Forecast Report 2022 by Realogics Sotheby's International Realty

202 Nothing Compares issue 1 | rsir.com

Forecast Report A COMPREHENSIVE LOOK AT THE PACIFIC NORTHWEST'S EVER-CHANGING RESIDENTIAL REAL ESTATE LANDSCAPE.

2022 Forecast Report

CONTRIBUTORS Amy Mutal| Principal | Prevail Wealth Management Andrea Savage | VP of Marketing Realogics Sotheby's International Realty Dean Jones | President & CEO

WRITER/EDITOR Alyssa Morrison PHOTOGRAPHERS Chris Fox Cora Brown Rock

Realogics Sotheby's International Realty

Dan DeLong

GeekWire Business Team

Rafael Soldi

Luke Easterly | Regional Vice President Caliber Home Loans Tadashi Shiga | Executive Director, Land Division Realogics Sotheby's International Realty Tiffany Bowie | Architect Malboeuf Bowie Architecture Todd Britsch | Senior Vice President Level Capital LLC

Samuel Owens PROJECT MANAGEMENT Alexia Brown GRAPHIC DESIGN Ryan Lybeck Chris Fox Maddie O'Brien EDITORIAL REVIEW Andrea Savage Jessica Peterson

2 | 2022 Forecast Report

TABLE OF CONTENTS 5

Welcome Letter

A Growth Mindset

Median Sold Price

New Year, New Challenges

Supply Issues

Condo Comeback

A Dozen Articles to Track on Geekwire in 2022

The Advantage

Market Frenzy

Financial Insights and Outlook

Inflation

How to Add Equity to Your Home in 2022

Advising Through Uncharted Waters

Design Trends Inside and Out

Pantone Color of the Year

The Next it Market

Beacon Hill

North Rose Hill

North Tacoma

Edmonds

Kingston

Extraordinary Results Nothing Compares | 3

6 CONVENIENTLY LOCATED OFFICES

Pictured From Top Row, Left to Right: Bainbridge Island Branch, Bellevue Branch, Kirkland Branch, Madison Park Branch, Mercer Island Branch and Downtown Seattle Branch.

rsir.com

4 | 2022 Forecast Report

What's Ahead

f you’re reading Realogics Sotheby’s International Realty’s 2022 Forecast,

you likely already know or have personally encountered the swiftness, the challenges, and the potential the real estate market has offered us over the past two years. 2022 has started with record-low inventory, but what’s to come? Here, we attempt to answer that complex and multifaceted question for you, with the help of experts in their fields who are navigating inflation, 1031 exchanges, supply chain issues, and more. The 300+ global real estate advisors who make up Realogics Sotheby’s International Realty are local experts with worldwide reach. So, after you’ve reviewed what these thought leaders have to say, our experts will be ready to connect to help you achieve your real estate goals in 2022 and beyond. Whether it’s about positioning you to list your home for sale in this historic sellers’ market or preparing you to win a competitive offer, with their in-depth knowledge of the market and insight into the Puget Sound area, you can trust our advisors to provide insight and service that’s as elevated as your standards. And they’ll connect you with whomever you need to make your house a home and help you protect your investment for years to come. Let’s take advantage of this historic year.

Dean Jones

Stacy Jones

President & CEO

Chief People Oﬃcer

Realogics Sotheby’s International Realty

Nothing Compares | 5

A Growth Mindset PUGET SOUND REGIONAL COUNCIL PLANS FOR 5.8 MILLION RESIDENTS BY 2050 AND TRENDS TO WATCH

Written by Dean Jones President & CEO Realogics Sotheby’s International Realty

6 | 2022 Forecast Report

he Seattle Metro Area is poised to recall “The Roaring Twenties” which defined boom cities like New York

and Chicago a century ago. As history repeats itself, a techfueled economic expansion of the region will meet a societal “return to normalcy” following COVID-19, just as American cities did after the 1918 influenza pandemic (the “Spanish Flu"). Meanwhile, meteoric population growth, geographic and urban sprawl limitations, and primed demographics equate to predictable housing trends ahead. It helps, too, that the region remains a relative bargain (for now), compared to other West Coast gateway cities, drawing lifestyle and housing demand from more expensive markets here. Tremendous job growth, especially within the tech industry, has led to a “brain gain” increase of 48,000 migratory employees or a 35.4% increase between 2016 and 2020. That’s more than twice the rate of the San Francisco Bay Area, in part because of greater affordability here, while average Seattle tech wages are only modestly less— $126,730 vs. $144,370, respectively. Tech titans get it, and that is why urban campuses draw talent with high incomes, attainable housing, and no state income tax. Even with the recent imposition of new capital gains tax on restricted stock units (RSUs), adding a 7% burden upon liquidity events, Washington’s moniker as the Evergreen State endures. It's still easier to create wealth and retain it here compared to

Tremendous job growth, especially within the tech industry, has led to a “brain gain” increase of 48,000 migratory employees or a 35.4% increase between 2016 and 2020. That’s more than twice the rate of the San Francisco Bay Area.

California, which has one of the highest combined tax rates in the union and requires a higher overall cost of living in the aptly-named Golden State.

Top: South Lake Union and downtown Seattle Nothing Compares | 7

From a broader perspective between 2010 and 2020, the

Market fundamentals will continue to drive the trends

Puget Sound region grew by 600,000 residents, according

ahead. Data from Oxford Economics points to Seattle

to the most recent census data. Of course, Seattle’s

outperforming national averages in terms of future job

population grew the most, increasing by 128,000, and

growth projections. The five-year forecast is 80% higher

nowhere was this more visually evident than in downtown

at 1.43%, prompting market pundits to predict 7.5% rent

Seattle. As America’s fastest-growing large city during this

growth in 2022, followed by another 5.6% increase in 2023,

period, more than 27,000 multi-family housing units were

according to Costar analysis of Seattle. While it’s true that

delivered within walking distance of one another, yet less

the COVID-19 pandemic (and work-from-home policies),

than 7% of this inventory was built for individual ownership.

political dysfunction, and social unrest reduced downtown

Seattle now has more renters than homeowners for the first

Seattle’s population by 5,000 residents by the end of 2020,

time in a century. And many of those apartment buildings

the city rebooted in 2021 and repopulated with rents now

are incubating future homebuyers.

exceeding pre-pandemic levels. However, groundbreakings

8 | 2022 Forecast Report

HOMEOWNERSHIP DEMAND IS ALSO EXPERIENCING A RENAISSANCE IN DOWNTOWN SEATTLE, IN PART BECAUSE IN-CITY CONDOMINIUMS ARE PERHAPS THE LAST BASTION OF ATTAINABLE HOUSING WHEN THE EMERALD CITY NOW COMMANDS A MEDIAN HOME PRICE OF $859,000 (RISING 7.4% FROM 2020).

of new apartment buildings dropped more than 80% last

in-city office buildings virtually vacant, until recently. Still,

year as the rising cost of construction supply chain issues

there could be a boomerang effect looming ahead as urban

pinches the pipeline for inventory. Hence, the likely supply

job centers repopulate, traffic mounts, and affordability

and demand imbalance ahead and upward pressure on

draws increased housing demand downtown. And as rents,

rents.

incomes, and interest rates rise, more apartment-dwellers

Homeownership demand is also experiencing a renaissance in downtown Seattle, in part because in-city condominiums

will seek homeownership to realize tax benefits and capital appreciation.

are perhaps the last bastion of attainable housing when

In-city market trends also provide a glimpse of what may

the Emerald City now commands a median home price of

be happening in exurban locales over time, especially as

$859,000 (rising 7.4% from 2020). Now it’s true that exurban

regional transportation policies are (finally) delivering

home prices saw far greater gains during the pandemic

global city benefits to a region that, historically, has suffered

considering that sustained work-from-home policies left

from small city planning. The Puget Sound Regional

Right: Rendering of Infinity Shore Club Residences on Alki Beach

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Council understands that “up not out” is the answer to housing, hence the up-zoning or “Manhattanization” of city centers, like downtown Seattle and downtown Bellevue (although there are clear trends for density in suburban areas, too). Certainly, Tacoma has become a renewed target for investment as its affordability and ready-to-go infrastructure resonates with both consumer and developer logic. Many smaller cities like Bothell and Sammamish also have clear plans for densification. Even suburban shopping malls like The Village at Totem Lake or Northgate Mall are being redeveloped with a true urban center “Main Street” concept. These “boom-burbs” of sorts, increasingly compete with the primary city centers while traditional bedroom community prices nudge savvy consumers to consider alternative lifestyles. That includes places like Kingston in Kitsap County, for instance, which benefits from a fast-ferry commuter service to and from downtown Seattle in just 39-minutes, and where the median sales price of a home is about $100,000 less (for now). Demographics will also drive the trends. The millennial generation (born between 1981 and 1996) is the largest such cohort in Seattle and represents 36% of the population, so it’s no surprise that in-city rental demand has been strong. But as “adulting” influences this consumer group and families become a greater focus, the migration to singlefamily neighborhoods recycles homes and allows aging empty-nesters to exit their homes in a sort of silver tsunami. Approximately 12% of Seattle’s population are 65 years old or older and many of whom own homes are exploring downsizing to a condominium for a lock-and-leave lifestyle. Oftentimes, those seeking fewer domestic responsibilities will be cashing in on significant equity gains and resourcing a second home in a destination market and other lifestyle pursuits, like travel and leisure. This will be another trend ahead as millennials and baby boomers are effectively, trading places.

10 | 2022 Forecast Report

A recent RSIR survey revealed how competitive the homebuying market is, especially for preferred single-family neighborhoods. Currently, RSIR brokers are representing 50% more buyers than sellers, and multiple offers are being experienced on more than 80% of transactions. The challenge is low inventory—the four-county region of King, Snohomish, Pierce, and Kitsap reveals total listings are a third of the volumes they were a year ago and more than 60% lower than two years ago. While there are would-be sellers, the prevailing fear is returning to the market as a buyer only to face fierce competition, rising prices, and insecurity that the next home may come with numerous compromises. Building a custom home provides a reasonable solution and presents another increasing trend.The region’s homebuilders are experiencing extraordinary demand as buyers prefer the logic of selecting their lot, designing their home, and controlling the cost and timing of their new residence. The challenge may be finding suitable land that isn’t already so improved, that it becomes unfeasible to demolish an existing home. Homebuilding companies like JayMarc Homes, a client of Realogics Sotheby’s International Realty, have significantly expanded their custom home program to leverage their spec home infrastructure. There are abundant opportunities to source lots in popular submarkets, like Mercer Island, where many residents are in their sunset of life, living in a mid-century home on a sizable lot—perfect for redevelopment while the seller enjoys downsizing. Other lots may be hiding in plain sight, as outlined in a subsequent article about DADU’s (Detached Auxiliary Dwelling Units), where suitable lots throughout Seattle host an additional single-family home without demolishing the existing residence.

