If you are planning on buying a home in the Olympia, WA area in 2022, you may be wondering:
- Where is the market is going?
- Is it still a good time to buy?
- Is the market going to crash?
Here are my predictions based on the local market along with tips to help you make the most of the 2022 real estate market.
Home Prices in 2022
Why are home prices going up?
- Low supply of homes for sale coupled with high buyer demand for housing
- Low interest rates
- Low unemployment
- COVID creating more virtual jobs where people could live anywhere
- Olympia’s relative affordability
In 2021, home price gains broke records, finishing the year with 20% annual gains on average in the Olympia area. Considering the historic gains averaged about five to six percent annually, this huge gain in home prices was impressive. It’s also unsustainable, in my opinion.
I’m predicting home prices will rise but at a slower pace with gains of eight to ten percent.
With Home Prices This High, Should I Still Consider Buying a Home in 2022?
For many, buying a home is still cheaper than renting a home.
The benefit of buying a home now is interest rates are still very low. Right now, rates are about three percent (for a 30-year loan with 0.7 fees/points).
Western Washington has seen a decade of price gains. In 2011 for Thurston County, the median sales price was just under $225,000. Now ten years later, the median home price is 107% higher at $465,000.
Looking ahead ten years in the future to 2032, I expect home prices to be much higher than they are today, so I believe it is still a very good time to buy especially with the current low interest rates. Although buyers are feeling the price shock of today’s home prices, buyers will be glad they purchased their Olympia-area home now.
What About Rising Interest Rates?
In 2020 and 2021, the national interest rates average for a 30-year loan were respectively 3.1 and 3.0 percent. Freddie Mac predicts 2022 interest rates to rise to an average of 3.5 percent. Fannie Mae predicts 3.3 percent.
Combined with rising prices, this uptick in interest rates could be enough to price some buyers out of the market, although I still do not see this as a huge influence that would significantly slow down the market. But interest rates, inflation, and consumer confidence all play major roles in the real estate market and affect buyer activity, and can affect home prices. If interest rates go up 1/2 percent, I don’t see that stopping most buyers.
Will the Market Shift from a Seller’s Market to a Balanced or Buyer’s Market in 2022?
For 2022, I predict low supply and high demand will continue, keeping the Olympia market strongly rooted in a seller’s market. For the Olympia market to get to a balanced market, the market would need an incredibly tidal wave of listings.
To express this disparity, in looking at November 2021’s numbers, to see a shift in market conditions from a seller’s market to a balanced market, the Olympia market would need to cut in half the number of sales and increase the number of listings over five times. To get to a buyer’s market, the number of listings would need to increase nine times.
New construction was a contributor to our market with listings but for the last several years, our market has not had enough new construction to meet the buyer demand.
Last year, 88% of the listings brought to the market were resale homes. In other words, buyers will be relying heavily on existing homeowners to list their homes.
Will COVID Affect the 2022 Real Estate Market?
In 2020, I thought COVID would shut down the economy and the real estate market. It had the opposite effect. In fact, in 2020, I was the one pumping the brakes while my clients were pushing me to go out and tour homes! I was very concerned about the virus, but I was surprised that my buyers and sellers were not. They wanted to continue with business as usual.
As we are coming up on two full years of the pandemic, I don’t see COVID stopping buyers or sellers unless there are government mandates that shut down business. This is not on the forefront of the minds of buyers or sellers.
What about Supply-Chain Issues and New Construction?
The National Association of Realtors’ Chief Economist, Lawrence Yun forecasts supply chain backlogs will subside. Others believe this is a very optimistic view and it may take much longer to get to pre-pandemic levels.
For new construction, supply chain issues have been a problem with getting building materials (both shortages and delayed deliveries). At the start of 2021, home builders had to deal with surging prices on building materials, particularly much higher lumber costs. (The good news is lumber prices currently have flattened.)
To cover these rising costs, some builders aggressively increased sales prices and/or accepted bidding wars; some stopped sales completely; some builders only released homes for sale when they were less than 60 days from completion, which took out the options for buyers to customize the home or make finish selections; and other builders put buyers on waiting lists.
Buyers certainly were just as frustrated with this new process. Buyers who are looking for new construction would like to at least make finish selections and have the ability to make some customizations and want to be locked into a lot, floor plan, and have a completion date set with a builder. Most builders could not accommodate this in 2021.
Labor shortages were also a problem in 2021. According to the National Association of Home Builders (NAHB), more than 55% of homebuilders surveyed reported a shortage of labor.
Between a shortage and/or delay in getting building materials and a shortage of labor, all of this adds up to delays in home starts and completion dates, and increased costs to buyers and builders.
With demand for new construction not falling off, this increases homebuilders’ backlog of buyers. It’s my opinion buyers of new construction won’t see much easing up in 2022 because of the continued backlog of supply chain issues. Builders will continue to find solutions so don’t fully count out new construction. I am seeing a few more builders doing presales and hopefully that is a trend that will continue.
