In this episode of the WECU Real Estate Market Update, host Nicolas Longo discusses the current state of the local real estate market. Then, in the “Ask the Expert” segment, Jackie Lira from The Muljat Group shares tips for how to have a strong offer when purchasing a home.
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Market Update Transcript:
Hi, I’m Nicolas and I’m the loan production manager on WECU’s Real Estate team. This is the WECU Real Estate Market Update.
In today’s episode, we’ll give you an update on our local real estate market, then we’ll move into a segment called ask the expert. We’ll hear from Jackie Lira from the Mulijat Group, and she’ll provide tips on how to ensure that you have the most competitive offer. It’s going to be a great episode, so here we go.
First up is our market snapshot. Spring is here, this year’s home buying season is ramping up. Over the last two years, we’ve seen the hottest housing market in our country’s history. In Whatcom and Skagit County, we saw median home prices surge upwards of 20%. This has been driven both by several factors, including demographics, as the large millennial generation reaches its peak home buying years, lack of supply and very favorable lending rates.
We expect 2022 to be another great year in residential real estate with strong buyer demand. However, we don’t anticipate it to be quite as hot as last year. Overall, we think we will see a strong housing market with homes sitting a little bit longer on the market and selling closer to list price, especially for homes in the higher end of the market. Homes at the median or lower end of the market may experience more competition.
There are a couple reasons for this. First, interest rates. As of March, the US had a reported inflation rate of 7.9%. This is the highest it’s been in more than 40 years. It started with inflation in a few specific areas, but it’s since spread to other areas of the economy. The Federal Reserve said at its March meeting that to combat inflation, it will raise the federal funds rate a quarter of a percent and will likely continue to increase it as the year goes on.
Fixed mortgage rates don’t move in lockstep with the federal funds rate, but instead track the yield on the 10 treasury bonds, which is influenced by a variety of factors, including how investors expect the Fed to react to inflation and the secondary market. The secondary market is where investors buy mortgage-backed securities. Most lenders bundle mortgages as they underwrite and sell them in the secondary marketplace to investors. When investor demand is high, mortgage rates tend a little lower. This is how the Fed has helped to keep mortgage rates low.
Since the start of the pandemic, they have purchased billions of dollars of mortgage-backed securities. In March, they slowed purchasing of these assets and they’ve signaled that in the future months they’ll begin reducing the size of their $9 trillion balance sheet. As a result, we expect interest rates to continue to tick higher as the year goes on.
This could dissuade new buyers from hopping into the market, as any increased interest rates makes buying a home more expensive. However, it’s important to point out that even if rates do continue to rise throughout the year, they are still historically low. Even so, for every half a percent an interest rate goes up, it makes homes 5% less affordable.
As interest rates continue to rise, this will cause higher competition for the homes listed in the lower end of the price spectrum. Because when interest rates increase, buyers can’t afford as much, so they’re forced to look at the lower price point. The first-time home buyers range, medium priced homes and below are going to be the most sought after in a rising interest rate environment. We also anticipate the easing of COVID-19 concerns to help increase the housing supply.
During the pandemic, it was theorized is that homeowners were hesitant to list their homes due to uncertainty from both a health and economic perspective. Life getting back to normal could prompt more homeowners to move forward with plans, be it retirement, a new job or a new school district and they’ll list their homes for sale.
Historically, the number of new listings bumps up in March and April, reaching a peak in May and June. Last year, the new listings in Whatcom County went up 16% from February to March, and that trend will likely continue for 2022. If you’re looking to buy a home this home buying season, you’ll want to be as competitive as possible.
To speak about how you’ll have the offers stand out, for our ask the expert segment, we’ll have Jackie Lira from the Mulijat Group.