Left: Aerial image overlooking Lake Washington

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Urban planning Seattle and Bellevue will continue to follow

Like Manhattan, the Seattle metro area is surrounded by natural barriers and population growth continues at a faster pace than land-use policies evolve. And so, the supply and demand pressures remain, and that’s requiring housing solutions and median home prices of the region to reflect the same trend—it’s going up.

trends observed in Vancouver, BC. This sister city has grown up a little quicker, and it provides development inspiration as it did in the form of the “tall and skinny” and tower spacing policies adopted by the 2006 Center City Plan in downtown Seattle (the catalyst for a booming high-rise development cycle). Not only has much of the SkyTrain rapid transit stops been up-zoned into urban, vertical neighborhoods, but much of the city’s arterial streets have now converted single-family and duplex zoned parcels into a gold rush of land assemblies as three-story townhomes and four-story multi-family flats and mixed-use developments that today, ring the singlefamily neighborhood they now front. Similar pressures are present in Seattle, however, NIMBY (“Not in My Backyard”) activism and voting opposition has limited this result from being as omnipresent as it is up

12 | 2022 Forecast Report

north. It seems more likely that massive up-zoning will

tomorrow” as we measure success six decades later. America

occur in new destinations along with the multi-billion-

was competing with the former Soviet Union in the Space

dollar expansion of Sound Transit 3, as the Seattle metro

Race, spawning Seattle’s Space Needle landmark. Today, the

area’s light rail pushes through more industrial land, such

region is the global capital for cloud computing with Microsoft

as the Bel-Red Corridor, where there are fewer NIMBY’s

and Amazon leading the way (in fact, four of the five most

but rather, progressive stakeholders. An example of

valuable companies in the world have significant operations

such planning is the burgeoning Spring District, east of

in the region). And with job and population growth, space is

downtown Bellevue. As Vancouver’s model has evidenced,

truly the issue.

light rail stations have proven to be very fertile for higherdensity development.

People can’t live in the cloud, and 3D printers can’t produce more land. Like Manhattan, the Seattle metro area is

As the metro grows, solutions for the future housing will

surrounded by natural barriers and population growth

only need to get more creative—much like the tech sector

continues at a faster pace than land-use policies evolve. And

that has spurred such growth needs to use creativity to

so, the supply and demand pressures remain, and that’s

deliver on the future of its industry. Back to the future,

requiring housing solutions and median home prices of the

it’s interesting that the 1962 World’s Fair included exhibits

region to reflect the same trend—it’s going up.

about the way Seattleites may live in the “world of

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W H ATCO M $549,000 ( 23.37%) R ES I D E N T I A L H O M ES

$350,000 ( 25.02%)

SA N J UA N $860,000 ( 26.84%)

CONDOMINIUMS

R ES I D E N T I A L H O M ES

$390,000 ( 30.43%)

S K AG I T $500,000 ( 18.20%)

CONDOMINIUMS

R ES I D E N T I A L H O M ES

$355,000 ( 10.51%)

ISLAND $527,500 ( 20.57%)

CONDOMINIUMS

R ES I D E N T I A L H O M ES

$295,000 ( 25.53%) CONDOMINIUMS

SNOHOMISH $680,000 ( 23.64%)

CLALLAM $415,000 ( 18.57%)

R ES I D E N T I A L H O M ES

$460,000 ( 22.67%)

R ES I D E N T I A L H O M ES

CO N D O M I N I U M S

$320,000 ( 11.99%) CONDOMINIUMS

J E F F E RSO N $560,000 ( 24.11%)

K I TSA P $494,700 ( 18.15%)

R ES I D E N T I A L H O M ES

$442,500 ( 34.09%)

R ES I D E N T I A L H O M ES

$309,900 ( 19.19%)

CONDOMINIUMS

KING $828,111 ( 14.23%) R ES I D E N T I A L H O M ES

$459,000 ( 6.74%) G RAYS H A R B O R $309,950 ( 23.98%)

M AS O N $375,000 ( 19.05%)

$280,000 ( 47.37%)

$444,500 ( 24.34%)

R ES I D E N T I A L H O M ES

CONDOMINIUMS

R ES I D E N T I A L H O M ES

CONDOMINIUMS

P I E RC E $502,500 ( 19.64%)

T H U RSTO N $458,000 ( 20.53%)

R ES I D E N T I A L H O M ES

$344,088 ( 18.65%)

R ES I D E N T I A L H O M ES

CONDOMINIUMS

$265,000 ( 25%) CONDOMINIUMS

PAC I F I C $299,000 ( 30.28%) R ES I D E N T I A L H O M ES

$222,935 ( 42%)

The median closed sales price of single-family homes and condominiums is shown for each county.

CONDOMINIUMS

$200,000-$300,000

14 | 2022 Forecast Report

$300,000-$400,000

$400,000-$500,000

Information and statistics derived from Northwest Multiple Listing Service.

$50

Median Sold Price By County 2021 Northwest

Multiple

Listing

Service

member-brokers

reported 107,354 closed sales during 2021. That marked the first time the annual sales volume surpassed 100,000 transactions. Last year’s completed sales were valued at more than $75 billion, eclipsing 2020’s figure by nearly $18.9 billion for a year-over-year (YOY) gain of almost 33.6%.

CHELAN $515,000 ( 16.52%)

Sales

R ES I D E N T I A L H O M ES

condominiums during 2021 outgained 2020 by 11,594

$349,000 ( 18.31%)

transactions for a 12.1% increase. Of the total completed

CONDOMINIUMS

residential

(single-family)

homes

and

sales, around 86% (92,713) were single-family homes and the remaining 14% (14,641) were condominiums. The activity in the Northwest MLS report reflects the work of more than 36,000 brokers in 26 counties. Collectively, these counties encompass more than 83% of the state’s population. Last year’s robust sales came despite record low inventory. No month had more than a month of supply. In general,

K I T T I TAS $483,950 ( 13.89%)

industry analysts define a balanced market as having

$350,000 ( 16.67%)

records shows the last time there was at least four months

R ES I D E N T I A L H O M ES

CONDOMINIUMS

4-to-6 months of inventory. A check of Northwest MLS

of inventory was in February 2014. Further evidence of a seller’s market is indicated by the ratio of listing, (or asking) price to sales price. For last year’s sales, buyers found themselves in competitive bidding

Copy and data provided by Northwest Multiplied Listing Service. To read the release and/or the complete report visit: nwmls.com/ News--Information/page/Northwest-MLS-brokers-end-2021-with-

00,000-$600,000

depleted-inventory-rising-prices-weather-disruptions

situations, often paying above asking price. Overall, buyers paid an average of 104.7% of the listing price. Buyers of homes in King County paid 106.6%, followed by purchasers in Snohomish County who paid 106%.

$600,000+

RESIDENTIAL PRICING HEAT MAP

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New Year, New Challenges INFLATION, RISING INTEREST RATES, AND THE RIGHT TIME TO SELL

Written by Todd Britsch Senior Vice President Level Capital LLC

2021

, in the “year-view” mirror! It’s difficult to talk about 2021 without a quick review of 2020

and the beginning of the pandemic. As challenging as the real estate market is, or can be, we are fortunate that it has been

I do not foresee a significant

the motor that has kept the economy going in 2021 despite the labor shortage, supply chain issues, and now inflation. As

drop in values primarily due

the Federal Reserve entered a quantitative easing program

to the lack of inventory on

in the second quarter of 2020 with its bond purchasing

the market. Nor do I see a

program in both treasuries and mortgage back securities, we saw mortgage rates drop to an all-time low. Some were

risk of a dramatic increase in

lucky enough to have locked a mortgage payment at 2.25%. As

the overall inventory levels.

I am writing this, a 30-year fixed rate is at an average of 3.66%

If homeowners were able to

according to Mortgage Daily News, down slightly from midJanuary and the 10-year Treasury seems to be retreating, for

refinance their homes, they

now!

did so with rates between

Throughout the second half of 2020 and the first two

2.5% and 3.5%.

quarters of 2021, it’s no secret that a mortgage became significantly more affordable than a rent payment. Then add in the stay-at-home order, take away restaurants, outdoor

16 | 2022 Forecast Report

Nothing Compares | 17

activities, and brick-in-mortar shopping just to name a few activities. Force children to stay at home and learn at the kitchen adjacent to a parent or two working from the kitchen table, space became a precious commodity. It was a perfect storm for a robust housing market.

APRIL 24, 2021, LUMBER FUTURES HIT A NEW HIGH OF

$1,649

A LINEAR THOUSAND FEET

2021 was off to a good start for both resale and new construction until May when it slowed down due to the increased cost of lumber. April 24, 2021, lumber futures hit a new high of $1,649 a linear thousand feet, a 300%

WHICH IS A

300%

INCREASE FROM JANUARY 2020

increase from January 2020. The estimated cost increase for a builder was $35,000 a door. Many builders sustained

dollar amount above asking price was over $85,000. The

a significant loss in profits due to the number of presales

early closings for January 2022 still show that 56% of sales

that had occurred in the previous six months. In the second

are selling at 9% above asking price or $70,000 as resale

quarter of 2021, it became necessary to stop presales as

inventory remains at a record low 13-day supply.

new construction budgets became virtually impossible to predict and supply chain issues started to take effect.

The new year comes with an entirely new set of challenges for the residential market. With trillions of dollars spent

The lack of available new homes, along with increased

on the PPE programs, extended unemployment benefits,

demand, forced many buyers that wanted new construction

and bond purchases, coupled with the current labor

into the resale market. Between March and July of 2021,

shortage and supply chain issues, inflation is our number

bidding wars for resale in the Puget Sound hit their peak with

one concern. The consumer price index which measures

75% of homes selling at 11% above asking price. The average

inflation is at a 40-year high of 7.1% and is still rising. Fuel

18 | 2022 Forecast Report

and energy costs are up nearly 50% year over year. The cost

have increased by 40 basis points since the beginning of

of food within the household is up 7% with meat, poultry,

December. Rising mortgage rates slow demand and it is

fish, and eggs up 12.5%. Inflation impacts the disposable

evident with January residential sales in the Puget Sound

income in households and will ultimately impact home

down roughly -12% year over year. That means 2022 will still

sales if it continues.

be a good year for housing, especially in the first half of the

While we have seen incomes increase, as of the Q3-2021 (the latest number reported by the U.S. Bureau of Economic Development) Washington state’s average salary increase was 2.1% year over year. Inflation is such a concern that the Federal Reserve has begun pulling out of its quantitative easing program by reducing it for bond purchasing with

year. (The typical buying season). In the second half of the year, I anticipate mortgage rates to be between 3.75 and 4% with total residential sales down between 14% and 20% year over year. Pricing should stabilize in most areas across the Puget Sound. Depending on where rates end this year it is possible that price compression may occur in certain areas.

their last MBS purchase scheduled before mid-year. The Fed’s current spending has been reduced by $15 billion to $105 billion a month in the bond market and we have seen the 10-year Treasury yield rise from 1.19% in August to 1.85% as of January 26th. Consequently, mortgage rates

Nothing Compares | 19

I do not foresee a significant drop in values primarily due to the lack of inventory on the market. Nor do I see a risk of a dramatic increase in the overall inventory levels. If homeowners were able to refinance their homes, they did so with rates between 2.5% and 3.5%. If/when rates climb above 4% or near 5%, homeowners will be reluctant to sell unless there is a life-changing event. Trading their near 3% rate to 5% reduces buying power enough that if a family wants better features or more space in the home, they will most likely opt for remodeling over moving. With inventory remaining low for the foreseeable future, new construction demand should rise throughout 2022. However, pricing becomes a challenge with costs that continue to rise. Builders are going to have to adapt quickly to meet their buyers needs and ability to purchase.

