The last few years have really been emotionally draining (or exciting?) for sellers throughout Grays Harbor. Having suffered depressed values for far too long, since the crash of 2007-2008, we only started to see upticks in value ~2015 and on. 

 

In 2019, and especially 2020 and 2021, Grays Harbor real estate saw massive increases in value seemingly overnight. The reality was that the GH market was just catching up to where it should have been 2-3 years prior AND THEN we experienced “COVID real estate” on top of that. All markets throughout WA (and the US, really) experienced “COVID real estate” – an unofficial way to describe the large scale appreciation, multiple offer situations, waived inspections and more fueled by folks working remotely on the heels of COVID. 

 

mid/late 2021 was by far the most lucrative time for an owner to sell in GH history. 

 

Since then, the GH real estate market has largely stagnated, even gone down in some key areas. 2022 was the year of stagnation after the height of 2021. We didn’t see much change this year, but the market overall cooled down (didn’t sell quite as fast). Early 2023 and on has had a different experience. 

 

End of 2022 and early 2023, buyers were suddenly faced with spiking interest rates. While buyers in the 2019-2022 time frame could get interest rates sub 4% (and many below 3%), those days were quickly gone and buyers were welcomed by 7%+ interest rates. 

 

The real estate market, for better or worse, is directly tied to interest rates. The cost of money, that is. If a buyer’s affordability in 2021 was 400k at 4% interest, their affordability in late 2022 with 7% interest quickly dropped to sub 300k. 

 

What happens when buyers’ affordability drops? Correct, prices drop. Well, sort of and it isn’t automatic. 

 

What actually happens is the compression of the real estate market. Let’s say there are 100 buyers. In the “old market” of lower rates, let’s say that 50 were approved up to 250k, 25 up to 350k, 10 up to 400k, 10 up to 450k and 5 up to 500k. 

 

With interest rates practically doubling, thankfully affordability didn’t reduce by ½ BUT it did compress. With those same 100 buyers, what we saw (and would see moving forward – either in reverse if rates go down or even worse if they go up) is that their affordability shrunk, thereby compressing the overall market. 

 

The first 50 buyers now could only get approved for 200k, the next 25 up to 275k, the next 10 325k, next 10 375k and the final 5 maybe 400k. 

 

So, in that exact moment what you had was buyers whose money did not go as far as it used to. The dream house (at then-current pricing) was unattainable and the market compressed, forcing those buyers to buy the then-priced houses at 200k, 275k, etc instead of 50-75k higher. At first, buyers either paused buying or bought the cheaper house, but eventually the upper houses had to reduce their prices to “catch up” to the buyer’s affordability, and that, my friends, is how the market ultimately responds to the lowering in demand caused by the rise of interest rates.

 

In owning real estate, time is on your side. Sure, buying at a higher price and/or higher interest rate can make your payments much larger than you want – at least at first – but by controlling (aka owning) the real estate you can do several things:

If rates go up or stay the same, inventory is slightly in the seller’s favor (aka low) now. If rates go up, housing will take longer to sell, more inventory will be available and therefore you will sell for less.

 

As noted above, interest rates greatly affect supply and demand. While rates are higher than they were, supply is still in favor of seller’s (aka more demand than supply) – unless you own land in Ocean Shores. That’s over-supplied, unfortunately.

 

Good weather, summer, school ending – all of that contribute to the historically “hottest time of year” to sell – aka now. Approximately ⅓ of the year’s sales volume will happen in the next 3 months. The sun’s out – let’s get that sign out in the yard!