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Inside Gig Harbor Housing: It’s now a buyer’s market
Welcome to this corner of real estate in Gig Harbor. I’m Paige Schulte, top real estate agent in Gig Harbor. Wife, mom, philanthropist and founder of Neighborhood Experts Real Estate, a boutique firm that is home to hyperlocal real estate entrepreneurs who obsess over service and stats in their geographic zones of happiness — we are All About Gig Harbor.
What’s up with the current state of housing?
If you listen to the news, it feels like we’ve driven off a cliff with values. Some may have some PTSD if you owned a house, or even just lived through the 2008 housing recession.
Here are some facts: We are in a buyer’s market. It’s a stark change from the days of 2021 through March 2022, when multiple offers flowed and sellers could practically name their price.
As of of Oct. 30, 168 homes were on the market in Gig Harbor (defined as between the Narrows and Purdy bridges), up from approximately 50 in early March of 2022. That was the peak of the market, before interest rates started to race up at the end of March 2022.
The current number of homes on the market on the Key Peninsula (all areas over the Purdy bridge) is 75, up from the lows in the 20s back in quarter 1 of this year.
How do we identify a buyer’s market?
Every week, we look at the ratio of the number of active homes and pending homes (we call this the sales ratio).
A balanced market is a 55% sales ratio, no real advantage to buyer or seller.
In 2021, we were in an extreme sellers market at over 300% sales ratio. Low inventory (approximately 50 homes in Gig Harbor) and historically low interest rates (cheap money) spurred demand. Competition was fierce. Even cash buyers were priced out. This lasted into the second quarter of 2022.
In March, talk of interest rates climbing started to have an effect on demand. We watched the sales ratio fall to 242%, 227%, 202%, 187%. Those ratios are all still incredible sellers’ advantages, as inventory hadn’t started to stack up. BUT the trend line was the indication that demand was cooling.
The run on the banks between January and March 2022 was over and interest rates started to inch up, reducing buyers’ ability to purchase the home they thought they wanted. Buying power changed and some buyers decided to wait it out or were knocked out of the market.
For example, I had a client who purchased a home for $760K in December 2021 and their intent was to purchase a second investment property in late 2022. However, due to the rise in interest rates, their new purchase price would be $600,000 and the rental income for a standard single family rental wouldn’t cover the mortgage payment. This is the power of the interest rate.
By September 2022, the sales ratio fell below 55% and inventory piled up to 176 homes. Finally, by late summer this year, buyers have more options. Rates also increased.
Today we are sitting at 7 to 8% interest rates, up from 3 to 4%. And sales ratios are at 34% in the Gig Harbor market — Strongly favoring buyers.
What does this mean for buyers and sellers?
Advice to buyers from the field
Welcome to your time to shine, negotiate, take your time and do your due diligence. Back to the good ol’ days, except for the sticker shock of the effect of the interest rates on your mortgage. We do expect rates to increase yet again but if you find the product that you LOVE and can afford the monthly payments then it can still be worth buying.
Remember real estate is a long-term investment. We are unlikely to see anything like the past two years any time soon (if ever). And if prices are falling, that means interest rates are rising … the great debate, get the home for less or get a lower rate? Your agent can help you navigate with your lender so you can structure an offer that gives you the best monthly payment for your long term plans.
Pro Tip: Get a great local lender that can walk you through some creative financing that exists right now that the sellers will pay for.
Get a local agent to help you determine how much negotiating power you have. A data-driven agent with local relationships will be able to empower you with information to get you to your dream home.
Inventory is still relatively low. To this point, 10% of homes being sold are STILL getting multiple offers. A hyperlocal neighborhood expert can help you identify a “unicorn” that may defy the current market stats and only be on the market 48 hours instead of the current days on market median of 42 days.
Advice to sellers from the field
Get a local agent to make sure you understand the market for YOUR home. Pricing is very important — are you a unicorn that can push the price? Or is your home in a price range where you have a ton of competition and you want to be just below market value to increase traffic? A local agent who studies the stats can guide you through the details.
In addition, you have more competition and your preparation is more important than ever. You want your marketing to look amazing online. You want to stand out. Ninety-seven percent of buyers use the internet to search for homes online, according to the National Association of Realtors, and 41% start their home search online, making your online presence paramount.
Hire a marketing ninja to make your home shine online and market your home beyond listing on the MLS and putting the sign in the yard. It’s time to prepare for longer days on market, negotiation skills, and casting a wide net to get buyer interest.
Looking farther out
It will get worse before it gets better, but when there is any type of drop in interest rates, buyers will flock and the low inventory issue will still exist. The truth is between 2020 and early 2022, almost all home owners locked in to rates 4% or below. This makes them more likely to hang on to their homes longer, reducing turnover. Builders are still far behind the number of units needed to satisfy the Millennial market looking to purchase a home.
Low inventory is the hedge against extreme falling prices. The media will tell you we have 150% more homes to sell. But when we started from almost nothing, statistics like that become irrelevant. Expect the correction to continue. Serious sellers will enter the market and savvy buyers with great representation will capitalize on the emotion and speculation that exists in this shifting market.
Join us next month as we provide insight into individual price ranges, breaking it down by price category so you know the strength of your micro market in Gig Harbor & the Key Peninsula areas. Knowing the numbers will empower your negotiations so buyers don’t over pay and sellers never leave money on the table.