20 | 2022 Forecast Report

PEOPLE NET MIGRATION Select time frame: -4,770

+1,820

2020 02

2021 12

YYYY MM

This map represents United States Postal Service data by zip code since the beginning of the pandemic through 2021. You will notice the rural zip codes around the Puget Sound have absorbed a significant amount of the shift in household formation while the City of Seattle has lost over 39,000 households. Areas that have a high concentration of apartments saw the most exit migration during the pandemic after rates dropped below 3%. In the past 24 months Washington state has seen an exit migration of roughly 83,000 households, nearly 48% of that exit was recorded in the last six months of 2021. Source: USPS data is used for trending purposes and may not reflect exact numbers. The USPS will not report on change of address in a zip code if the change is less than 10 for that particular month. The data tracks the permanent change of address and will not indicate second home purchases. Nothing Compares | 21

Material Supply Issues May Put Long-Term Pressure On Home Prices Article Courtesy of the 2022 Luxury Outlook by Sotheby's International Realty®

ith delivery schedules delayed and prices of material

goods

rising,

pandemic-induced

Delayed building deliveries mean that developers’ equity remains tied up in 2021, and are poised to continue into the new year. While existing projects, rather than invested the supply-chain issues have an effect on every corner of the in new ones, further slowing down the economy, the housing market has felt a particularly dramatic new-construction pipeline and leaving impact. builders to assess whether new projects “Every part of a house is more expensive today,” says Philip are financially feasible at all. supply-chain issues have dominated headlines for much of

A. White Jr., president and CEO, Sotheby’s International Realty. “It’s impacting new-home construction more than anything. We hear the most about lumber, but it’s everything. And that’s pushing up the average sales price.” People will still build personal homes if, for example, a $12 million house now costs $13 million instead, says Jason Friedman, senior global real estate advisor, Daniel Gale Sotheby’s International Realty in New York. But for developers, a sudden spike in the price of construction material, compounded by a chronic shortage of labor, can change the entire calculus of a project.

22 | 2022 Forecast Report

“The Achilles’ heel in the market right now is construction costs,” says Dean Jones, owner, Realogics Sotheby’s International

Realty

Washington.

“The

delays

associated with COVID have given every developer pretty significant [difficulties],—some projects are facing six- to 12-month delays.”

Even a shortage of basic appliances like stoves and refrigerators is slowing things down. “The thing we’ve been seeing the most problem in getting is actually the appliances,” Friedman says. “You can pay whatever you want to pay, they just don’t have them.” Delayed building deliveries mean that developers’ equity remains tied up in existing projects, rather than invested in new ones, further slowing down the new-construction pipeline and leaving builders to assess whether new projects are financially feasible at all. All of which translates into yet another factor putting a squeeze on inventory and upward pressure on home prices. “Unfortunately, added costs of construction from the supply chain are going to get passed on to the consumer,” Jones says. “Things are more expensive,” adds John Young, real estate advisor, Golden Gate Sotheby’s International Realty in California, who is also an independent real estate developer. “You have increased demand from people spending more money on their houses [than they did before the pandemic], then reduced supply from COVID-induced shocks to the material supply chain.” Even once the supply chain gets back to running at its usual pace, the ripple effects of a construction slowdown could be felt in the housing market for years to come. “It could be 2024 or 2025 before we see some kind of pickup in new supply,” Jones says. “The entire economics of building a building has really been turned on its head, and it’s going to take a number of years to heal. Then once it heals, it will take a number of years to get the supply.”

View the 2022 Luxury Outlook report at: sothebysrealty.com/eng/luxury-outlook-2022 Nothing Compares | 23

The Condominium Comeback Written by RSIR Staff/New Developments Realogics Sotheby’s International Realty

Top Left: Seattle Skyline Bottom Right: The Graystone Seattle

24 | 2022 Forecast Report

long-awaited inflection point for the downtown Seattle housing market occurred in 2021 following

three years of political dysfunction, an economic downturn, and value corrections. These headwinds were propelled by adverse tax policies and civic budget cuts, social unrest, and of course, the COVID-19 pandemic, which all combined in 2020 and resulted in a net loss of 8,000 residents from downtown Seattle. That’s reversing course in 2022.

The promise of a new mayor (and several City Council seats), has renewed investment in social services, and the reopening of businesses and lifestyle attractions brings with it improved consumer confidence and increased housing demand to the city center. It helps, too, that developer discounts and incentives at both newly delivered apartment and condominium buildings have been coupled with historically low interest rates and a booming stock market. Savvy, in-bound residents are pouncing on attractive housing opportunities with increased purchasing power. Discounts on new condominiums with deferred HOA dues and free rent periods on apartments are becoming harder to find.

Nothing Compares | 25

26 | 2022 Forecast Report

55%

OF SEATTLE’S JOBS ARE DOWNTOWN WHILE IT OCCUPIES JUST

OF THE LANDMASS

Downtown

Seattle

experiencing

extraordinary

comeback as the region’s urban employment center draws thousands of workers back (55% of Seattle’s jobs are downtown while it occupies just 6% of the landmass). Shockingly, the metro area experienced two years of traditional apartment demand during the first half of 2021, according to O’Connor Consulting Group, and downtown Seattle’s apartment vacancies dropped from more than 8% at the end of 2020 to just over 3% today. Rents have returned to pre-pandemic values, averaging $3.80 per square foot per month, with lease rates expected to increase 15% by 2023. Despite thousands of new apartment units nearing completion, Brian O’Connor, Principal of O’Connor Consulting Group, believes the market is “at equilibrium” and he only expects a slight uptick in vacancy rates by 2023. O’Connor says new rental demand will remain high as will job growth, but some renters will want to take part in rising condominium prices, so a migration from rent to own is also likely ahead. It may already be happening. SHORE CLUB RESIDENCES

Left: Featured image of Infinity Shore Club Residences on Alki Beach Nothing Compares | 27

The cohort of new, move-in-ready condominiums experienced a 415% increase in pending sales in 2021 compared with the same period in 2020. Currently, 59% of the 2,218 new units across 11 active developments have already found a buyer, and two active and recently completed condominium projects were converted to apartments to take advantage of the upswell of rental demand. Furthermore, at least two more condominium towers that were being tracked in the pipeline also reverted to rental. It now appears fewer than 1,500 new condominiums are likely to be added to the market by 2026, and that’s if they all get built. Total unit deliveries have been in steady decline since 2019. The resale of existing condominiums also show dramatic improvement with active inventory declining more than 60% year over year, while pending sales have soared 46% during the same period. Prices, while about 4% lower than a year ago, have stabilized and will likely trend higher again as bargain hunters were the first to seize the preferred selection at corrected values (the bottom of the market has already passed, as it has in other major metro areas like San Francisco and Manhattan). Power broker Nikki Field of Sotheby’s International Realty said, “New York is beyond back.” Now the challenge with high-rises is the demand can rise much quicker than supply (it can take five years to assemble land, secure entitlements, and construct a tower for occupancy). As the current housing cycle ends with final unit deliveries in 2022, and only a few buildings are underway for the next development boom, it will likely take several years to manifest a meaningful supply of either new apartment or condominium towers. O’Connor asserts construction hard costs have risen by more than 30% over the past two years, in part due to COVID-era protocols, but also because of inflation of raw material prices, labor shortages and union strikes, and protracted development schedules. Construction lending is also tightening. The bottom line is that both rents and condominium values will have to rise significantly to pencil new projects in the new market cycle. O’Connor

28 | 2022 Forecast Report

Top: JADE Residences Condominiums in Kirkland Bottom Left: Infinity Shore Club Residences on Alki Beach Bottom Right: The Graystone in Seattle

Now the challenge with high-rises is the demand can rise much quicker than supply (it can take five years to assemble land, secure entitlements, and construct a tower for occupancy). As the current housing cycle ends with final unit deliveries in 2022, and only a few buildings are underway for the next development boom, it will likely take several years to manifest a meaningful supply of either new apartment or condominium towers.

believes a new condominium tower will need to average $1,500 per square foot during presales before any project in the condominium pipeline is likely to move forward. Again, just two new condominium towers are under construction with occupancy scheduled for 2023 and 2024, respectively. Approximately 45% of the 745 units being developed are already under contract with buyers. Given rising construction costs, a similar development downturn can be found with rental housing supply. New apartment starts in Seattle have decreased 87% during 2021 compared with 2020, which is concerning considering this submarket historically captures 63% of the apartment demand for the Seattle-Bellevue-Everett area. More supply is needed to keep lease rates from swelling. To put this in perspective, 27,000 multi-family housing units were added to downtown Seattle during the last decade, of which approximately 93% were purpose-built for rent and not for sale. During this time, rents grew 50%, and while 2020 proved to be a speedbump in this upward trajectory, experts agree the marketplace has rebooted and rents are on the rise again.

Nothing Compares | 29

30 | 2022 Forecast Report

Seattle entered 2020 as the fastestgrowing large city in the U.S., and it’s proving to be the first in and the first out of the COVID-19 pandemic and the related housing disruption in-city. So, with new supply unlikely to keep up with demand, this creates a familiar investment opportunity for in-city condominiums, as it did a decade ago.

More than 100,000 residents were living within the urban core by the end of 2021, according to the Downtown Seattle Association. Meanwhile, more than 80 million square feet of commercial office space is repopulating, and another 10 million square feet is being built or in planning. The expanded residential base and a steadily increasing daytime workforce in downtown Seattle bode well for the economic recovery of retail, restaurants, cultural venues, residential services, and other lifestyle attractions that were shuttered during the darker days of 2020. From a macro perspective, the Seattle metro area continues to experience the highest aggregate median home price increases in the U.S. As attainably priced housing becomes more elusive in outlying areas, in-city condominiums become more attractive. Seattle entered 2020 as the fastest-growing large city in the U.S., and it’s proving to be the first in and the first out of the COVID-19 pandemic and the related housing disruption in-city. So, with new supply unlikely to keep up with demand, this creates a familiar investment opportunity for in-city condominiums, as it did a decade ago. After the Great Recession, it took five years from the last unit delivery of the past cycle to the first unit delivery of the next market cycle. While the dearth of new condominiums is not likely to be as pronounced this time, the upward pressure on pricing is as predictable, and history is likely to repeat itself. Nothing Compares | 31

A DOZEN STORIES TO TRACK ON GEEKWIRE IN 2022

1 2

How will Seattle’s new elected leaders interact with the technology community? Much has been written and debated about the impact

Remote work: Where is tech talent settling and what does this mean for the future of offices and downtown Seattle’s core?

of big tech attracting thousands of high-income

What started as two weeks, then two months is now

earners into the region, the rift between leadership

exceeding two years and has permanently altered how

of Seattle’s largest companies and elected officials.

and where we live and work. (GeekWire coverage:

Will new leadership create a fresh start? (GeekWire

Tracking back-to-office plans: Seattle tech companies

coverage: A conversation with Bruce Harrell)

in holding pattern as Omicron surges)

Rise of Bellevue: Is the once-sleepy suburb now the preferred destination for tech? What’s undeniable is the rapid growth of Bellevue and the Eastside as the home of many an HQ2. The emerging startup scene is fueled by the same skilled

SCAN TO VIEW FEATURED ARTICLES

talent, creative minds and dogged innovation that’s nourished the region for decades. Coming next year, we’ll finally learn together the result of connecting the urban core to suburban core with light rail. (GeekWire coverage: Bellevue’s boom: City’s tech industry is poised to eat Seattle’s lunch)

32 | 2022 Forecast Report

Bottom Right: VR Glasses | Photo by Tolgart/iStock Photos

The Microsoft campus has remained largely empty since the beginning of the pandemic. (Michael Vi/iStock Photos)

IN YOUR WORDS, DESCRIBE THE METAVERSE. “IT’S THE INTERSECTION OF THE PHYSICAL AND DIGITAL WORLDS, WHERE AUGMENTED REALITY, VIRTUAL REALITY, BLOCKCHAINBASED ENVIRONMENTS ENABLE PEOPLE TO DEVELOP AND LIVE IN NEW ‘WORLDS’ — A FULLY IMMERSIVE EXPERIENCE TO EXPRESS THEMSELVES, CONNECT, INTERACT, CONDUCT COMMERCE, AND EXPERIENCE A WHOLE NEW REALITY." - Andy Liu, partner at Unlock Venture Partners

Are we living in the metaverse yet? Meta, the parent organization for Facebook, Instagram and WhatsApp is racing to dominate the metaverse. But there's a long way to go, and plenty of hurdles. This decentralized world is already in motion around gaming communities such as Minecraft, Roblox, and Rec Room. Will 2022 bring the highly anticipated Apple mixed reality headsets and how rapidly will our physical and digital worlds merge? (GeekWire coverage: We asked seven venture capitalists if the metaverse is the next big thing or just a lot of hype)

Nothing Compares | 33

Mega financings, record IPOs, spectacular SPACs, M&A mania: Does the good time express keep chugging along in 2022, or does this train fall off the tracks? Another day, another deal. That’s sometimes how it feels in the market for venture capital, private equity buyouts, acquisitions, IPOs, SPACs and every other transaction. But there are signs the bloom might be coming off this rose.

