is decreased, um, purchase price-wise, like the actual cost, cost of the home. And so lenders started offering programs like a 2-1 temporary rate buydown, and for the first year, the interest rate is decreased by two percentage points. So if it was 7% initially, for that first year it would drop down to 5%, which the monthly payment on a 5% versus a 7% mortgage is drastic. Yeah. Can make $1,000 plus difference. The second year, the interest rate is dropped down by 1%, so if it was, again, 7%, it would drop down that second year to 6%. The reason that people and lenders were doing this is because, uh, the common thought was that interest rates will be lower by the end of kinda 2023. And we just need to buy ourselves some time affordability-wise, monthly payment-wise, until rates do drop, when you can then refinance your loan and get that lower rate, hopefully below 6%, maybe in the 5s. Um, uh, I personally, this, I'm just gonna throw this out there. I don't think in our lifetime we will ever see rates again in the 3s.

Reed: [11:56] Yeah.

Christian: [11:57] I just, th- th- it had never really happened before, and I don't think it's ever really gonna happen again. Mm-hmm. So, um, for anyone that thinks that, you know, you're gonna wait until rates come back down, forget about 3s. If they're in the 4s, that's insane. Mm-hmm. I, I think that's even kinda crazy and maybe far-fetched. I don't really know. Um, I think 5s is, like, very realistic for- Yeah … your, for your interest rate. So, um, to continue this kinda October, November, December timeframe, this is always the slowest time of year no matter what- Mm-hmm … for the Seattle area. I mean, we have four hours of daylight it seems like.

Reed: [12:36] Yeah.

Christian: [12:36] It's rainy, it's snowy, there's ice storms. Like, no one wants to move, and it's the holidays, and if you've decorated at all, you don't wanna move- No … during that timeframe. So generally every single year, this is always the month that has the least number of transactions, and that's really what we saw here as well. So that kinda ended that. So let's kinda go over what happened overall from start to beginning in the Seattle area. So according to Case-Shiller, the year-over-year appreciation for Seattle was 4.5%. That's taking into account that crazy February to March jump of $110,000 of equity in one month.

Reed: [13:20] Mm-hmm.

Christian: [13:23] Uh, but that end with prices kind of coming down from that peak of 875 to ending the year at about 800,000. Mm-hmm. Uh, we still were up about 4.5%. So still not a bad year, especially if you were able to buy, uh, after the market started to normalize a little bit more with the shift. Um, I think those buyers are gonna be sitting pretty, and they're gonna be- Mm-hmm … pretty happy with their, with their purchase. Mortgage rates now are hovering around 6%, give or take. Some days they're, you know, getting closer to that 6.5%. Some days they're in the high fives. Uh, it just kinda depends on what economic news has come out and what's going on with the economy. Uh, months of supply, that's up to 1.6 months of supply. And one funny thing is that when we were looking up these stats, these are very, very similar to what was happening in 2019.

Reed: [14:21] Yeah. And I- Surprisingly so.

Christian: [14:22] Yeah. And I know that seems like a lifetime ago, but that's really, I mean, it's January of 2023 right now. 2019 is, I guess, technically four years, but really, like, just over three years away. That wasn't that long ago. No. And that's the market that we're kind of in right now, is really that- 2019 market. We had a similar number of months of supply of homes available. Homes were selling for a little bit under the asking price, just like they are today. The only difference is then rates were in the 4% range. Now they're in the, you know, high 5, 6% range. Mm-hmm. So that's, that's really the only difference. But to look back and go, oh, well this isn't that abnormal, this isn't that crazy, it was only 2019 when we saw very, very, very similar markets.

Reed: [15:12] Absolutely. So I wanna just close out by talking very briefly about the real estate market nationally to put those Seattle numbers you just gave us into a little bit of perspective. So even though the news is very focused on housing crashes and decreases, nationally home appreciation was still up 6% from a year ago. The median existing home sales price was $379,100 in October, which is up 6.6% from a year ago, but down from the record high of the year, $413,800 in June. And this is all from the National Association of Realtors. So while they did take a dip, we're still up about 6%.

Christian: [15:56] And speaking of headlines that came out even just last week, was from The Seattle Times, and the headline was, "Seattle home prices falling twice as fast as the rest of the US." And I was like, wow, that's an attention-grabbing headline.

