Northwest Oregon and Southwest Washington Home Prices

❱ The average price that a home sold for in the region fell .1% year over year and was essentially flat compared to the second quarter of 2023.

❱ On average, the median listing price of a home rose a modest 1.9% compared to the second quarter of this year, suggesting that home sellers are starting to be realistic about the impact higher mortgage rates are having on buyers.

❱ Average sale prices rose in 10 counties compared to the third quarter of 2022, while eight saw prices fall. Wasco and Clatsop counties experienced fairly significant declines in prices, but these are relatively small markets where significant swings can occur. The same can be said when looking at markets where prices rose, with prices in Klickitat County up more than 10%.

❱ Price growth appears to have stalled out, which isn’t surprising given that mortgage rates were above 7% for almost the entire quarter. I expect home prices to remain fairly static for the fourth quarter as buyers and sellers wait to see where mortgage rates are headed.

Mortgage Rates

Mortgage rates continued trending higher in the third quarter of 2023 and are now at levels we have not seen since the fall of 2000. Mortgage rates are tied to the interest rate (yield) on 10-year treasuries, and they move in the opposite direction of the economy. Unfortunately for mortgage rates, the economy remains relatively buoyant, and though inflation is down significantly from its high, it is still elevated. These major factors and many minor ones are pushing Treasury yields higher, which is pushing mortgage rates up. Given the current position of the Federal Reserve, which intends to keep rates “higher for longer,” it is unlikely that home buyers will get much reprieve when it comes to borrowing costs any time soon.

With such a persistently positive economy, I have had to revise my forecast yet again. I now believe rates will hold at current levels before starting to trend down in the spring of next year.

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.

Although modestly lower home sales could suggest that buyers are in a better position when it comes to negotiating for a home, list prices, sale prices, and shorter market time favor home sellers.

In the second quarter market update, it was suggested that the market was returning to one that favors sellers and moved the needle accordingly. This is still the case, but mortgage rates remain a significant obstacle. Therefore the needle stays in the same position as last quarter: very slightly favoring sellers, but not by much.

Northwest Oregon and Southwest Washington Home Prices

❱ The average sale price in the region fell 3.7% year over year, but there was a profound spring bump. Prices in the second quarter were 8.4% higher than in the first quarter of this year.

❱ On average, median list prices rose 7% compared to the first quarter of this year, suggesting that home sellers are feeling confident about the market.

❱ All but three counties saw average sale prices fall compared to the second quarter of 2022. Every county other than Clatsop, Linn, Marion, and Skamania saw prices rise compared to the first quarter of this year.

❱ I expect home prices to rise as we move through the second half of the year, but mortgage rates will dictate the pace of growth.

Mortgage Rates

Although they were less erratic than the first quarter, mortgage rates unfortunately trended higher and ended the quarter above 7%. This was due to the short debt ceiling impasse, as well as several economic datasets that suggested the U.S. economy was not slowing at the speed required by the Federal Reserve.

While the June employment report showed fewer jobs created than earlier in the year, as well as downward revisions to prior gains, inflation has not sufficiently slowed. Until it does, rates cannot start to trend consistently lower. With the economy not slowing as fast as expected, I have adjusted my forecast: Rates will hold at current levels in third quarter and then start to trend lower through the fall. Although there are sure to be occasional spikes, my model now shows the 30-year fixed rate breaking below 6% next spring.

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.

Rising list prices, home prices, and sales all point to a market that favors home sellers. Although one quarter of growth could be an anomaly, I do not believe this to be the case here.

In the first quarter Gardner Report, I gave the advantage to home buyers, but I also stated that I could easily see the market returning to one that favors sellers as we approached the summer months. This appears to be the case. As such, I have moved the needle to favor home sellers again.

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.

Northwest Oregon and Southwest Washington Home Prices

❱ The average home sale price in the region fell 5.2% year over year and was down 3.1% compared to the fourth quarter of 2022.

❱ Compared to the final quarter of 2022, home prices fell in nine counties but rose in the other nine. Hood River and Skamania counties had double-digit price growth over the prior quarter, but these are very small markets and are prone to significant swings.

❱ All but seven counties saw average home prices fall compared to a year ago. In the markets where prices rose, the pace of growth was generally slower than has been the case for a number of years.

❱ Half of the counties in this report saw listing prices rise, while the other half saw them fall. This is a little counterintuitive given the lack of inventory, but it may be that prices in some markets simply rose too much in recent years and that affordability is still a hindrance.

Mortgage Rates

Rates in the first quarter of 2023 were far less volatile than last year, even with the brief but significant impact of early March’s banking crisis. It appears that buyers are jumping in when rates dip, which was the case in mid-January and again in early February.

Even with the March Consumer Price Index report showing inflation slowing, I still expect the Federal Reserve to raise short-term rates one more time following their May meeting before pausing rate increases. This should be the catalyst that allows mortgage rates to start trending lower at a more consistent pace than we have seen so far this year. My current forecast is that rates will continue to move lower with occasional spikes, and that they will hold below 6% in the second half of this year.

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.