GLOBAL VENTURE FUNDING CLIMBS TO NEW RECORD

$158.2B Q3-2021

105%

Increase YoY

$77.0B Q3-2020

(GeekWire coverage: Have we hit peak unicorn?) 34 | 2022 Forecast Report

Crypto and blockchain and bitcoin, oh my: What’s behind the curtain? And will the decentralization trend take over, or will

Bill Gates 3.0 and Jeff Bezos 2.0: What are the next acts for the mega-billionaires? From saving the planet to developing ways to exit

big tech continue to rule the day? Is it the future

the planet, the intrigue of these two with local

of currency, will its audience and fans reconcile its

ties won’t diminish anytime soon. (GeekWire

impact on the climate? Obviously, we have more

coverage: Jeff Bezos says he’s spending more on

questions than answers. (GeekWire coverage: Crazy

his Earth Fund than on Blue Origin space shots)

for crypto — or not: Seattle VCs sound off on tech’s hottest topic following Coinbase IPO)

Autonomous vehicles: What’s taking so long? Will Amazon’s need to automate their last mile delivery service be the tipping point for autonomous driving? Hoping it’s not a VW Beetle named Herbie. (GeekWire coverage: Amazon’s Zoox will test its au-

A Zoox concept car. (Zoox Photo)

tonomous driving technology in Seattle’s ‘different driving culture’)

Top: South Lake Union Bottom Left: A screenshot of GeekWire’s deal tracker, showing recent acquisitions, SPACs and IPOs.

Nothing Compares | 35

Amazon CEO Andy Jassy at the 2021 GeekWire Summit in Seattle. (GeekWire Photo / Dan DeLong)

TENSION IN AMAZON’S LEADERSHIP PRINCIPLES: WITH THAT AS A BACKDROP, SOME OF THE MOST TIMELY QUESTIONS AND INTERESTING RESPONSES INVOLVED AMAZON’S TWO NEW LEADERSHIP PRINCIPLES: “STRIVE TO BE EARTH’S BEST EMPLOYER,” AND “SUCCESS AND SCALE BRING BROAD RESPONSIBILITY.”

MacKenzie Scott, Melinda French Gates and the future of philanthropy: Can these billionaires save society and the planet?

Amazon under Andy Jassy: How does the longtime leader guide the trilliondollar behemoth as new hurdles arise?

Over $1 trillion in total charitable giving in the U.S.

The headliner of last year’s GeekWire Summit speaks

alone is amazing. Choosing to shine the spotlight on

out. (GeekWire coverage: Amazon CEO Andy

the purpose of beneficiaries of philanthropy rather

Jassy on the natural ‘tension’ in the company’s new

than dollar amounts is real progress.

leadership principles)

(GeekWire coverage: MacKenzie Scott says ‘no dollar signs this time’ as she finds new value in philanthropy’s meaning)

36 | 2022 Forecast Report

Bottom Right: Solar Farm Minidoka County, United States

FOR VETERANS OF “CLIMATE TECH” OR “ENERGY TRANSITION,” THE NEW FOUND PASSION FOR THE SECTOR — WHICH SPANS RENEWABLE ENERGY, BATTERIES, DECARBONIZED TRANSPORTATION, GREEN CONSTRUCTION AND LOW-CARBON AGRICULTURE — IS LONG OVERDUE.

The clean tech revolution returns, and maybe just in time. Climate tech, the decarbonization revolution, and a heated marketplace for renewables. (GeekWire

Pandemic-to-endemic: How will we cope with the ongoing nemesis of COVID-19, and will Seattle area innovations help guide a way forward?

coverage: Can we innovate our way out of the climate

Our region is the fortunate home of significant

crisis? Venture capitalists sound off on saving the

research institutions like UW Medicine, Fred Hutch,

Earth)

Seattle Cancer Care Alliance, Seattle Children’s, PATH, Bill & Melinda Gates Foundation, naming a few. The presence of those healthcare behemoths, along with the entrepreneurial innovations colliding with massive

SCAN TO VIEW FEATURED ARTICLES

interest and investments into health tech accelerated by the pandemic equals red hot activity in life science and biotech. (GeekWire coverage: COVID-19 experts answer questions about Omicron — and where the variant may have come from) Provided by GeekWire's Business Team

Nothing Compares | 37

The Advantage LENDING’S CONFIDENCE IN THE HOUSING MARKET, APPRECIATION, AND NEW LOAN OPPORTUNITIES Written by Luke Easterly Regional Vice President Caliber Home Loans

38 | 2022 Forecast Report

uyers entering the market in the first part of the year

Homeowners who have thrived during this time are the ones

are motivated to do so quickly by low-interest rates

who are thinking outside the box and see real estate as an

that are already starting to climb—as the Federal Reserve

intricate piece to creating long-term wealth. By aggressively

System combats rising inflation in the United States. Yet,

growing their real estate portfolios, homeowners have been

despite the uptick in interest rates in Q1, we are projecting

and could likely continue to see their increased home equity

rates to remain between 3-4% in 2022. This is a wide range in

accruing every year. This is giving them more confidence to

percentage, as there is uncertainty surrounding the impacts

take a real estate risk for a better quality of life by moving out

future COVID-19 variants will have on the economy; in

of state because of remote working or buying that second

addition, the FED has cut back the stimulus distribution and

home they always wanted. The new benefit of buying a

buying of mortgage-backed securities.

second home is that some mortgage options will allow you

Owning a home has been one of the safest investments you can make in recent years—just look at the rise in

to have short-term rental income and bring less than 20% down payment to closing (more on this later).

appreciation. Since 2020, U.S. homeowners have seen an

With so much demand, and not nearly enough supply,

increase of 31.1% year over year in home appreciation1.

home appreciation is up, creating confidence in the market.

Homeowners are leveraging equity to reinvest back into

I don’t have a crystal ball that tells me exactly what kind of

their homes by remodeling and upgrading as they work

appreciation we will see in the immediate future, but I would

remotely or prepare to sell for top dollar. For some, they

imagine somewhere between 5-15%.

are willing to spend more on these home improvements and renovations than in previous years due to money saved during the pandemic lockdown.

With the market as competitive as it is, buyers will continue to secure home equity loans for their down payment, like Caliber’s Departing Residence loan program, to purchase

With so much demand, and not nearly enough supply, home appreciation is up, creating confidence in the market. I don’t have a crystal ball that tells me exactly what kind of appreciation we will see in the immediate future, but I would imagine somewhere between 5-15%

Left: Seattle Skyline ¹ CoreLogic.com Nothing Compares | 39

WITH THE MARKET AS COMPETITIVE AS IT IS, BUYERS WILL CONTINUE TO SECURE HOME EQUITY LOANS FOR THEIR DOWN PAYMENT, LIKE CALIBER’S DEPARTING RESIDENCE LOAN PROGRAM, TO PURCHASE A NEW PRIMARY RESIDENCE RATHER THAN SELLING AFTER THEY CLOSE ON THEIR NEW HOME.

a new primary residence rather than selling after they

The new year also brings more opportunities for those

close on their new home. While these loan options may not

seeking a home, and one of the ways we’re helping buyers

mean there’s the same pressure for a buyer to find a home

achieve their real estate goals is through non-qualified

immediately, the pressure is still to lock in that new address

mortgages. Along with Caliber’s new owner, New Rez, we

before interest rates climb to the high threes.

have rolled out a handful of new Non-QM options. Buyers

And now, buyers in King, Snohomish and Pierce Counties have more power to compete, with the new High Balance Loan limit 2 at $891,250. (Other Washington counties are capped at $647,200.)

who want to invest and build equity, but who might have been outside of the parameters for a conventional loan, can qualify for a loan with a Bank Statement Loan, a 1099 Loan, or a transaction where we only qualify the investment property based on projected rents.

The competition will continue to be aggressive and is becoming the new normal when buying real estate in most areas. Residential homebuyers are facing off against builders who want teardowns, land to build new communities, and investors that are doing 1031 exchanges that have to move

In 2022, I would avoid assumptions regarding limitations. The market is fluid, and there are advantages to seeking opportunities sooner than later. Connect with a lender to learn more about mortgage eligibility and options.

quickly—and they all have the additional funds to escalate

Caliber Home Loans’ Jolene Messmer

the purchase prices. The low inventory is a prime problem

contributed to this report.

that has created an aggressive market, which is great for sellers—but where are they going to move?

40 | 2022 Forecast Report

Right: Aerial photo of Juanita/Kirkland 2 A conventional mortgage where the original loan amount exceeds the conforming loan limits published yearly by the Federal Housing Finance Agency (FHFA), but does not exceed the loan limit for the highcost area in which the mortgaged property is located, as specified by the FHFA. Nothing Compares | 41

Is There Relief Ahead From The Market Frenzy? Article Courtesy of the 2022 Luxury Outlook by Sotheby's International Realty®

42 | 2022 Forecast Report

hile the current state of the housing market is

"Denver is at an interesting point, where we’re so starved

great news for sellers, for buyers, the past year

for inventory and it’s so hard to find a house, but there are

and a half has felt like they can’t catch a break. This past spring and summer, homes would go on the market and within three days have 30 offers, with prices going almost $100,000 over asking,” says Jenny Telwar, managing broker, Zeitlin Sotheby’s International Realty in Nashville, Tennessee.

massive amounts of transactions occurring,” says Shannel Ryan, president, LIV Sotheby’s International Realty in the Denver, Colorado, metro area. “There’s very little standing inventory, which is different from nothing coming [on the market]. It just doesn’t stay around for very long.”

