If you watch the real estate market at all, you already know that housing prices have been going up, up, up. While the Covid-19 pandemic has hurt almost every aspect of our lives, the one thing it hasn't hurt is the housing market.
By Adeline Jazinski, Copyright © 2022, SoundListings.com
On the contrary, over the past two years, home prices have been steadily increasing. According to Zillow, the typical home is worth 32.4% more today than it was in February 2020.
If you manage to sell a house during the uptick in prices, that's awesome! But for people trying to buy a home, the steadily rising prices are a nightmare. A limited inventory of homes for sale combined with skyrocketing prices makes it next to impossible for some families to buy a home. If you are a buyer, you may wonder: when is the next buyer's market?
Factors Affecting the Housing Market
Many factors affect the housing market, and no one has a crystal ball to see which way things will go. Housing trends depend on where people live, where people are moving, how many houses are available, and how many people want to buy them. Here are some of the major factors that can influence the housing market.
Population Migration
It makes sense that where people choose to move has a big impact on the housing market. While migration into the state of Washington has slowed since the onset of the pandemic, it continues at a positive rate, meaning that the overall population is increasing. According to the most recent available data from Washington's
Office of Financial Management, net migration into the state totaled 42,1000 in 2021. Net migration is the number of people moving into the state minus the number of people moving out.
This number means that while some people are leaving the state, there is still an increased demand for housing. As long as more people move to Washington, housing demand and housing prices should stay high.
Location
Of course, not every part of the state experiences the same housing pressures as other areas. Seattle and the greater Puget Sound market are notorious for low supply and high demand, which translates into high housing prices. Redfin reports that as of February 2022, housing prices were up 8.5% compared to the previous year. With homes selling in an average of just six days, it is still a seller's market in Seattle and the surrounding area.
Seattle Times: Many People Are Moving out of Seattle
The Seattle Times reports that many people are moving out of Seattle. Roughly 7% of the city's population left in 2020. Most of these people moved to other parts of Washington, particularly to relatively close cities such as Bellevue and Kirkland. The Covid-19 pandemic can explain this trend, at least in part, because many people are now working remotely and have the flexibility to work from any location. These migration patterns should not drive down home prices, especially since more people moved in from other states for a total population increase.
Interest Rates on the Housing Market
Since most people take out a mortgage when they buy a house, mortgage interest rates have a strong impact on the housing market. As of this writing, both 30-year and 15-year fixed mortgage rates are lower than they were one year ago. Low interest rates make it possible for more people to take out a mortgage and buy a home, which means demand for housing has increased. As long as interest rates remain relatively low, the housing market should remain a seller's market.
Wildfires Affecting the Housing Market
Wildfires may be one factor that will bring on a buyer's market in Washington. Research has shown that wildfires may reduce housing prices in nearby areas. Potential buyers may be spooked out at the prospect of living near a forest that might burn down and take the house with it.
This study found that property values in a town two miles from a major wildfire dropped 15% after the fire destroyed 12,000 acres and ten homes.
On the other hand, housing prices in Napa Valley, Sonoma County, and El Dorado County have continued to soar in spite of drastic wildfires in California. If this trend carries over to western Washington, the Washington housing market may remain strong.
Climate Change and the Affect on the Housing Market
While more and more people are aware of and concerned about climate change, it has yet to significantly affect the housing market. Redfin surveyed homeowners and found that while one in five homeowners believe that climate change has negatively affected their home values, housing prices in areas affected by climate change have not dropped over time.
People have many factors to consider when buying a home. It may be that even people who are hesitant to buy a home in an area prone to wildfires, floods, and extreme temperatures must compromise. Employment opportunities and affordability may push people to buy a home in an area at higher risk even if they have some concerns. Of course, if climate change causes a dramatic increase in natural disasters related to climate change, buyers may become reluctant to purchase homes in these areas and housing prices may eventually drop.
No one knows for sure when the next hot buyer's market will be. Some factors, like mortgage interest rates, are determined by people. Others, like climate change and wildfire, are out of human control. Under current conditions, the housing market will continue to be a seller's market for some time.
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