Last week had a lot of rough financial news from the Federal Reserve Chair Jerome Powell saying rate hikes are coming higher than predicted and more often, the stock market reacting to that news, Silicon Valley Bank and other banks collapsing, and interest rising. You’d think the Olympia real estate market would have come to a halt. It hasn’t and here’s why.
February 2023 Real Estate Market Stats
The 12-month trailing median home prices in February continue to rise, up 7.4% from last February, to $500,000.
Home prices have flattened but then continue their upward trajectory. From August to November last year, home prices hovered around $493,000 and then bumped up to $500,000 for the months of December, January, and February. We predict this trend for the coming year.
Why haven’t home prices dropped?
The reason why home prices haven’t collapsed is because our inventory levels are very low and we have more buyers than sellers. This was very evident in February where we had 337 pending sales and only 221 new listings came to the market. We look at pending activity as those are the buyers snapping up listings. This imbalance of pendings to listings has created a stronger seller’s market.
Thurston County has a 1.38 month supply of homes. This is down from January nearly by a full month of supply. The low supply of homes for sale gives buyers fewer choices and creates competition for the homes that are available for sale, therefore raising sales prices.
Interest rates
Jerome Powell last week announced that the Feds will be raising interest rates at a higher amount and more frequently to get inflation down. Both Democrats and Republicans questioned him on his tactics last week because he essentially said that he is going to get inflation down at any cost. This cost could be with aggressive interest rate hikes, which could prevent buyers from buying and sellers from selling, and people losing their jobs and getting laid off.
What is interesting in our market, this attempt to destroy demand has actually had the opposite effect and has suppressed supply. Sellers are not putting their homes on the market yet we still have brisk buyer demand.
Interest rates are very volatile now. The national average interest rate for a 30-year mortgage loan is up to 6.73%. This is up 6.65% from last week. (As of March 16, 2023, the national average for a 30-year mortgage dropped to 6.6%.)
Buyers are still buying.
If you are not buying a home, then you are looking at renting. Rental rates in Thurston County have gone up over 68% since 2006, and of course, you are paying down someone else’s mortgage and creating wealth for them, not you.
Buyer Competition and Multiple Offers
Some buyers are surprised that they are running into multiple offer situations. They are writing aggressive offers in order to rise above the competition but the terms are still reasonable, unlike last year. Buyers are not having to waive their home inspection contingency and we are not seeing the 22AD come into play – that is the form we used where buyers were guaranteeing a potential low appraisal by bringing more money to the table.
Terms are Reasonable
Terms are still reasonable, which is creating opportunities for buyers. Last year, the bidding wars increased home prices, and this year, if there are bidding wars, they are bidding skirmishes – they are on a smaller scale.
How buyers can capitalize on this market
Buyers can be successful in this market if they have a full understanding of their financial status.
This means working with a local lender.
The reason why you want to use a local lender is simply you will find success.
1) If you are in a competitive situation and you have a lender out of another state, you are not going to win against buyers who are using a local lender. Sellers need assurances and will not take the chance that you are not approved, you are not underwritten, nor gamble if you can financially complete the sale.
2) Local lenders know how to process loans in our area because Washington and Thurston County have some unique requirements.
3) A local lender knows the local agents and the local title and escrow companies. They have to work with all of these folks to close the transaction successfully and on time.
4) A local lender is accountable because they live and work here, they know me because I live and work here, and you will be living here, too. You might run into them at the grocery store so they want to do a great job for you! You are not just a number when you use a local lender.
5) The most important reason is to learn about potential loan programs that can help you. A local lender can take a personalized approach and take the time to learn about your financial status so they can suggest and educate you on different options.
Having your financing in order now puts you in a position to take advantage of the market, no matter what it is doing.
Because inventory levels are low and home choices are not as prolific for buyers, that perfect house may take a while to come on the market. When it does, you need to be ready – not scrambling to figure out your finances. You will miss out on that opportunity if you are not prepared and ready.
You don’t have to be a cash buyer in order to succeed in this market.
Our percentages of cash buyers have remained steady and February was no different. Cash buyers were in the minority last month while over 85% of buyers secured financing. Don’t think that just because you are not a cash buyer, you can’t be successful – you can.
How sellers can capitalize in this market
Olympia area sellers are achieving gains. To get the most this market can give and squeeze the most equity out of your home, I recommend:
Prepare the home for sale.
Even though inventory levels are low and home choices are limited, sellers need to prep their homes for sale because I rarely run into a buyer who says they want a project. 99% of my buyers say they want a home that is move-in ready or has minimal cosmetic updates that are needed.
For example, one comment I hear many times from sellers is that they don’t want to replace worn-out carpet because a buyer would want to choose their own flooring. Yes, but buyers would rather have new flooring of any kind or color versus old, dirty, worn, stained flooring.
In order to get the most this market can give, have a clean, repair-free home where buyers don’t need much imagination to see themselves living there. This will help you not only attract more buyers, but get more money for your home, and you can have a smooth inspection and appraisal process. (I can help you if you need contacts for contractors, handypersons, cleaners, or landscapers to get your home ready.)
Have a pricing strategy.
As a former appraiser and an active buyer’s agent, I know how banks will view your home as well as how buyers will value your home. The market analysis I prepare for you is based on how the market is currently behaving. This assessment is based on past closed sales, pending sales and how quickly those went under contract, analyzing homes that were market-rejected, and looking at the inventory for your kind of home in your location. From here, we’ll discuss a pricing strategy based on your goals. And yes, there is a strategy for each seller that I will recommend so that we can get the most for your home.
Having the home available for showings.
When I’m working as a buyer’s agent, there is nothing more frustrating than when I cannot get an appointment to show the home or when I cannot reach the listing agent. I have several options for my sellers to make showings less stressful yet get the most buyers in to see the home.
Having an offer review date.
This should be coming back into play but I’m seeing sellers and listing agents miss the mark on this. Too many sellers are leaving money on the table by accepting the first offer they receive. I’ve even had sellers cancel scheduled showings because they received an offer on the first day.
Our market is producing multiple offer situations. This buyer competition can yield a higher sales price so have a little patience and give your home at least a few days on the market.
These are just a few tips for buyers and sellers on how you can make opportunities in this market. For a more personalized approach to your buying or selling, contact me today.
VIDEO: February 2023 Real Estate Market Update and the Opportunities for Buyers and Sellers in Olympia, WA
Unless otherwise noted, statistics compiled by Coldwell Banker Evergreen Olympic Realty and/or Francine Viola 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.