Will There be an Increase in Foreclosures in 2022?
No, simply because the robust real estate market has helped give most struggling homeowners the ability to easily sell, avoid foreclosure, and even pocket some profit. Also, the forbearance programs put in place during the pandemic have helped homeowners stay in their homes and avoid foreclosure.
In the mid-2000s, Thurston County’s foreclosure filings were 30 to 35 filings per week. By contrast in 2021, there are about 3 filings per week. I would expect the same for 2022.
Some buyers believe foreclosures are their answer for affordable housing. I disagree with this unless the buyer is an investor because 1) a true foreclosure is a property that is auctioned and buyers are expected to have cash in hand and 2) most foreclosures are in disrepair. Unless the buyer has deep pockets to purchase the property with cash and have the funds to make repairs, foreclosures are not for the typical buyer.
I don’t predict a huge influx of other distressed property types like bank-owned sales or short-sales to hit the market in big numbers either.
Tips for Buying a Home in 2022
The good news is mortgage rates are still historically low (but are predicted to rise slightly) and new listings are coming to the market daily. I believe competition amongst buyers will decrease slightly but buyers still need to be prepared to submit their best offer. Here are some tips for succeeding in the 2022 real estate market:
- Use a brokerage site to search homes for sale. Third-party sites like Zillow, Trulia and Realtor.com don’t always list everything that is available for sale and may not have accurate information listed. To make sure you do not miss new listings, use any brokerage site like my site (https://www.francineviola.com), which is a Coldwell Banker site, Redfin, Windermere, etc. (Click here for more on this and my video on the pitfalls of using third-party websites.)
- Know the area where you are buying. I work with many buyers who want to buy a home in the Olympia area but they have never been here before. Plan a trip to tour the different towns and neighborhoods of Thurston County and/or find a temporary rental like an Air B&B to get the know the area and tour homes in person.
- Have your financing in order. Whether you plan to pay cash for your next home or get financing, have your funds ready. For borrowers, being approved by a local, reputable lender will help you win the bidding war. Talk to me for local lender referrals that will put you ahead of other buyers.
- Shorten contingency timelines or remove contingencies altogether. If the boilerplate language for a particular contingency is 10 days, consider shortening that to 5 days, for example.
- Waive non-essential contingencies and submit a streamlined offer. Non-essential contingencies vary with each buyer. What one buyer believes is non-essential is absolutely essential for another, so as your buyer’s agent, we’ll need to discuss your best route. The takeaway here is to submit a clean offer with only your most essential contingencies.
- Get your offer in before the review date. Here in Thurston County, sellers will indicate the date they will review offers but sellers have the right to accept an offer prior to the review date. Submit your offer as soon as you can.
- Submit your highest and best offer; don’t rely on the seller countering your offer. With most sellers receiving multiple offers, they will simply select the best offer without countering. Submit your best offer, including offer price and terms, because you may not have a second chance.
- Understand the seller’s perspective to write a better offer. I’ll contact the listing agent to find out if the seller is looking for specific terms. Some sellers may have a preferred close date and/or move-out date, or maybe they have a pool table that they can’t move and it will stay with the house, for example. If buyers can accommodate the seller with their requests, buyers will have a better chance at an accepted offer.
The good news – what I predict going away in 2022
- Waiving home inspections. Thankfully, sellers are accepting offers with buyers conducting home inspection. In the spring of 2021, buyers did not have a chance at winning the bidding war unless they waived their home inspection contingency. This trend slowly went away as we made our way through the year. I predict we can keep this trend in 2022.
- Cover appraisal shortfalls with cash at closing. I’m 50/50 on this one. Towards the end of 2021, there were fewer offers with the form 22AD – the assurance that buyers would cover a potential appraisal shortfall with cash, guaranteeing to the seller the offer price. This could be that homes were priced more aggressively and buyers ended up offering a lower percentage over the asking price. Or sellers were worried the market was cooling off. But I’m not sure where this trend will go in 2022.
In summary, my forecast for the Olympia 2022 real estate market is:
- Seller’s market will persist throughout 2022
- Home prices will go up 8-10 percent
- Interest rates for a 30-year mortgage will top out at 3.5 percent
- Buyer demand will continue consistently throughout 2022 but surges in listings will ease the competition amongst buyers.
- New construction homes will be a scarce and a challenge for buyers regarding extended build times, higher building costs, and lack of customization and finish selections.
- Real estate contracts and negotiations will continue to be complicated and detailed with many obstacles for buyers. Buyers should have their own representation with an experienced and educated Realtor on their side.
VIDEO: 2022 Real Estate Predictions for Buyers in Olympia, WA
Unless otherwise noted, statistics compiled by Coldwell Banker Evergreen Olympic Realty from NWMLS data. Statistics not published or compiled by NWMLS.
Unless otherwise noted, statistics based on our own proprietary market study. Information and statistics derived from NWMLS.