The December 2020 real estate market did not slow down for the holidays. In fact, December 2020 had the most sales in the last twenty years of December homes sales.
Normally our summer months are the highest for sales but this late-year activity was spurred by the pause in the spring by the pandemic. This pause pushed what would have been summer sales to the fourth quarter.
Home buyers were hoping that the typical, seasonal lull in December would ease competition but that wasn’t the case this December. Buyers had to continue to compete and write compelling offers.
Low Supply, High Demand
In December 2020, the Olympia real estate market experienced its lowest supply on record of 8.7 days (or 0.29 months supply). We are strongly seated in a seller’s market.
This is remarkable to note because this is the main factor of why home prices are increasing – high demand and very low supply.
What is Absorption Rate?
Absorption Rate is the number of months it would take the sell the existing inventory by taking the number of homes listed for sale divided by the number of sales.
- An absorption rate of less than four months is a seller’s market.
- A balanced market is 4 to 6 months of inventory.
- A buyer’s market is 6 months or more of inventory.
Homes for Sale
The story of 2020 and for December 2020 is the dwindling supply of listings. December 2020 did see an uptick in new listings but those listings were quickly snapped up as demand clearly outpaced supply.
Last December, the market had 550 homes listed for sale; this December, only 136 listings.
(To see all the homes currently listed for sale, be sure to check out my website at www.francineviola.com.)
Olympia WA Home Prices
With the low supply of homes and the high demand from buyers, home prices saw an 11.8 percent gain. This market’s historic gain average about 5.5 percent per year. The trailing 12-month median home price in Thurston County ended the year at $380,000.
What does this market mean for Current Homeowners, Potential Sellers and Active Buyers?
Current Homeowners
Current homeowners are experiencing tremendous gains in equity. Homeowners who purchased just three years ago are, on average, seeing 6-digit gains. (These numbers exclude home sales that had significant remodeling or renovations.)
With low interest rates, homeowners may consider refinancing their current mortgage. There are costs to refinance but for some homeowners, it pencils out and matches their long-term financial and homeownership goals.
Potential Sellers Thinking about Selling
One of the questions I get from homeowners thinking of selling is wondering where they are going to move to in this low inventory market. Some sellers are looking at temporary housing options while others will be contingent upon selling their current home in order to buy their next home.
The good news is in this market, sellers can be more open to accepting contingent offers. Read more and watch my video about the three ways to buy and sell in this market.
Although homes are selling very quickly and sellers are receiving multiple offers, potential sellers can squeeze even more profit out of this market by continuing to prepare their homes for sale by cleaning, decluttering, staging, painting, and taking care of repairs.
Selling during a Pandemic
The pandemic has not slowed down the real estate market except for the dip between April and June this year. COVID has actually increased the desire for people to move as many more have work-from-home options and are looking for a better quality of home and area. No longer are some buyers limited by commuting concerns or finding a home near their workplace.
Usually my buyers will start with the type of home they are looking for – now the first item on their wish list is a home with good internet service.
Our Governor has allowed real estate services to continue as long as Realtors and their clients follow strict protocols such as all parties need to wear masks, all showings are by-appointment-only, no open houses, and virtual meeting are encouraged.
For sellers who are concerned with having their home shown during the pandemic, I have several strategies to make the home selling process a healthy and safe one. Call me and we can discuss your particular situation and concerns.
The common recommendations I give to sellers are to:
- have the home ready for buyers by turning on all the lights (to prevent buyers and their agents from having to touch the light switches),
- have closet doors open (to prevent touching the doorknobs),
- have hand sanitizer by the front door for all to use before entering, and
- have shoe coverings available.
After showings, I recommend my sellers wipe down hard surfaces, doorknobs and cabinet handles after the last showing of the day.
Buyer’s agents will make appointments to not overlap with other showings and will limit their time in the house. As of this writing, no more than six people can be in the home at a showing, inspection or appraisal (per Washington State Governor Inslee’s proclamation).
With more and more people receiving the COVID vaccination, I am hopeful this will reduce some seller’s fears that may have prevented them from listing and selling their home in 2020.
Active Buyers and How to Succeed in Olympia’s Real Estate Market
Thurston County still remains one of the most affordable counties along the I-5 corridor. Low interest rates are helping to absorb the high sales prices. Although the sales prices might be intimidating for some buyers, buyers should focus on their monthly payment, not necessarily the sales price. The low interest rates can extend a buyer’s purchasing power and keep that monthly payment attractive.
For buyers to be better equipped to succeed in this market, here are a few expectations buyers should have:
- Competing with other buyers. Being financially prepared is the most important step in buying a home in today’s market. This means getting approved with a local, reputable lender, submitting your tax returns, pay stubs and the like, and having the lender run your credit.
- Paying over the asking price. This can vary by the property, but sometimes buyers are paying ten to twenty percent over the list price.
- Providing financial proof. Buyers should expect to provide not only a preapproval letter but also proof of funds to the seller for the buyer’s down payment.
- Add more value to the offer. Buyers will be expected to eliminate some contingencies, shorten time periods for other contingencies, have flexibility on the close date, and be able to cover an appraisal shortfall with cash at closing.
With bidding wars, sellers want to be assured the winning buyer can complete the purchase. By having a strong lender, competitive offer and proof of funds, a buyer can be successful and ease any seller’s worries.
Is the Market Going to Crash? Is the Bubble Going to Burst?
See my upcoming full predictions for the 2021 Olympia Real Estate Market here but here are a few thoughts:
- Similar activity and market conditions in 2021 as in 2020.
- Low supply will continue to drive prices upward. The likelihood of inventory increasing, offering buyers more choices and less competition, is slim.
- The Fed has stated interest rates will remain low through 2023, which helps buyers and can also be a driving factor for buying and investing in real estate.
Conclusion
Now more than ever, buyers and sellers will need to rely on their team of professionals (their Realtor, lender, inspector and title and escrow team) to get the facts about the market so they can be successful in the 2021 Olympia real estate market.
Buying and/or selling a home can be stressful simply because you may feel you don’t have all the answers or the RIGHT answers. I educate my clients, offer choices and resolve problems by offering fact-based solutions. My years of experience also comes into play but that doesn’t mean I rely on what has worked in the past will work today. You are unique as each house and each market are unique – I am always learning and evolving so I can best serve you.
P.S. I help my clients stop feeling overwhelmed and uncertain by the demands of their home purchase or sale and start feeling excited, confident and smart about their next move! Call me if I can help you with your next sale or purchase.