“Buyers have been burned out by that experience a little bit. And not every buyer has the capability to throw so much cash at [a deal] and to waive all contingencies.” For market watchers on any side of the equation, the breakneck pace of sales leads to an obvious question: How long can a frenzy like this one last? "We’ve seen markets like Aspen, Colorado, more than double sales volume for our company,” says Philip A. White Jr., president and CEO, Sotheby’s International Realty. “There are so many examples like this. We have an office in Destin, Florida, that’s done $2 billion in sales volume through November 2021, and it’s less than 100 agents in the panhandle of Florida. Park City, Utah, is a similar story.” Toward the end of the summer and the start of the fall season, aggressive bidding wars in hot markets have shown small signs of easing up. I envision that it’s going to abate to some degree; it can’t continue to grow at the velocity it has,” White says. “But people are still moving. I still hear about multiple bids.” Even in areas where buyers have grown unwilling to make wild offers just to compete, a chronic lack of inventory all but guarantees that the market will remain tight.

A 12,000-square-foot home in Toronto’s Bridle Path neighborhood is a serious trophy property, complete with a pool, hot tub, and water features

Sotheby’s International Realty Canada Nothing Compares | 43

Even in areas where buyers have grown unwilling to make wild offers just to compete, a chronic lack of inventory all but guarantees that the market will remain tight.

44 | 2022 Forecast Report

While anything resembling a buyer’s market is a long way off, sellers expecting dozens of over-asking offers and waived contingencies may need to adjust their expectations. "The market isn’t slowing down, but it’s not the case anymore that you put your house on the market and that day you have 50 showings and 15 offers,” Ryan says. “It’s an education process with our sellers. We need them to have the right expectation.” With the data in hand, they’re able to guide their clients toward good decisions, she says. "I think the buying public is having a moment of, ‘This feels more like what I was used to,’” Ryan adds. “‘Denver is competitive, but I’m not having to give away my firstborn.’” In Nashville, Telwar says, “Going into the fourth quarter [of 2021], we’ve seen fewer offers on homes, and it’s normalized a bit. But in hot areas there will still be three to five offers within a day or two. That’s better than 30 offers, but we’re still seeing a multiple-offer situation.” For buyers, then, the traditionally slow winter months may be an opportune moment to get into the market while competition is slightly less rabid, and before prices climb any further. "Prices are only going to escalate in 2022, so they really need to buy now,” Telwar says. "Inventory isn’t likely to go up,” White says. “With interest rates low, buyers may want to consider buying as much house as they can.”

View the 2022 Luxury Outlook report at: sothebysrealty.com/eng/luxury-outlook-2022

Old-world craftsmanship endures at the Burlington mansion in Nashville, Tennessee.

Zeitlin Sotheby’s International Realty Nothing Compares | 45

2022 Financial Insights and Outlook LOOKING OUT FOR YOUR INVESTMENTS IN THE YEAR AHEAD

Written by Amy Mutal Principal | Financial Advisor Prevail Wealth Management, LLC

46 | 2022 Forecast Report

he S&P 500 index ended up more than 25% for 2021. That said, most stocks experienced a correc-

tion at some point during the year. A correction is defined as a drawdown of more than 10% from a peak. In short, while overall stock market performance has been strong, there has

In 2022, global GDP

been some volatility beneath the surface.

is estimated to grow

The 2020 recession was intense but short-lived, lasting

around 5%, making

about two months. Since then, our economic recovery has

for the strongest back-

been strong. In the second quarter of 2021, GDP returned to its pre-pandemic level. Since the economy hit bottom in the

to-back years for the

second quarter of 2020, economic growth has surpassed

world economy since

consensus expectations formed at the beginning of the

the early 1970s.

pandemic. So, what should we expect for 2022? As the adage goes, no one has a crystal ball, so it’s difficult to say for sure. Will U.S. stocks begin to reflect more of some of the weaknesses we saw in 2021? It’s possible, especially as the world’s major central banks begin to drain the liquidity that has supported financial markets since the start of the COVID-19 pandemic. But major uncertainties remain, including the pace of inflation, how central banks will react to it, and the changing conditions related to the virus. As we enter a new year, some market volatility should be expected as U.S. stocks and the economy are under pressure. Still today, COVID-19 remains a risk. Although the latest variant, Omicron, seems to be milder, hospitalizations have increased simply because the variant is so contagious. What we’ve learned since the pandemic began, however, is that it’s the restrictions and/or lockdowns imposed on society that cause the most economic damage, and countries have had extremely different reactions in this regard. The pandemic also has exposed instability in the global supply chains, perhaps signaling a long-term environment of widespread supply setbacks, rather than just supply and demand issues we’ve experienced over the past 20 years.

Nothing Compares | 47

GLOBAL STOCKS & ECONOMY: STILL GROWING, BUT SLOWING Global gross domestic product (GDP) has now exceeded its pre-pandemic level in 2021 and completed the transition from recovery to expansion, aided by strong policy support,

depend on how policymakers continue to respond. That said, markets could remain volatile if we continue to see new variants of the virus. Historically, when global growth is above average, international stocks have performed favorably. For investors, this underlines the importance of global diversification, making sure your portfolio includes an appropriate allocation to international as well as U.S. stocks, based on your goals, investing timeline, and risk tolerance.

the implementation of vaccines, and economic activities returning to somewhat normal. In 2022, global GDP is estimated to grow around 5%, making for the strongest back-to-back years for the world economy since the early 1970s. The growth supported by a change in fiscal policy is expected to help prop up the global economy in 2022, despite concerns from COVID-19, inflation, materials shortages, and rate hikes.

FIXED INCOME Last year proved to be a volatile year for fixed income. The faster than expected reopening of the economy from Covid-19 shutdowns early in the year led to a rise in yields during the first quarter, only to be followed by a drop in the summer as virus cases rebounded. The expectation of higher inflation has risen but is mostly believed to be for a

The potential for new Covid variants will continue to represent risks to the global economic outlook, but as with the pandemic, the economic and market impact will likely 48 | 2022 Forecast Report

short period of time. Although 2022 presents more volatil-

THE PANDEMIC ALSO HAS EXPOSED INSTABILITY IN THE GLOBAL SUPPLY CHAINS, PERHAPS SIGNALING A LONG-TERM ENVIRONMENT OF WIDESPREAD SUPPLY SETBACKS, RATHER THAN JUST SUPPLY AND DEMAND ISSUES WE’VE EXPERIENCED OVER THE PAST 20 YEARS.

ity for fixed income, bond investors looking for income will likely find yields moving higher. One thing that seems to be clear for 2022 is monetary policies implemented by central banks since the beginning

The Importance of a Yearly Financial Checkup

of the pandemic will be ending. Less easy money circulating should mean higher interest rates, but the effects will depend on the pace and magnitude of the policy change. The Federal Reserve has signaled that it will taper its bond purchases, but it's unclear how quickly the rates will rise.

You understand the importance of maintaining your physical health. Just like your physical health, your financial health is equally vital. If your finances had to pass a physical test, would they pass with flying colors? When it comes to protecting your family and securing your legacy, it takes healthy finances. Are yours up to the test? If you don’t know, it’s time for a checkup. Whether your last medical appointment was for preventative care or to diagnose an issue, a series of questions and tests were run to make an accurate assessment of your physical health. This snapshot helped devise a plan for your optimal physical health moving forward. When was your last financial checkup? Much like your physical health, it’s essential that you are aware of your financial well-being to determine what adjustments are necessary to stay on track. Just like with our bodies, to ensure we are living our best life and propelling toward our goals, it’s vital that we have a clear knowledge and understanding of our level of financial wellness. To schedule a complimentary financial checkup, Visit www.prevailwealth.com/rsir

*The information provided is for general information purposes only and all expressions of opinion are subject to change without notice in reaction to shifting markets Nothing Compares | 49

Amid Inflation And Relatively Low Interest Rates, Luxury Real Estate Remains A Trusted Investment

A 12,000-square-foot home in Toronto’s Bridle Path neighborhood is a serious trophy property, complete with a pool, hot tub, and water features

Sotheby’s International Realty Canada

50 | 2022 Forecast Report

he expansive growth in the luxury-home market during the COVID-19 pandemic is expected to

continue in 2022, albeit at a slower pace, as low interest rates and inflation fears push wealthy individuals toward alternative asset classes, and countries reduce economicstimulus measures.

“If you look over the course of decades and centuries, luxury real estate—with all its ups and downs—has held value and even grown in value,” Woloshin says.

Across the globe, luxury-home sales reached record levels in 2021. The U.K. saw a major increase in sales priced at £5 million or more during the first half of 2021, while its stampduty holiday was still in place. While that program has since ended, the luxury market there is expected to benefit from foreign investors coming back into the market, as travel restrictions loosen in some parts of the world.

Article Courtesy of the 2022 Luxury Outlook by Sotheby's International Realty®

In the six months from June to November 2021, listing prices for homes in the top 10% of the market in the U.S. were up nearly 20% compared with the same period the year before, according to data compiled by Realtor.com “We don’t think the current pace of home-price growth, at least in the aggregate, is sustainable,” says Joel Kan, associate vice president of economic and industry forecast, the Mortgage Broker’s Association. Still, as inflation rates rise, and developed markets continue to debase their currency, luxury real estate could be an attractive hedge and a way to get out of paper money, says Jonathan Woloshin, head of real estate and financials research, UBS Wealth Management. With experts predicting the 10-year Treasury yield won’t surpass 3% by the end of 2022, real estate may become even more attractive. “If you look over the course of decades and centuries, luxury real estate—with all its ups and downs—has held value and even grown in value,” Woloshin says. In late 2021, the U.S. Federal Reserve announced that there could be three interest rate hikes ahead in 2022, and the Mortgage Bankers Association has predicted the 30-year fixed rate could rise to 4% by the end of 2022.

Nothing Compares | 51

“Every little bit of that rate increase is going to matter more

Even countries that have long attracted high-net-worth

because you’re applying it to a much bigger loan balance,”

individuals on account of their low taxes are considering

Kan says.

increases. Singapore officials have hinted that higher levies

However, buyers paying in cash or using a securitiesbacked loan will be less affected by interest rates, if at all, Woloshin notes. Meanwhile, many countries are considering increasing taxes, which may influence where high-net-worth individuals decide to locate. In the U.S., the current 37% top rate on income will rise to 39.6% in 2026, as 2017 tax reform provisions are scheduled to expire. President Joe Biden’s

for real estate may be on the way. The country already has imposed limits on second-home owners and foreign buyers. In China, some speculate the government may roll out a nationwide property tax. The policy focus is “common prosperity” and addressing the wealth gap. In addition to proposed property taxes and regulatory measures aimed at controlling prices, the development of rental housing has gained traction.

plans for a social spending bill would also create a new

Canadian Prime Minister Justin Trudeau pledged a ban that

surcharge on high-income individuals whose adjusted gross

would keep foreigners from buying homes for two years if he

income is over $10 million—or the top 0.02% of Americans.

is re-elected. One of his opponents, Jagmeet Singh, called

While those increases may not be enough to make wealthy

for a 20% tax on foreign buyers. (Already, in Vancouver,

individuals pick up and move elsewhere, a wealth tax could,

residential properties that sit vacant more than six months

Woloshin says.

per year are taxed at 3% of their assessed value, due to a

“We’re seeing more and more of the wealthy renounce their U.S. citizenship, for economic reasons and for political reasons,” he says. Already, the number of Americans who renounced their citizenship hit an all-time high in 2020, at 6,707, according to the Internal Revenue Service. 52 | 2022 Forecast Report

2016 Empty Home Tax passed by the City Council.) In its 2021 budget, the Canadian government also included a proposal for a nationwide “underused housing tax” that would tax vacant residential property with non-resident, non-Canadian owners.

