Windermere’s Chief Economist Matthew Gardener recently shared his Top 10 Predictions for 2021 during the company’s annual kickoff event. We wanted to add a local spin and share how we’re seeing these trends play out in the Pierce County market:
1. Buyers are fleeing to the ‘burbs... and their wish lists have changed
This has been a prediction since the stay at home order was first put into place, and it’s been interesting to watch the reality play out. Yes, we have seen a significant number of people leaving more crowded urban areas, or multi story condos/apartments, in search of social distance and private outdoor space. There is no denying this. We did not see a mass exodus however, and net migration into Washington state (and Pierce county specifically) is projected to remain significantly higher than projections for new housing units. Overall, we saw a trend towards more second homes in the mountains or coastal areas (hello Lewis county!) and people opting to do temporary moves (say to Palm Springs for a month or two) vs. permanent relocations. We also saw many people taking advantage of their equity and remodeling their existing homes to feel more like an Airbnb (remember the great hot tub shortage of 2020??)
2. US Homes Sales will rise significantly, but price growth will moderate
Prices have skyrocketed in Pierce County vs. one year ago. We’ve seen the impact at every price point and in every city, big and small. Matthew predicts that prices growth will ease in 2021, and honestly we can only hope. He suggests three reasons for this: one, mortgage rates will rise (but not significantly - look for them to stay around 3% in 2021). Affordability may hit a ceiling in some areas. effectively narrowing the demand for new listings. The other interesting factor is an increasing comfort level with relocating to other areas (as in, remote work becomes permanent). We truly wouldn’t be sad to see all three of these predictions come true so that we can bring this market back down to earth and within reach for our local buyers.
3. The Luxury Housing Market will continue to perform well
The South Sound has been a haven for Seattle buyers looking to purchase waterfront properties at a “discounted” price, but the commute often held them back from becoming full time residents. Now that many of those Buyers are enjoying more flexible work from home arrangements, we’re really seeing the impact on the 1M+ market. When you add in relocating buyers from Northern & Southern California, we saw a dramatic uptick in the number of pending sales (324 vs. 190 in January 2020). The days on market for these luxury listings also dropped sharply - from 45 to 16!
4. Worries about forbearance are overblown
Let’s address the elephant in the room. Many people have expressed concern that this latest housing boom is another bubble, ready to pop. Here in Pierce county, we stay leery of this scenario, as many of remember what it was like to be the “foreclosure capitol” of Washington state. However, Matthew says our fears are unfounded -- except perhaps in the softening condo market. We are seeing an increase in inventory, days on market and a decrease in sales price for condos over $500,000 year over year (Jan 2020 vs. Jan 2021). But condos $499,999 and under continue to see strong demand across Pierce County with big drops in homes for sale, days on market and price increasing 9.6% year over year.
For homeowners who have fallen behind on payments, strong price gains have created a scenario where they can either refinance into better terms and/or work with their banks to restructure their loans (add missed payments onto the end of the loan term for example). Perhaps most telling, Gardener notes, was that the number of homes in forbearance was down 43% since its peak in May. The strong housing market has resulted in the Western states having some of the lowest delinquency rates in the nation.
Shall we end on a high note? Matthew also predicts that the economy will pick up in the second half of 2021, and this is a trend we can really get behind. With mass vaccine clinics underway and the move to Phase 2 here in Pierce County, we’re starting to see hope for a return to “normal” -- and most of us can’t wait to visit our favorite restaurants, shops and theaters! We are hopeful that spending will stimulate our local economy.