Reed: [16:12] Crazy.

Christian: [16:13] Crazy. I don't feel like that's actually happening.

Reed: [16:16] Mm-hmm.

Christian: [16:16] Like, that's not the feeling I'm having at all. And generally, with our boots on the ground and doing this every single day, you'd think I would notice that.

Reed: [16:23] Yeah.

Christian: [16:25] Here's the true numbers. Prices fell 0.5% from September, the fourth consecutive monthly decline for an a seasonally adjusted measure of home prices in 20 large major cities. Seattle dropped 1%.

Reed: [16:40] Ah. Of course.

Christian: [16:43] So the nation in general fell 0.5%, and the headline's not wrong. We did double that all the way to 1%. So-

Reed: [16:55] Look at us go.

Christian: [16:56] Yeah. Whoo. Scary times, guys. They dropped 1% in one month, the slowest month on general on year. Yeah. Um, yeah. So when you see headlines, read the actual article, think about it, use your brain. Uh, these headlines often are somewhat, if not very misleading. Um, so yeah, so just pay attention to that. I guess in general it's been a crazy year. There was a lot of change, and the market made some big shifts this, this year. Um, and, and I know now you're wondering what the heck is gonna happen in 2023. And like I said at the beginning, just wait two weeks from now on Thursday, we are going to Release our annual market predictions for 2023. And again, in that episode, every single year, we always kinda try and find as many expert predictions as possible. We package them all up neatly. We go over them, and then you- we give you our predictions on top of that. So it's kind of the one-stop shop for understanding what the experts are, quote-unquote experts, are, are saying is gonna happen. Um-

Reed: [18:11] That's right. And if you ever have questions, please do reach out to us, either over email or Instagram or wherever you'd like to.

Christian: [18:17] Yeah. Our phone numbers are all on the website as well. Feel free to just- Mm-hmm … text us. Like, we are happy to chat. We do not charge anything to talk with you. Um, we are an open book and, and wanna help you out. So we always have home buyer classes. So if you are thinking if, you know, home buying does make sense, or maybe you wanna dig into these stats a little bit more, we do that in our one-hour-long home buyer classes. They are every month. In January, we actually have two home buyer classes. In February, we have at least one. I think we're potentially doing two in February.

Reed: [18:49] Mm-hmm.

Christian: [18:49] Um, but we have classes all the time. All you have to do is go to beersandhomebuying.com (opens in a new tab). That's beer as in the alcoholic beverage. Beers with an S, and homebuying.com. Uh, the classes are totally free. They're an hour long. We give you free beer. Some of the venues, we include food. And it's l- just a super laid back introduction to understanding the market, understanding how the home buying process works, and most people walk away from that going, "Oh, well…" And we hear this all the time. Like, "Oh, that's… I came in thinking this was all scary, and I was really nervous."

Reed: [19:29] Mm-hmm. " Speaker: I thought maybe this was gonna be like a timeshare presentation." It is not. Yeah. There's nothing like that at all. We just teach for an hour, and by the end, you're gonna have a much clearer idea of what's happening and, and if this even makes sense for you. They're very, very laid back classes, like I said, and, uh, and no pressure whatsoever. So if you are interested, just go to the website. You can always sign up there. Um, and that's it. It was a crazy year. We definitely helped a lot of buyers and sellers navigate throughout this year. Um, we helped numerous sellers really determine what they should do to prep their house and what, more importantly, what not to do- Yeah

Christian: [20:09] uh, to prep their house. We had one seller in particular where, you know, they were thinking of doing a full-on remodel and spending, you know, almost $100,000 on this big remodel, and when we ran the numbers, it didn't make sense. It actually made sense f- Made more financial sense to not do that and instead just do paint and scrape the popcorn ceilings and clean the carpets and come on the market. Yep. And they made more money doing that than spending all that money and time and effort into a big remodel, 'cause they would have at the end of the day netted less money. So- Yeah. Absolutely … l- lean on us for those expert tips and advice. That's what we're here for. Um, and that's it for this year. I am super excited about our predictions episode. Me too. That's always one of the best ones. And Reed, thank you so much for, for joining and sharing your awesome knowledge on the podcast.

Reed: [21:02] Absolutely. Stay tuned for those predictions in two weeks.

Christian: [21:06] Awesome. We'll see you then.