IN THE COMING YEAR, NEW DEMOGRAPHIC TRENDS WILL ALSO IMPACT THE MARKET. IN NORTH AMERICA, MILLENNIALS AND GEN XERS ARE EXPECTED TO MAKE UP THE VAST MAJORITY OF LUXURY-HOME SALES. Even with pressure to recoup revenues lost to COVID-19,

Many of those sellers are staying in urban environments,

it’s yet to be seen whether these proposals become reality.

looking to relocate to larger spaces, according to agents who

A long-discussed pied-à-terre tax aimed at luxury second

work with them.

homes failed to pass through New York’s legislature this last year. In a move more favorable to those buying second homes, the U.S. government rolled back a policy meant to limit Fannie Mae and Freddie Mac’s ability to purchase loans for new investment properties, which may mean lower rates for

Still, others will continue to re-evaluate their lifestyles and move to small towns or suburban areas in a search for more space and a respite from city life. “People have the ability to live their lifestyle their way,” Woloshin says. That, he says, means that the demand for second homes or relocations won’t go away in 2022.

those buyers in the short term. The U.S. also plans to raise the cap for mortgages backed by Freddie Mac and Fannie Mae to close to $1 million in high-cost areas to assist home

View the 2022 Luxury Outlook report at: sothebysrealty.com/eng/luxury-outlook-2022

buyers as prices continue to rise.

BUT WHAT ABOUT SUPPLY? While inflation and higher interest rates may play a role in the luxury market, a larger question looms: whether supply can catch up with all the recent demand. "Because the economy’s still improving, we do expect that inventory to free up, and we’re going to see more transactions, which will help this rapid home-price growth moderate a little bit,” Kan says. Yet in many luxury markets, such as ski resorts or Manhattan’s Billionaires’ Row, supply is highly constrained. “We’re talking about a very unique subset of real estate where there is a certain fixed amount of the best of the best,” Woloshin says. In the coming year, new demographic trends will also impact the market. In North America, millennials and Gen Xers are expected to make up the vast majority of luxury-home sales. Nothing Compares | 53

How to Add Equity to Your Home in 2022 OWN IT, RENT IT, SELL IT—IT MAY BE THE PERFECT TIME TO CONSIDER ADDING A DADU.

Written by Tadashi Shiga Executive Director, Land Division Realogics Sotheby’s International Realty

54 | 2022 Forecast Report

hether the plan is to live in your home for the years to come, or if you’re going to list in 2022, it’s possible to add a huge asset to your home. I’m talking about a detached accessory

dwelling unit or DADU for short. First, a little history—DADU, and its cousin the ADU (attached dwelling unit) have been known for years as “mother-in-law apartments.” Outfitted with everything you’d need in a typical apartment, three-quarters or full bath, kitchen with complete appliances, and a separate entrance—these units were, as the name implies, largely built for multi-generational living. But in the 21st century, a DADU could be used for the in-laws or an additional income stream. And if you’re considering adding one of these outbuildings before listing your home for sale, the value of your home will increase exponentially. While the permitting laws surrounding DADUs and ADUs vary by city, for our purposes here, today I’m talking about Seattle zoning. In our (on the next page) we’ve provided some surface-level criteria for building an ADU/DADU in different areas across the Seattle metropolitan area.

With a lack of single-family home inventory available in the Seattle area in 2022, DADUs provide additional housing for a city with a growing population. The City of Seattle has created regulations around building DADUs in the city that make it possible for many single-family homes to build one of these permitted residences, and while creating additional income for themselves, increasing the equity in their home by, potentially, hundreds of thousands of dollars.

Left: Targa Homes DADU located in Ballard photographed by Cora Brown Rock Nothing Compares | 55

Learn more

56 | 2022 Forecast Report

For homeowners, a DADU can provide three types of income streams: First, a rental on your property. Earn rental income over the years, pay down your mortgage faster, or pocket the extra savings for your next investment. Next, an Airbnb or VRBO rental can provide income, and more flexibility for those who desire to use the additional space to host guests, as a studio, or otherwise. Finally, DADUs have the potential of being condo-ized. Form an HOA and sell the DADU and/ or ADU, and all of the properties under that HOA would become condos. With a lack of single-family home inventory available in the Seattle area in 2022, DADUs provide additional housing for a city with a growing population. The City of Seattle has created regulations around building DADUs in the city that make it possible for many single-family homes to build one of these permitted residences, and while creating additional income for themselves, increasing the equity in their home by, po-

In a single-family zone in

tentially, hundreds of thousands of dollars. In a single-family zone, the minimum lot size to build is 3,200 square feet, and

Seattle, the minimum lot size to

the floorplan of the DADU can reach up to 1,000 square feet.

build is 3,200 square feet, and

In Residential Small Lot (RSL) or low-rise zones, a DADU may

the floorplan of the DADU can reach up to 1,000 square feet. In Residential Small Lot (RSL) or

be built with a floorplan of up to 650 square feet. Many homes in Seattle could accommodate a DADU or ADU if the homeowner is ready to make the investment. Of course, whether you’re ready to explore the possibilities

low-rise zones, a DADU may be

of building a DADU in Seattle, Kirkland, or on the Kitsap

built up with a floorplan of up to

Peninsula, your Realogics Sotheby’s International Realty

650 square feet.

broker will be able to connect you with the architects, contractors, and experts on permitting. With the inventory as scarce as it has been why aren’t you considering the benefits of a DADU? If you’re ready to add equity to your home in 2022 and beyond—there may be no smarter decision than creating a backyard cottage of your own.

Top Right: Targa Homes DADU located in Shoreline photographed by Cora Brown Rock

Nothing Compares | 57

Advising Through Uncharted Waters Written by Andrea Savage VP of Marketing Realogics Sotheby’s International Realty

o say it’s been an ever-changing market would be an

purchase of homes from a distance. Whether it was a

understatement. I’ll lean on my sailing experience to

thoughtfully orchestrated in-person tours following the

share that it was more akin to navigating uncharted waters in

CDC guidelines or a FaceTime showing, they managed, and

the dark. In facing these riptides (or challenges) our brokers

negotiated on their clients’ behalf, to close $3.2 billion* in

evolved. Beyond an “essential worker” we found our brokers

sales in 2021.

take a new form as Global Real Estate Advisors.

As we’ve heard across the nation, “home” has taken on new

Embracing every tool at their disposal, our global real estate

meaning, whether it became a classroom, an office, gym,

advisors advocated for their clients at every turn and guided

or a reality baking series, there were others that it opened

them through complex transactions. While the pandemic

new borders for. The new models of remote or hybrid

seemingly stopped time, there were still transactions that

working changed the conversation from just upsizing

faced critical timelines and these advisors continued to keep

a home, to exploring new territory. Through Sotheby’s

pace. Many managed through remote closings and agents

International Realty’s expansion across 78 countries and

facilitating virtual inspections. From those “virtual” viewings

territories, our brokers are leveraging their network and

stemmed a more frequent behavior and made trust more

relationships with other Sotheby’s agents to help find

important than ever.

their clients’ homes across the globe. That privilege has

The heritage of the Sotheby’s name dates back to 1744 and comes from a line of building trust. As large and equitable investments are best made under respected advisement, our brokers have been entrusted to facilitate the sale or 58 | 2022 Forecast Report

not just helped our clients in our backyard but allowed us to advocate for our clients outside our market and strengthen our alignment with the 24,000 sales associates of Sotheby’s International Realty®.

SOTHEBY’S INTERNATIONAL REALTY OFFICES AND CONNECTIONS

Right: The Seattle Great Wheel *Total sales volume 2021, includes off-market sales. Nothing Compares | 59

60 | 2022 Forecast Report

As we’ve heard across the nation, “home” has taken on new meaning, whether it became a classroom, an office, gym, or a reality baking series, there were others that it opened new borders for. The new models of remote or hybrid working changed the conversation from just upsizing a home, to exploring new territory.

Listing inventory has continued to be scarce in most U.S. markets, causing pent-up demand and what some would call a frenzy. In some cases, it has discouraged homeowners from entering the market and instead nest on an abundance of equity. As the market has felt increasingly squeezed, many of our advisors wielded the strength of our awardwinning marketing agency to build strategic marketing that connected buyers with homes or quickly cast the largest net for their listings to grant the highest return for their clients. When compared to our competitors in 2021, our advisors garnered the highest average listing sold price of $1.291M for all of Washington*. No matter where your journey takes you next, you can trust one of our 300+ global advisors of Realogics Sotheby’s International Realty will work alongside you to help you achieve your real estate goals.

* Average list sold price Washington state 1/21-12/21, Trendgraphix data. Nothing Compares | 61

$ 1 Billion SOTHEBYS LUXURY

AUCTIONS

Sotheby’s Auction Totals

$6 Billion

Sothebys Private SalesTotals

$1.3 Billion

NEW

buyers

E, the People

Most valuable historical document ever sold: a rare printing of the

US CONSTITUTION

$43.2 million

62 | 2022 Forecast Report

Online sales: a record

$800

million

125 Records

MADE FOR LEADING ART IN SOTHEBY’S MARQUEE S

Works from th

Macklowe

Collection

$676

MILLION

MOST VALUABL

SINGLE OWNER AUCTIO

EVER STAGE

Botticelli

NEW

Bidders

Banksy’s

TISTS SALES

Highest price for an

Love is in the Bin triples high estimate to bring record

$25.4

Old Master

$1.8 MILLION

92% of total bids placed

online 2021 2020

$100 million

NFT

16.6

million livestream views

sales to date

200,000

101

bids

BORED APE

YACHT CLUB

NFTs $24.4 million

151

$5-50 million

$18.9

FOR LS

Transactions from

AG LE E LE SE L UB

million N

Kanye West 2008 ‘Grammy worn’ Nike Air Yeezy Samples

million

SNEAKERS EVER SOLD:

1933 DO

MOST VALUABLE

OVER

92.2

at Sotheby’s:

44%

R EC

O ORD F

Nothing Compares | 63

Design Trends Inside and Out A LOOK AT DESIGN AND HOW WE’RE LIVING IN 2022 Written by Tiffany Bowie Architect Malboeuf Bowie Architecture LLC

Fremont Garage with Green Roof

Type: Residential & Landscape Location: Fremont, Seattle Size: Approximately 1200 Square Feet Photography: Rafael Soldi

64 | 2022 Forecast Report

IN ORDER TO GET THE WORK DONE, YOU’LL HAVE TO HIRE YOUR CONTRACTORS—MANY OF WHOM ARE BOOKED MONTHS IN ADVANCE. I ADVISE MY CLIENTS TO INTERVIEW A MINIMUM OF THREE GENERAL CONTRACTORS AND FIGURE OUT IF THEIR PROJECT IS A FIT EARLY IN THE SCHEMATIC DESIGN PHASE.

he adage, luck is when preparation meets opportunity is usually used in business,

or sports, or entertainment. Not in design. But here we are. In 2022, I’m paying attention to trends that will make an interior pop, and am listening to how my clients want to live so we plan the perfect remodel or design the ideal home from the studs up. If you want to get any of that done, however, you’ll need to plan ahead. For those planning on buying a home and doing any sort of remodel in 2022, sign on with your designer as soon as you go pending—that’s when I’m signing clients on. The sooner the better. Nothing Compares | 65

Likewise, in order to get the work done, you’ll have to hire your contractors—many of whom are booked months in advance. I advise my clients to interview a minimum of three general contractors and figure out if their project is a fit early in the schematic design phase. Contractors are great at helping refine the scope of a project, which will allow you to stay on budget without any huge surprises down the road. And where’s the supply chain affecting your remodel? Appliances. As soon as you sign the contract, order your appliances. It may take months for them to arrive. Now that you’re prepared for how to design your home in 2022, here are the trends we’re expecting to see this year.

