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The following analysis of select counties of the Central Washington real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere Real Estate agent.
Regional Economic Overview
Central Washington lost 3,431 jobs over the past 12 months. Although it’s never good to see a region shed jobs, I believe the declines in total employment are due to businesses pulling back in anticipation of a slowing economy. A recession in 2023 is far from guaranteed though, and if we manage to avoid one, I expect businesses will start hiring again. When adjusted for seasonality, unemployment levels in Central Washington were 6.2%, up from 5.4% a year ago. The lowest unemployment rate was in Chelan County, where it was 4.9%. The area’s highest jobless rates were in Yakima and Okanogan counties, where 6.7% of the labor force was unemployed.
Central Washington Home Sales
❱ There were 941 home sales in Central Washington in the final quarter of 2022, which is a decline of 37.5% from the same quarter the prior year.
❱ Pending sales, which are an indicator of future closings, fell 44.2% compared to the third quarter of 2022, suggesting that the market may not show much growth in early 2023.
❱ Sales fell significantly across the board relative to the same period the previous year. The number of homes sold was also down 33.8% from the third quarter of 2022.
❱ Inventory levels rose 24.6% year over year, giving buyers who were still in the market significantly more choices.
Central Washington Home Prices
❱ The average home price in Central Washington rose 4.3% year over year to $489,710. Prices were down 5.3% from the third quarter of 2022.
❱ Median listing prices fell in every county other than Kittitas compared to the third quarter of 2022. It appears that sellers are being more realistic about prices given the significant increase in mortgage rates.
❱ All counties other than Douglas saw prices rise year over year, with an increase of more than 10% in Kittitas County. But prices fell across the board compared to the third quarter of 2022.
❱ The winter months typically see a slowdown in the real estate market. The question now becomes whether buyers will restart their home search in the spring despite higher mortgage rates, or if sellers will have to lower prices further to entice the buyers back into the market. I believe the latter is more likely.
Mortgage Rates
Rates rose dramatically in 2022, but I believe that they have now peaked. Mortgage rates are primarily based on the prices and yields of bonds, and while bonds take cues from several places, they are always impacted by inflation and the economy at large. If inflation continues to fall, as I expect it will, rates will continue to drop.
My current forecast is that mortgage rates will trend lower as we move through the year. While this may be good news for home buyers, rates will still be higher than they have become accustomed to. Even as the cost of borrowing falls, home prices in expensive markets will probably fall a bit more to compensate for rates that will likely hold above 6% until early summer.
Central Washington Days on Market
❱ The average time it took to sell a home in Central Washington in the final quarter of 2022 was 54 days.
❱ Relative to the same period the year prior, it took 17 more days to sell a home.
❱ On average, it also took 17 more days to sell a home in the fourth quarter of 2022 than it did in the third quarter of the year.
❱ All counties saw the average time it took for homes to sell rise compared to both the third quarter of 2022 and the fourth quarter of 2021.
Conclusions
This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.
Employment growth has turned negative and uncertainty about the economy is sure to impact demand for housing. Mortgage rates have started to pull back, but I do not see them falling enough in the near-term to result in a surplus of home buyers.
That said, buyers have not abandoned the market entirely. I expect they are waiting for listing prices to soften a little more. If they see this happen and mortgage rates break below 6%, they are likely to resume their home search. Given these dynamics, I am moving the needle to slightly favor buyers, though I would describe the market as being quite neutral.
About Matthew Gardner
As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.
In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.
