As Featured in PSBJ: Tales of a Housing Market Gone Amok

This article originally appeared in Puget Sound Business Journal on June 18, 2021

Today’s housing market is on fire all over the U.S., and Washington is one of the hottest locations.

Qualified buyers are rushing in to make enormous offers way above asking price in a market where inventory is low, prices are high and fewer people want to leave their existing homes. The higher cost of lumber and other building materials equals higher-priced new homes being built — and fewer of them.

While some are saying this situation is a bubble that must burst, Windermere’s Chief Economist Matthew Gardner disagrees.

In a recent op-ed on Inman.com, Gardner says current homeowners are by and large in good, financially stable shape and, according to the most recent Federal Reserve Financial Accounts of the U.S. report, are collectively sitting on more than $21 trillion in equity.

He points to the latest data from Attom Data Solutions indicating that more than 30% of homeowners had at least 50% equity in their homes at the end of last year.

“It’s irrefutable that home prices have been increasing at well above average rates for several years now, and that is cause for concern, but not because of any impending bubble,” he writes.

What concerns him is housing affordability, especially for first-time homebuyers flooding in. He calls it a “wave,” and says “Over the next two years, 9.6 million millennials will turn 30, and Gen Z is close on their heels. Given where prices are today, the question should be: Where will they be able to afford to buy? This, in my opinion, is a far bigger issue than any mythical bubble bursting.”

We interviewed more than 40 brokers, buyers and sellers in four key areas of Western Washington to get an idea of how the markets look in Pierce County, Snohomish County, Seattle and the Eastside, and came up with some solid samplings and stories representative of each of these markets.

PIERCE COUNTY: 'WAIVE THE INSPECTION'

For millennials David and Katje Hopkins, it was a struggle to find their first home and get it “signed, sealed and delivered” in Tacoma’s intense market.

The couple had submitted six or seven offers before finally securing a home.

”One was a house that someone put in the exact same offer, but they made their offer 20 minutes before we did. Those few minutes made the difference,” said Katje, a screener at a surrogacy agency.

The two had been living with parents on Fox Island and were eager to get their own place. They wound up buying in the Proctor area of Tacoma, an up-and-coming neighborhood,

The couple — who offered more than the asking price and the sellers counter-offered — wound up paying $25,000 over the price of the home. They credit their broker, Nick Casanova, for helping them land a place in the frenzied market.

“We had to do things ... like waive the inspection, which feels scary, but Nick held our hand really well through the process,” Katje said.

Windermere Abode broker Anne Jones said it’s not uncommon that homes are snapped up in five days with multiple offers above the asking price.

Clients range from young first-time homebuyers to retirees to people downsizing for cash, buying a piece of waterfront or the lifestyle they want.

“We’ve gone from being the No. 1 foreclosure county in the depth of the recession to one of the hottest markets in the country,” Jones said. “The pressure is not only from King County buyers who have been priced out of that market but also from the Bay Area, Southern California — climate refugees looking for something more temperate or a break from the wildfires.”

Jones said although locals feel intense sticker shock, the influx of inbound residents is because “we still look like a bargain. They’re excited to come here and be able to buy a piece of the dream.”

David equated the process of buying a piece of the dream to running a race.

“That’s really how that felt. But the team that has your back for the homebuying process became so clearly more important than any sort of means of purchasing, whether full cash offer, conventional, FHA or VA loan — that didn’t matter in the end,” he said. “It was clearly more important just what and how willing your team is to just run that race.”

SNOHOMISH COUNTY: 'I'VE NEVER SEEN ANYTHING LIKE THIS'

Brenda Haug is designated broker/owner of Marysville-based New Horizon Realty and has 25 brokers working for her. She has worked in the business for more than three decades.

“I’ve never seen anything like this in my 35 years,” she said, noting that inventory is at an all-time low and, like Tacoma, houses are selling in less than a week with multiple offers made the first day a house goes on the market.

“Ordinarily we don’t review the offers until the fourth or fifth day, but some buyers make such enticing offers, more than $100,000 over asking price, that sellers don’t want to wait if they can sell in a day,” Haug said.

She notes that buyers are flocking north from King County where they can “get more for their money and pay far less in taxes.” She says many others are moving from out of state, particularly from California, some for job opportunities.

