Market News • January 31, 2023

Q4 2022 Central Washington Real Estate Market Update

by Windermere Economics

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.

A map showing the real estate home prices percentage changes for various counties in Central Washington. Different colors correspond to different tiers of percentage change. Douglas has a percentage change in the -1% to -0.1% range, Okanogan and Chelan are in the 3% to 5.9% change range, Yakima in the 6% to 8.9%, and Kittitas is in the 9%+ change range.

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.

A bar graph showing the mortgage rates from Q4 2020 to the present, as well as Matthew Gardner's forecasted mortgage rates through Q4 2023. After the 6.79% figure in Q4 2022, he forecasts mortgage rates dipping to 6.27% in Q1 2023, 6.09% in Q2 2023, 5.76% in Q3 2023, and 5.42% in Q4 2023.

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

Matthew Gardner - Chief Economist for Windermere Real Estate

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.

Market News • January 31, 2023

Q4 2022 Eastern Washington Real Estate Market Update

by Windermere Economics

The following analysis of select counties of the Eastern 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

Year over year, total employment in Eastern Washington fell 2,909 jobs. Spokane and Grant counties collectively lost 3,253 jobs. There were minor job losses in Lincoln, Walla Walla, and Whitman counties, but employment rose in Benton and Franklin counties. Unadjusted for seasonality, the regional unemployment rate was 5%, up from 4.2% a year ago. Seasonally adjusted, the jobless rate was 5.3%, up from 4.4% a year ago. Businesses may be looking to consolidate in anticipation of a possible economic slowdown this year. Although I am not particularly worried now, I will be watching to see if job losses continue as we move through the spring, which would be a greater concern.

Eastern Washington Home Sales

❱ In the fourth quarter of 2022, 2,167 homes sold, which was 42.8% lower than the same period the previous year and 34.4% lower than the third quarter of 2022.

❱ Listing activity rose 111% compared to the fourth quarter of 2021, but the average number of homes for sale was 12.5% lower than in the third quarter of 2022. This is expected given the slowdown that is traditional during the winter months.

❱ Year over year, sales fell across the region. Compared to the third quarter of 2022, sales were flat in Lincoln County but fell everywhere else.

❱ Pending sales fell 39.9% from the prior year, suggesting that the market will likely not see a buoyant early spring.

Eastern Washington Home Prices

❱ Year over year, the average home price in Eastern Washington rose 4.3% to $442,603. Average prices were down 4.5% from the third quarter.

❱ Compared to the third quarter of 2022, prices fell in all counties with the exception of Franklin (+1.9%) and Walla Walla (+0.7%).

❱ Average sale prices increased year over year in every county but Lincoln. Walla Walla County experienced significant price increases.

❱ Mortgage rates peaked in the quarter, which undoubtedly impacted home prices. Additionally, median listing prices fell in all counties compared to the prior quarter, which also impacted the pace of price growth.

A map showing the real estate home prices percentage changes for various counties in Eastern Washington. Different colors correspond to different tiers of percentage change. Lincoln has a percentage change in the -6% to -0.1% range, Franklin is in the 0% to 2.4% change range, Spokane and Benton are in the 2.5% to 4.9%, Whitman is in the 5% to 7.4% range, and Grant and Walla Walla are in the 7.5%+ change range.

Mortgage Rates

Eastern Washington Days on Market

❱ The average time it took to sell a home in Eastern Washington in the final quarter of 2022 was 35 days, which was 11 more days than the same period the previous year.

❱ Compared to the third quarter of 2022, average days on market in the region rose 11 days.

❱ All counties except Lincoln saw the average number of days it took for a house to sell rise compared to the same period the year prior.

❱ Higher financing costs and economic uncertainty have led market time to rise, but it’s possible that buyers are waiting for both mortgage rates and prices to fall further before starting their home search.

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 suggested in the last Gardner Report that higher financing costs were starting to act as a significant headwind in the market, and I stand by this statement. That said, seasonality always skews the numbers, so I will see how the spring market performs before I consider the region to be firmly in the hands of home buyers.