DESIGN ELEMENTS THE KITCHEN IS KING Kitchens have been the heart of the modern home, and it will stay that way in 2022. It’s nine-times-out-ten the most important feature to our clients, and as such, the kitchen redesign is typically included in a whole house remodel. I see function winning out over style, making room for the top appliances that make a kitchen *chef’s kiss* the perfect place to spend all day. But that doesn’t mean function can’t be beautiful. This year you’ll see more custom hoods over stainless steel appliances and brass finishes to add a classic touch.

THE GREAT OUTDOORS We will continue to see requests for expanding decks and creating curated backyard spaces. The exterior of the home is just as important as the interior of the home. Low maintenance materials are key, especially here in the Northwest where the weather can take a toll on a personal oasis. Flexibility in our outdoor spaces, too, is 66 | 2022 Forecast Report

Portland Remodel Type: Residential retrofit Location: Portland, OR Size: 2,600 Square Feet Photographer: Rafael Soldi

gaining popularity. We’ll see more retractable awnings in the new year. In new construction, I believe buyers will continue to desire a highly planned, and efficient outdoor space that is highly functional for entertaining, but that instead will devote yard space to detached accessory dwelling units (DADUs). Whether it is being built for additional income or multi-generational living—using this space, to create more living space will be more sought after by those creating their dream homes.

LAYOUT FLEXIBILITY COMES FIRST The idea of rarely using a room is like an untapped resource. As you start to envision your home and how you’ll use it, the layout is likely one of the first items you’ll address. Whether it’s creating a room that can be an office but transform into a guest suite when friends drop into town or creating a playroom that can transform into a home’s media hub, my clients are seeking solutions in both additional storage and layout than can offer homeowners the flexibility they long for. A guest bedroom that’s just for a bed? That’s so 2019.

Nothing Compares | 67

68 | 2022 Forecast Report

FROM UNUSED TO FUNCTIONAL While the open concept living-dining-kitchen is still incredibly popular, so are having spaces in the house for which one can escape. And one place where we’re creating these escapes is in otherwise unused square footage. It’s not only adding value to the home financially but for the spirit as well. If it’s an escape from work, an escape from home, an escape from working at home, a new library, meditation space, craft area, or place for your indoor putting green, it might be exactly what you need to turn a house into your personal sanctuary. Likewise, particularly in new construction, the desire for more bedrooms will outweigh the preference for large bedrooms, as it creates more opportunity for privacy and alone time. The primary bedroom and en suite bath are still important; however, I expect to see clients willing to sacrifice the size of the en suite and the additional bedrooms if it means they can pick up more space for an office, playroom, or home gym.

Queen Anne Kitchen Remodel

Type: Residential remodel Location: Queen Anne, Seattle Size: 450 Square Feet Photographer: Rafael Soldi

Nothing Compares | 69

Introducing Pantone’s 2022 Color Of The Year A CONVERSATION WITH LEATRICE EISEMAN

Article Courtesy of Sotheby's International Realty®

70 | 2022 Forecast Report

Striving for newness was precisely the goal with Very Peri. “We

antone’s Color of the Year is a highly anticipated announcement for design aficionados and consumers

alike, and the color institute’s heralded shade for 2022 is Very Peri—a blue hue with warm red undertones that “encour-

deliberately invented

ages personal inventiveness and creativity”. As expected,

a new color, the idea

there are many factors at play when making this selection.

of newness as we looked towards the future,” Eiseman says. “Our lives have been upended in the last few years and we’re looking for new ways of living.”

Here, Pantone Color Institute Executive Director Leatrice Eiseman shares her insights on this celebrated new shade, and suggests how to embrace it in one’s home.

PURPOSEFULLY DYNAMIC According to Eiseman, Very Peri’s violet hue is especially unusual because while it embodies variations of blue, it’s an unexpectedly lively color. “When you add that red violet undertone, you’re adding energy to the color, a certain dynamism,” she explains. “When you ask people what temperature blue is, they say cool. But when you add that other element of red violet, now you’re adding some excitement to

Bottom Left: Very Peri found in nature

the color, you’re energizing it.”

Bottom Right: Photo Courtesy of Leatrice Eiseman

Nothing Compares | 71

DEVELOPMENT AND INSPIRATION Determining Pantone’s Color of the Year is an alchemy of science and culture. On the technical side, creating Very Peri took more time than usual. “There’s a lot of give and take that goes on with the scientists, and when you say ‘it needs a tad more violet’ you have to go further than a tad,” Eiseman explains when asked about the process. “It was a back and forth, then we tested it in the digital realm, paper, and print.” For initial inspiration, Pantone looks to trends in a range of fields, from the art world, to museums, to films, to fashion and beauty. “What else is out there, that we see happening in the future, will validate our choice,” she says.

THE DESIRE FOR NEWNESS Innovation and freshness are important in any new year, but perhaps even more so in 2022. Striving for newness was precisely the goal with Very Peri. “We deliberately invented a new color, the idea of newness as we looked towards the future,” Eiseman says. “Our lives have been upended in the last few years and we’re looking for new ways of living.” She notes that new techniques, technologies, and digitization have impacted color and increased its vibrancy, especially as gaming and animation increase in popularity.

CONSIDER FABRIC AND TEXTURE Eiseman highlights a French term, changeant, that applies to Very Peri, which is the color’s changeable quality. She points to luxury fabrics with metallic shimmer, or silk or taffeta, that embody this transformational ability, and how the color of the year would lend itself well to those textures. “The color itself has the undertones melting into the blue,” she says. “It’s like an optical illusion that’s happening. It can be very striking and intriguing.” 72 | 2022 Forecast Report

Top: Athena Wang, New Zealand / Sotheby’s International Realty Bottom: Very Peri accent wall and pieces

START SMALL AT HOME At first glance, Very Peri may be a daunting shade to incorporate at home, but Eiseman has advice for those who are hesitant. “For anyone who is more timid, use it in small touches,” she advises. “Experimenting in small steps and using paint in particular is so easy to change out.” Eiseman recommends staying away from commitments like tile or furniture that’s not easy to reupholster, but the shade can be used to refresh existing furniture. “Now you’re adding some whimsicality, some humor,” she says.

IT’S ABOUT CONTEXT With all home design choices, the impact comes down to context. Eiseman encourages asking the following questions: “Where is it, what’s the attitude, what do you want to get across? [What’s] the mood that you want to create?” For example, Very Peri might seem playful as a painted accent wall in a living room, but in a bedroom, it’s more serene—the latter is a choice Eiseman has personally embraced. “It’s a wonderful bedroom color, associated with calming blue, and yet some fire underneath the color.” As Eiseman has shared, Pantone’s Very Peri has the power to evoke energy, yet simultaneously provides a sense of calmness—managing to perfectly capture the desires of our time. With enough intrigue and optimism to carry us through 2022, Very Peri’s versatility means this hue is likely to feel at home in any house.

View this story online at sothbeysrealty.com Link to: www.sothebysrealty.com/extraordinaryliving-blog/introducing-pantones-2022-color-ofthe-year-a-conversation-with-leatrice-eiseman

Nothing Compares | 73

Top Left: Museum of Glass (Tacoma) Bottom Left: Edmonds Waterfront Top Right: Beacon Hill Light Rail Station Middle Right: Saltair Beach Park (Kingston) Bottom Right: North Rose Hill Woodlands Park 74 | 2022 Forecast Report

THE NEXT it MARKET Looking to move into desirable neighborhoods when the market is hot, can often be defeating. Demand is high, which can quickly price potential buyers out. Timing it right, buying property in an up-in-coming neighborhood before values skyrocket, makes the dream of owning achievable and a great investment opportunity. The local experts and global real estate advisors with Realogics Sotheby’s International Realty help their clients identify the neighborhoods, towns, and communities that are in transition and will soon be the “it” place to call home. Whether driven by lifestyle, price point, style of home, or nearby amenities, an upand-coming neighborhood is an ideal location for first-time homebuyers, move-up buyers desiring new construction, investors, or those who long to be on the cutting edge. There are signs that your neighborhood is on an upswing—from new construction to flipped houses and an influx of new generations—potentially taking advantage of lower home and rental prices that may have pushed them out of already established neighborhoods. In some of these neighborhoods, you’ll make sacrifices (though not necessarily) but long term you’ll also reap the rewards. When neighborhood values increase, so will the equity in your home. A collective of our local experts and global real estate advisors helped us compile this list of neighborhoods that are on the rise in 2022.

Nothing Compares | 75

Neighborhood Highlight BEACON HILL

Written by Alyssa Morrison Photography by Samuel Owens & Chris Fox

76 | 2022 Forecast Report

he neighborhoods that span the

city

Seattle

offer

different amenities, communities, and lifestyles. Each is uniquely “Seattle” in its own way. But the price points of homes across the city vary greatly, and while proximity to downtown certainly

drives

desirability

and

demand, in Seattle so does access to public transportation. And yet, when we examine up-and-coming neighborhoods in the Seattle area, why does Beacon Hill stand apart from the other neighborhoods as one that at the top of our list for transformation? First, located to the south of downtown, Beacon Hill is a transportation hub—with a Link light rail stop as well as a major bus hub. It’s also an easy exit from I-5. Whether it’s a trip to the airport, pivoting north to the University of Washington, or commuting to the business and tech

Bottom Left: Views Of Downtown Seattle From Jose Rizal Bridge Top Right: Pacific Medical Building Bottom Right: North Beacon Hill Townhomes

cores of downtown and South Lake Union or the Eastside by car, train, bus, or bike, Beacon Hill presents options for both drivers and the car-less. Beacon Hill has transformed over the past 10 years. Just watch for the

construction

—

Northwest

Contemporary homes are replacing smaller, older homes in large lots. The opportunity for townhouses along the area’s busier thoroughfares creates more options for homeownership, and at a lower price point than many other neighborhoods in the city.

Nothing Compares | 77

Top Left: Beacon Hill Station

Geographically, the neighborhood offers quiet residential

Bottom Left: Views From Jefferson Park

living just blocks away from bustling streets, with views

Top Right: Northwest Contemporary Style In Beacon Hill

of downtown, SoDo, Elliott Bay, First Hill, or the Rainier

Middle Right: Jefferson Park's Skateable Art Sculpture, Red Bull Skate Space

Valley—depending on your vantage, with Mount Rainier,

Bottom Right: South Beacon Hill Townhome

the Olympics, and the Cascades visible to those who have higher hilltop homes. And while green spaces and parks are relatively easy to find, the focal point of this community is Jefferson Park, 52 acres that include a public golf course, along with lawn bowling, a skate park, and an extensive playground, tennis courts, and plenty of open space—where events are held or groups can gather for picnics. Many of the shops and boutiques of the neighborhood speak to its roots as one of the most racially diverse neighborhoods in the city, and alongside those, trendy restaurants, breweries, specialty cafes. Seeing the old guard hang in as the new amenities pop up, is also a sure sign that this neighborhood is on the rise.