Longtime New Horizon Realty broker Tracey Lang cites one Everett home listed at $320,000. Her first-time homebuyers — Ryan and Chelsea Papka, with their two young children — have been looking for a home for seven months. They put in an offer for $380,000, but found they were competing with 41 offers. The home went for $400,000 to a buyer who waived the inspection, offered $50,000 in nonrefundable earnest money and a high down payment.

It’s challenging for first-time buyers to get a foothold anywhere in this market.

Ryan is a manager at a Seattle restaurant. Chelsea is a preschool teacher planning to go back to work at the start of the school year. They live in a rental condo in Everett and are looking for more square footage for their expanding family. They want to stay in Snohomish County where most of their extended family lives.

“We put in $50,000 to 75,000 more than the asking price on one house and we were still in the middle of the pack, which is insane,” Ryan said.

Ryan said they’re going to keep looking. But even though they’ve been approved and are financially set to buy, they are not willing to waive inspections or overpay by much.

“Even if we offer $100,000 more than what we wanted, I’m not very confident at this point that it is going to happen,” he said. “We’re discouraged with the market and it’s not going to get better for a few more years. With a 4-year-old and a 1-year-old in a two-bedroom condo, we don’t want to wait three to five years to make it happen.”

SEATTLE: '$350,000 OVER ASKING'

Dr. Nupur Garg and husband, Ross Axel, who works in tech, started looking for a house at least seven months before they purchased in Magnolia in March.

“It was tough,” Garg said. “We put in three other offers before we got this home, but there would be 12 or more offers on each. Some would go for $350,000 over the asking price.”

The two were not first-time homebuyers, but they had an infant and needed more space.

“Even having that experience buying homes, you had to waive your inspections and make decisions in a matter of minutes, so just to find a home was crazy,” Garg said.

Broker Eleanor Heyrich Payne advised the couple to be meticulous and patient earlier in the year when they were looking.

“Words of advice for a Seattle buyer,” Payne said. “Exercise some patience. Our market is incredibly predictable.”

Payne says the most competitive price points are up to $1 million. But it doesn’t stop there. She said there has been “extraordinary” movement in the $2 million to $2.5 million range, as well, and Magnolia has surpassed Queen Anne as a neighborhood in demand.

Payne relies on historical data that indicates most inventory comes in between May and July.

“There’s more inventory coming and prices will not accelerate,” she said.

EASTSIDE: 'HOW DO YOU EVEN REVIEW THAT MANY OFFERS?'

Broker Moya Skillman of Team Foster with Compass says people have had so much time during the pandemic to reflect on their lives, driving what she calls “a heightened frenzy” of homebuying.

“We have never ever seen a market like this, and it’s nationwide,” Skillman said. “One house in West Bellevue is going to be selling a million dollars over asking price. Buyers automatically offer $300,000 to $700,000 over asking price and are losing the bid anyway.”

Skillman said they’re seeing 20 to 50 offers on one home. “How do you even review that many offers? It’s crazy,” she said. “And there’s a lot of early offers. Agents will come in earlier before the deadline and it’s hard for that seller to say no to all cash, no contingencies and earnest money released right away.”

A couple who asked to remain anonymous used Team Foster to sell their house in the Woodridge neighborhood in Bellevue. He is a contractor and she is a nurse practitioner. The home was built in 1959. They bought the house in 1999 for $259,000 as a fixer-upper and remodeled every inch.

The asking price in January was $985,000. And after 150 showings, 21 offers and five days, the home sold for $400,000 over the asking price. The couple, absolutely thrilled with the results, has moved to Sequim and bought another fixer-upper.

Another couple, Cori Walters and Kristian Erickson, just found a home in Fall City.

She is the executive director of the Issaquah Food and Clothing Bank. He is an IT director at Costco. Both owned properties in Issaquah that they bought when the market was low. They both sold at the right time and were able to look for their dream home in Fall City in February.

“It was stressful.” Walters said. “There were 13 offers. We had to come to the table with a good chunk of earnest money, no contingencies and waived inspections, but we happened to have the best offer — $200,000 over asking price.”

They got 5 acres with a 2,500-square-foot, three-bedroom home with a view, an enormous deck, a horse barn and a pole barn.

“Cori and Kristian are examples of the feeding frenzy. They went from passive lookers to hard-charging buyers in a matter of two or three days. I’ve never seen anything like this,” their broker, Karl Lindor, said.