I expect prices will fall a little further before stabilizing and then starting to rise again at a significantly slower pace. Because the current market favors neither buyers nor sellers, I have moved the needle to the center.

About Matthew Gardner

Living • January 30, 2023

Pros and Cons of Living in a Penthouse

by Windermere Staff

A group of friends attends a party at a modern penthouse apartment. The unit has an open floorplan connected to a small yard on the building’s rooftop.

Penthouses take the luxury lifestyle to new heights; they boast the best views in the city, offer unparalleled exclusivity, and often include outdoor spaces not typically found in other units throughout the same building. These perks, however, come at a cost. For those considering renting or purchasing a penthouse, the following information will help to inform your discussions with your real estate agent.

What is a penthouse?

At its core, a penthouse is a luxury apartment/condominium. Located on the top floor of an apartment building, condominium complex, hotel, or tower, its luxury features differentiate it from the building’s lower-level units. The living space of a penthouse is usually set back from the building’s outer edge and the remaining square footage of the roof deck is typically used as a yard, hot tub, pool, outdoor kitchen, etc.

Pros

The View: Even in a densely populated metropolitan area, living in a penthouse is your best chance at an unobstructed view of the city. Perched above the vast majority of other apartment and condominium buildings, a penthouse provides a bird’s eye view of your surroundings without being blocked by neighboring units.
Indoor and Outdoor Space: A penthouse is more than a luxury apartment; it’s your own private outdoor terrace. With access to the outdoors, you have more room for your favorite at-home activities, plus an array of entertaining opportunities. Penthouses are typically designed with open-concept floorplans which emphasize their extra square footage. For those looking to increase their living space while remaining in the city, a penthouse may be the perfect solution.
Privacy: Because penthouses only have neighbors below them, a penthouse floor sees fewer visitors than the lower floors in a building. Some penthouse floors have a separate, private entrance for added security.

Cons

High Price: Gaining access to this exclusive lifestyle is expensive. The high price tags reflect its unique characteristics: being far away from street noise, having more square footage and outdoor space, added privacy, etc. In some places, the costs to purchase or rent a penthouse can outpace the average monthly mortgage payment for a single-family home in the area, especially if you have Homeowners Association (HOA) fees tacked on.
Home Maintenance: Having more indoor and outdoor space means there’s more to maintain. Owning or renting one of these units comes with a longer to-do list than a smaller apartment or condominium. You’ll either have to carve out additional time for upkeep or consider hiring a professional to clean your home regularly.

Work closely with your real estate agent to determine whether renting or purchasing a penthouse is right for you. Learn more about other housing types and the differences between them here:

House vs. Townhouse vs. Condo

Featured Image Source: Getty Images – Image Credit: skynesher

Market News • January 30, 2023

Q4 2022 Colorado Real Estate Market Update

by Windermere Economics

The following analysis of select counties of the Colorado 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

Although employment in the region is still expanding, the pace of growth continues to slow. Over the past year, 103,400 jobs were added, which is the slowest annual pace since the 12-month period ending in July 2022. The unemployment rate in November stood at a very respectable 3.5%. Regionally, unemployment rates ranged from a low of 2.8% in Boulder to a high of 4% in the Grand Junction metropolitan area.

Colorado Home Sales

❱ In the fourth quarter of 2022, 7,097 homes sold, which was 43% fewer sales than in the fourth quarter of 2021 and 34% lower than in the third quarter of 2022.

❱ Sales fell across all of the markets covered by this report compared to the same period the year prior and the third quarter of 2022.

❱ Normal seasonal shifts in the market led the number of homes for sale to drop 20.1% compared to the third quarter. However, inventory levels were up by a very significant 164.6% from the fourth quarter of 2021.

❱ Pending sales (an indicator of future closings) dropped 40.1% from the third quarter, which suggests that the market is likely to see little, if any, growth in the early spring of 2023.