Mortgage rates in the first quarter were lower than at the end of 2022, which generally favors buyers. Additionally, falling listing and home sale prices are also creating favorable conditions for buyers. The data suggests that buyers have a slight advantage in many, but not all, markets in the region.

As a result, for the first time in over a decade, I am giving them a slight advantage over home sellers. That said, I can easily see it returning more toward sellers as we approach the summer. Only time will tell.

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.

Northwest Oregon and Southwest Washington Home Prices

❱ The average home sale price in the region matched that of the same period the year prior, but it was down 5.6% compared to the third quarter of 2022.

❱ Relative to the third quarter of 2022, average prices fell across the board. Columbia, Hood River, Lincoln, and Wasco counties saw double-digit declines.

❱ Prices in all but seven counties fell year over year. Where prices did rise, the pace of growth was far lower than the market has seen in a number of years.

❱ Several markets appear to show listing prices either stabilizing or increasing modestly. It is possible that some markets have adjusted to account for higher mortgage rates. It will be interesting to see if this continues as we move into the spring market, or if we will see prices erode further.

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.

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.

I believe the market will remain somewhat soft as we move through the spring, but with many sellers believing that prices have found a bottom (as indicated by the stabilization in listing prices), buyers may not end up in as strong a position as they might think.

The market is, without a doubt, closer to balance than it has been in over a decade. As such, I have moved the needle as close to the balance line as we have seen in a very long time.

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.

Northwest Oregon and Southwest Washington Home Prices

❱ The average home sale price in the region rose 5% year over year to $566,595. Prices were 3.9% lower than in the second quarter of this year.

❱ Relative to the second quarter of 2022, average prices rose in Benton, Clatsop, Lincoln, and Wasco counties. They remained static in Marion County but fell in the balance of the markets.

❱ All but five counties saw average sale prices rise compared to a year ago, but the pace of growth is certainly slowing.

❱ Clearly, rising mortgage rates have started to impact home prices. Median list prices are still rising in almost all markets compared to the second quarter, which suggests that sellers continue to be confident. That said, I expect to see either list prices start to soften or sellers take their homes off the market until they see conditions improving.

Mortgage Rates

This remains an uncertain period for mortgage rates. When the Federal Reserve slowed bond purchases in 2013, investors were accused of having a “taper tantrum,” and we are seeing a similar reaction today. The Fed appears to be content to watch the housing market go through a period of pain as they throw all their tools at reducing inflation.

As a result, mortgage rates are out of sync with treasury yields, which not only continues to push rates much higher, but also creates violent swings in both directions. My current forecast calls for rates to peak in the fourth quarter of this year before starting to slowly pull back. That said, they will remain in the 6% range until the end of 2023.

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.

Although the labor market is slowly recovering, the specter of an economic slowdown in 2023 is starting to weigh on the market. The rapid pace of home-price growth in 2020 and 2021 was never going to last forever. The market is currently going through a period of reversion, which will slow it to a more sustainable pace. Although this may be painful to watch for some, it is necessary. Sellers have seen the value of their homes skyrocket over the past two years, so even if we experience a modest downturn in home prices, they are still in a very good situation. I would add that 58% of homeowners with a mortgage in Northwest Oregon/ Southwest Washington have more than 50% equity in their homes.

All that considered, I am moving the needle more toward balance, but until buyers and sellers start to feel more confident in the local and national economy, the market is likely to continue experiencing uncertainty. This will lead to lower sales activity and put downward pressure on prices.

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.

Northwest Oregon and Southwest Washington Home Prices

❱ The average home sale price in the region rose 11.2% year over year to $589,526. Prices were 7.8% higher than in the first quarter of 2022.

❱ Relative to the first quarter of 2022, average prices rose in all counties other than Clatsop and Columbia. Home prices were up by more than 20% in Hood River and Klickitat counties.

❱ All but five counties saw average sale prices rise more than 10% compared to a year ago.

❱ Rising mortgage rates have yet to impact home prices. Median list prices are still rising in most markets, which suggests that home sellers remain confident. I will be closely monitoring list prices going forward, as they will be the first indicator that the market may be cooling; I currently see no real signs of this.

Mortgage Rates

Although mortgage rates did drop in June, the quarterly trend was still moving higher. Inflation—the bane of bonds and, therefore, mortgage rates—has yet to slow, which is putting upward pressure on financing costs.

That said, there are some signs that inflation is starting to soften and if this starts to show in upcoming Consumer Price Index numbers then rates will likely find a ceiling. I am hopeful this will be the case at some point in the third quarter, which is reflected in my forecast.

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.

Though the job market is recovering more slowly than I would like, the housing market is still performing strongly. As we move through the year, some may believe that the market is underperforming, but this is not the case. Along with much of the rest of the country, the Northwest Oregon and Southwest Washington housing markets have been overperforming since the onset of the pandemic. As I expect the market to start trending back to its pre-pandemic pace of sales and price growth, the slowdown might feel exaggerated, but there is no cause for concern.

Despite dramatically rising financing costs, buyers still appear to be motivated. List prices have yet to “roll over,” suggesting that sellers are still confident. This, combined with the other data presented here, tells me that they are still in the driver’s seat.

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.