78 | 2022 Forecast Report

Geographically, the neighborhood offers quiet residential living just blocks away from bustling streets, with views of downtown, SoDo, Elliott Bay, First Hill, or the Rainier Valley

Nothing Compares | 79

Neighborhood Highlight NORTH ROSE HILL

Written by Alyssa Morrison Photography by Samuel Owens & Chris Fox

80 |

transitioning

Kirkland

neighborhood

nestled

between South Rose Hill and Totem Lake, North

Rose Hill boasts amenities, parks, and supports those who seek the lifestyle of the Eastside with relative affordability. While some areas of Kirkland have seen an explosion in popularity, which of course leads to climbing home sales prices, North Rose Hill is a gem yet to be discovered by the masses. The neighborhood is particularly of interest for those who work in the Eastside tech sector, in particular Google’s Kirkland campus. And beyond, its access to I-405 affords connection to the entire region, plus an easy pivot to Amazon in Bellevue, Facebook in Bellevue and Redmond, and Microsoft in Redmond. The amenities of Kirkland’s expanding downtown, including shopping and restaurants, aren’t far either. Just down the street shopping at the newly developed Village at Totem Lake is also a big draw with stores like Whole Foods, Lululemon, and Nordstrom Rack. Schools in the Lake Washington school district both anecdotally and by the data offer a great education, boasting excellent test scores. The neighborhood’s parks offer outdoor escapes, playgrounds, and more, that will appeal to residents of all ages. Forbes Lake Park is found in southwest North Rose Hill and is ideal for taking a stroll on the paved paths through their wetlands to spot local wildlife. Mark Twain Park offers a playground, playfields, and basketball court, in addition to a paved trail for short jogs. Known as Castle Park to some, for its popular playground, Woodlands Park’s westside boasts two playgrounds, picnic tables, and shelters.

Left: North Rose Hill Water Tower

Nothing Compares | 81

82 | 2022 Forecast Report

The homes of North Rose Hill are largely Traditional or Craftsman,

The amenities of

though a large influx of new homes are being built by Merit Homes, MN

Kirkland’s expanding

Custom Homes, and others at a rapid pace, generally in the Northwest Contemporary style—new construction homes are a sign that this

downtown, including

neighborhood is on the rise and one to watch.

shopping and restaurants, aren’t far either. Just down the street shopping at the newly developed Village at Totem Lake is also a big draw with stores like Whole Foods, Lululemon, and Nordstrom Rack.

Top Left: Woodlands Park North Entrance Bottom Left: New Construction Becoming The Norm Top Right: Small 10-Home Development

Nothing Compares | 83

Neighborhood Highlight NORTH TACOMA

Written by Alyssa Morrison Photography by Samuel Owens & Chris Fox

orth Tacoma is a collection of some of the city’s most eclectic and vibrant neighborhoods. A

Developed in the late 19th and early 20th century, the historic North End some opportunity for multi-family living, this area of offers a wide array of architecturally Pierce County provides stunning water views, plenty of significant homes, ranging from retail activity, and parks, typically at lower listing prices craftsman-style bungalows to stately compared to Seattle and Bellevue homes to the north. mansions. Many of North Tacoma’s To say North Tacoma is an undiscovered gem does a small neighborhoods have undergone disservice to the people who call it home and couldn’t redevelopment in recent years inviting a imagine leaving. Finding a home in this area can still be resurgence in restaurants and shops. competitive, even while the price points remain lower. mix of historic and traditional single-family homes, with

But with patience, you may be able to find exactly what makes this community right.

of North Tacoma’s small neighborhoods have undergone

Highlights for homebuyers include homes with water

redevelopment in recent years inviting a resurgence in

views—depending on the location, a full panoramic vista of

restaurants and shops. Nestled in the neighborhood, The

the Sound, or peekaboo seascapes. There’s also easy water

Proctor District features a mix of locally-owned shops,

access across much of the area, too, with trails that lead from

restaurants, and a Saturday farmers market, drawing those

small public parks to the water’s edge. Developed in the late

who want to experience a comfortable small-town feel.

19th and early 20th century, the historic North End offers a wide array of architecturally significant homes, ranging from craftsman-style bungalows to stately mansions. Many

84 | 2022 Forecast Report

North Tacoma’s status as an up-and-coming neighborhood stems from its growing accessibly to the business cores of the metro area. While work-from-home has taken

Top Left: Traditional Home Style In North Tacoma Bottom Right: Museum Of Glass Artwork Right: Tacoma #1 Fireboat In Old Town

Nothing Compares | 85

prominence, the ability of Seattleites to choose a destination farther from their business address, allows a community like North Tacoma to be a feasible possibility that may have only been convenient for Tacomans before. Its schools, while not rated among the top in the state, are heralded for their diversity and their opportunities for athletes. For Tacomans seeking a North End address, they already know that part of the appeal of this neighborhood is how much there is to explore. Point Defiance Park is a 702-acre park that’s nestled on the northernmost tip of North Tacoma and blends into the waterfront—and that’s just to start. From Old Town to Ruston to the North Slope Historic District, along with the Stadium District and the University of Puget Sound neighborhood, there’s plenty to see and do.

Left: Stadium High School Top Right: Dune Peninsula At Point Defiance Park Bottom Right: Early 20th Century Architecture In North Tacoma 86 | 2022 Forecast Report

Nothing Compares | 87

Neighborhood Highlight EDMONDS

Written by Alyssa Morrison Photography by Samuel Owens & Chris Fox

88 | 2022 Forecast Report

ust 18 miles north of Seattle, Edmonds is a welcoming hamlet of 42,000, perfectly placed on the west-facing

slope of Puget Sound. Its tree-lined streets, boutique downtown, and beautiful vistas make this Snohomish County town a hideaway for those who desire something quieter but not too far from the city. It’s a place where flowers bloom in every yard come spring and people smile when they walk down Main Street. But don’t let the size of Edmonds and its charm fool you, this is no sleepy town— it’s on the rise. Edmonds, and especially Meadowdale, are now an oftsought local for those who may not find in-city life or Eastside suburbia, practical for their needs and wants. The area is dotted with Traditional and Mid-Century Modern homes, with plenty of new construction opportunities and land development sales currently under contract. Some, it appears, have opted to remodel and preserve mid-century homes rather than tear down and build the Northwest Contemporary style popping up elsewhere in the region. There’s a reason for that—there’s opportunity for land development in Edmonds without tearing existing houses down. Amid tall firs on quiet streets, these neighborhoods boast a sense of community, preservation, and opportunity.

Top Left: Edmonds-Kingston Ferry From Olympic Beach Park Bottom Right: Mural In Downtown Edmonds Nothing Compares | 89

The schools in Edmonds are praised anecdotally, though

The schools in Edmonds are praised anecdotally, though its district isn’t among the top-rated in the state. Combine these good reviews with its easy access to both I-5 and SR-99, and it becomes an ideal community for families, allowing professionals to commute to the business core while raising little ones in a small-town environment.

its district isn’t among the top-rated in the state. Its safest neighborhoods. Combine these good reviews with its easy access to both I-5 and SR-99 creates an ideal community for those who live that hybrid-remote-work-life and might prefer an environment more akin to a small-town lifestyle. A walk down Main Street showcases much of what makes Edmonds the ideal waterfront community. Centered around a fountain at the intersection of 5th and Main, the town spreads out in an eclectic array of independent shops mixed with art galleries, wine bars, and sidewalk cafes. The streets are equally beautiful in any direction you choose, accented by art and colorful hanging baskets. On a summer night, the glow from vintage streetlamps mingle with the scent of blossoming geraniums and begonias; it’s a magical scene. And let’s not forget about the views. While views of the Puget Sound can cost millions in downtown Seattle, depending on the location of the home, in Edmonds, water views hit at a lower price point. And with those vistas, homeowners can watch passing ferries and Puget Sound wildlife. While Edmonds may not be associated with the hustle and bustle of the tech and business cores of Seattle and Bellevue, you won’t lack things to do. There’s a full calendar of yearround events, enough gourmet restaurants to satisfy even the pickiest foodie, and so many transportation options that you’ll never be stuck in traffic again. Only a short and picturesque train ride away from Seattle, Edmonds is the perfect choice for those seeking comfort of small-town life with the world at their fingertips.

Top Left: Local Fish And Chips Bottom Left: Local Market And Restaurant Far Right: Edmonds Historical Museum Bottom Right: Edmonds Marina 90 | 2022 Forecast Report

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Neighborhood Highlight KINGSTON

Written by Alyssa Morrison Photography by Samuel Owens

ingston may be across the water from the Seattle metro, but the key to its growth is its 40-minute ferry

access to Seattle. And it’s no secret to the 2,200+ residents that call this quaint town “home”, its waterfront location has a lot to offer. Often referred to as the northern gateway to the Olympic Peninsula, Kingston is a resort town that serves as the economic and social center of north Kitsap County. Compared to its neighboring towns on the Kitsap Peninsula, Kingston offers more flexibility, more affordable home prices, and a variety of lifestyle opportunities. Transportation and the connectedness of the city can often be a signal that a place will soon be in demand. And like its neighbor to the south, Bainbridge Island, Kingston offers two ferry options. The Kingston-Edmonds ferry is operated by the Washington State Department of Transportation and takes passengers that both walk-on and drive-on. The Kingston Fast Ferry is a 40-minute, passenger-only option (no driveon), operated by Kitsap Transit, that docks in Seattle at Pier 50, just south of Colman Dock. Of course, Kingston isn’t the only fast ferry-connected hamlet across the water from the metro. However, when comparing its home sales prices to that of Bainbridge Island, which offers similar amenities, the cost of living is much lower. And with such little inventory available on the Island, those who are seeking to escape the fast pace of Seattle and the Eastside, are turning to other Kitsap towns. Kingston and Poulsbo offer a similar median home sales price, however, the latter doesn't offer an easy pivot to Seattle. Of course, those seeking waterfront living on the Peninsula can seek an array of options, but a saltwater address in Kingston affords many of the same amenities, it just takes a visit on a sunny day to see the appeal of the town’s quaint Main Street lined with shops and pubs. A Farmers Market and other fun annual

Left: Kitsap County Fast Ferry To Downtown Seattle

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community events unite residents amid a landscape that offers more space and safety than the metro area. The White Horse Golf Club offers 18 holes as well as an all-grass practice facility and putting greens. And for those seeking wilder outdoor adventures, the nearly 800-acre North Kitsap Heritage Park offers trails amid the wildlife and green trees, and is an incredible hiking destination—the large network of trails allow visitors to create loops for shorter or longer trips.

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Top Left: Kingston Sunset From Puyallup Ferry Top Right: White Horse Golf Course Bottom Right: Waterfront Homes Near The Ferry Terminal

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46M

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300+

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Nothing Compares. The global real estate advisors of Realogics Sotheby’s International Realty are local experts who live and work in the communities they serve, with deep knowledge of our swiftly moving market. They guide buyers and sellers to make advantageous decisions that will help them achieve their real estate and investment goals whether that’s in the Northwest or across the globe. Offering the Puget Sound’s quintessential innovation along with award-winning marketing and backed by a talented team who goes above

and beyond, these global real estate advisors are committed to uniting more buyers and sellers year after year. For expertise that reaches down the block and around the world, there’s Realogics Sotheby’s International Realty.

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