What to Expect from the King County Housing Market in 2021

 

After an unpredictable 2020, what does 2021 hold for Seattle and the King County housing market? Expect a competitive but slightly less volatile New Year.

The end of one year and the beginning of a new one is always a time for celebration. Never has that celebration been more anticipated than for the coming year of 2021.

There's little doubt that 2020 won’t be fondly remembered. New vaccines and slowing infection rates give hope to a return to normalcy at some point in the coming months. Considering the tumult of the past 12 months, many people will be seeking not merely a return to normal, but a completely fresh start.

The first place many will start is housing. But what does the future hold for greater Seattle's real estate market? 

Let's explore what to expect from the King County housing market in 2021.

A Seller's Market

Surprisingly enough, one of the few bright spots in 2020 was the nation's housing market.

Although the pandemic wreaked havoc on home buying and selling in April and May — as it did the rest of the country's economy — housing emerged as a shining beacon of hope. But it was anything but conventional.

Thanks in large part to pent-up demand — in April and May, housing activity was virtually non-existent, with no tours, few listings, and even fewer deals — buyers flooded the market in July, snapping up what few suburban homes were available.

As the coronavirus crisis deepened, new home shoppers — those freshly minted work-from-home converts — also began looking for places outside the dense city center. More space and more dedicated spaces were in demand. 

Due to social distancing guidelines and the closing of restaurants, bars, and other places of interest, outlying communities soon became the refuge for those sheltering, working, and learning from home. There were also plenty of fundamental lifestyle-based dynamics at play, including aging millennials having kids and needing extra space for their expanding families.

Historically low interest rates also fueled the push for new housing, especially in the luxury segment. Rising prices were less intimidating if you could pair them with a loan hovering between 2.5% and 2.8%.

This confluence of circumstances led to a tight seller's market. Further complicating the situation, many would-be sellers opted to hold back on listing their homes. Whether due to early concerns about not generating interest in their home or to sellers eventually falling into the competitive buying themselves, inventory was down to historic lows.

For 2021, expect the market to continue to be a favorable one for those willing to list a home. The frenzied buying will prove incredibly lucrative for those selling in Bellevue, Mercer Island, and Sammamish.

But Seattle remains a highly desirable location — far more so than some of its peer cities to the south, such as San Francisco. In fact, amid COVID-19, Seattle and greater King County is proving a desirable area for out-of-state folks to move to.

And locals are staying too, even if they opt not to stay put. Areas such as Queen Anne will prove popular for those who may be ready to leave the denser downtown districts but still want to stay as close as possible once the pandemic is over. 

Ultimately, the local housing situation, especially luxury housing, mirrors that of the nation as a whole. According to a report from Realtor.com, existing home sales for Seattle are expected to increase by 8.9% in the coming year. The sales price is set to see a nearly double-digit increase, up 9.7% for 2021.

If you are curious about the right time to sell your home while also maximizing its value, 2021 may very well be the best time to do so.

A Game Plan for Buyers

First, a little sobering news. The harsh realities of the COVID-19 pandemic that created the current market will linger into 2021. Increased demand coupled with a dearth of inventory means an ultra-competitive market amongst buyers.

Home prices will also continue to rise. Currently, there's little to indicate that a flood of homes will enter the market or that demand will suddenly ease up to pre-COVID conditions. Low interest rates will help some of that (see a few paragraphs below), but don't expect a ton of negotiating power, especially in highly desirable areas.

The good news? 

A return to more predictable windows in which to make a move on a purchase. 

For instance, even though home prices are high, the historically low mortgage rates that carried much of 2020 should continue into the early part of 2021. Greater purchasing power will make those high home prices far easier to stomach. But you don't want to lean on the low mortgage rates lasting forever.

Several outlets are anticipating mortgage rates to inch upward throughout the year. In early November 2020, a 30-year fixed rate could be had for 2.78%. The rate for 15 years was 2.32%, the lowest since the charting of the rates began in 1971.

For 2021, the expectations are for the overall average to hover around 3.1% to 3.3%. The potential is there for rates to end the year at 3.4% or 3.5%. Not disastrous by any means, but the difference is enough to adjust timetables for making a home purchase.

With that data in hand, you can make more informed decisions. You can also plan out your home buying strategy with more confidence versus the "blink, and you'll miss an opportunity" market of the past few months. 

One other consideration for buyers is that if space and location are less of an issue or investment piques your interest, it might be worth your time to explore downtown Seattle. Be it a permanent or part-time residence or full-time income property, you might find reasonably attractive deals. 

The rising home prices mean there will still be plenty of renters in Seattle. If you've longed to enter the investment arena, conditions are favorable.

Make no mistake, there won't be any bargain basement pricing. As mentioned, Seattle remains a highly attractive spot for out-of-staters. But with the focus currently on outlying neighborhoods and suburban communities — and with low interest rates — a few downtown real estate steals will be on offer.

A (Hopeful) Return to Normalcy 

One thing that both buyers and sellers can expect in 2021 is a less feverish game of catch-up that has been the hallmark of the previous five months. Basically, a return to the normal ebbs and flows of the housing market.

As we noted earlier, the outlier that was 2020 slammed the door shut on the typically hot spring and summer buying seasons. Fall and winter took up the slack, but don't expect a similar phenomenon next year.

Barring any unforeseen circumstances (or worse, a repeat of 2020 conditions), the typical market seasonality will return: a strong spring and summer followed by a slow fall and winter. This proves helpful to those attempting to make plans ahead of time. 

Sellers may want to jump on a potentially hot market while interest rates remain attractive for buyers early in the year. Buyers with time and circumstances in their favor might find a greater negotiation position if they put off a move until later in 2021, even if those interest rates do edge a bit higher.

Final Thoughts

However, if 2020 taught us anything, it's to keep your guard up and remain diligent. Whether you're in the market to sell or looking to buy, maintain a close eye on market conditions. 

Recovery from the pandemic may be slow in some sectors and could impact inventory, prices, interest rates, and even demand. Also, non-pandemic related news, such as Boeing's plan to move 787 Dreamliner production to South Carolina, can have a considerable impact on both sub-markets and the local economy as a whole.

That said, should current trajectories hold (high demand, low inventory), housing will help show the way to further economic recovery once we move past the pandemic. If you're a buyer, a seller, an investor, or just taking a wait-and-see approach, a COVID-free Seattle is one market condition we can all appreciate.

Are you interested in buying or selling downtown Seattle real estate? Or are you seeking more information on homes for sale in Bellevue, Queen Anne, or Mercer Island? Contact the team DH Estates today. It would be our pleasure to help you navigate the best of Washington real estate and Seattle's luxury market.