Colorado Home Prices

❱ Home prices rose 3.4% from the same period in 2021 to $628,373. However, prices were 4% lower than in the third quarter in 2022.

❱ Compared to the third quarter, prices fell in all counties other than Larimer, which rose .4%. Listing prices were down in every county other than Clear Creek and Gilpin.

❱ Year over year, prices rose by double digits in Clear Creek and Denver counties. Annual price growth was negative in five of the other ten counties covered by this report.

❱ Home prices rose at an unsustainable pace during the pandemic but rising mortgage rates, higher inventory levels, and lower affordability are now having an impact. Home sale prices will likely continue to pull back as we enter the spring, but the correction should halt during the summer as mortgage rates continue falling.

A map showing the real estate home prices percentage changes for various counties in Colorado. Different colors correspond to different tiers of percentage change. Boulder, Gilpin, Jefferson, Park, and El Paso have a percentage change in the -3.9% to -0.1%+ range, Adams and Arapahoe counties are in the 0% to 2.9% change range, Weld is in the 3% to 5.4% change range, Douglas is in the 6% to 8.9% change range, and Clear Creek and Denver counties are in the 9%+ change range.

Mortgage Rates

Colorado Days on Market

❱ It took an average of 38 days to sell a home in the region.

❱ The average time it took to sell a home in the markets contained in this report rose 18 days compared to the same period in 2021 and the third quarter of 2022.

❱ Year over year, the length of time it took to sell a home rose across the board.

❱ Buyers have a lot more choice in the market than they have been used to. In addition, uncertainty about the direction of mortgage rates and home prices is likely keeping some buyers sidelined.

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.

Slowing job growth, the possibility of a mild recession in 2023, and higher financing costs are all weighing on the housing market. I suggested in the third quarter Gardner Report that the market was likely to continue slowing until prices became more realistic given higher mortgage rates; I am holding to this theory. I still anticipate many markets will see negative annual price growth this year, but prices will only pull back to 2021 levels. In other words, there is no significant cause for concern.

Prices are likely to fall a little further in the first half of the year before starting to rise again in the second half. All things considered, I have moved the needle to a neutral position, favoring neither buyers nor sellers.

About Matthew Gardner

Market News • January 30, 2023

Q4 2022 Southern California Real Estate Market Update

by Windermere Economics

The following analysis of select counties of the Southern California 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

Employment growth in Southern California continues to slow, with only 33,400 jobs added over the past three months. Annual growth also slowed: only 141,100 new jobs were added, which is down from 347,700 added between September 2021 and September 2022. Total employment in the counties covered by this report is still 305,300 shy of the region’s pre-pandemic peak. Los Angeles County still has the largest shortfall (-310,000), followed by Orange County (-36,800) and San Diego County (-19,500). Employment levels in the Riverside and San Bernardino markets remain well above pre-pandemic levels. The region’s unemployment rate in November was 4%, down from 5.4% a year ago. The lowest rates were in Orange County (3%) and San Diego County (3.3%).

Southern California Home Sales

❱ In the final quarter of 2022, 28,953 homes sold. This is 43.9% lower than the same period the year prior and down 24.5% compared to the third quarter of 2022.

❱ Pending home sales, which are an indicator of future closings, were down 30% from the third quarter, suggesting that sales activity in the first quarter of this year may also be down.

❱ On a percentage basis, sales fell the most in Riverside County, but all markets pulled back significantly. Compared to the third quarter, sales were down 24.5%, or 9,400 units.

❱ The lower number of sales can be attributed to more listings in the market, which were up 83.5% year over year, and higher mortgage rates, which make homes less affordable.

Southern California Home Prices

❱ Fourth quarter home sale prices were .7% higher than the same period the prior year but were 2.5% lower than in the third quarter of 2022.

❱ Mortgage rates, which peaked in October, have impacted both the number of sales and prices. Median listing prices were down 4.9%, which indicates that sellers have been adjusting their expectations, but I believe they will fall further before stability in the market is restored.

❱ The region had very modest price growth in all markets other than Orange County, where prices fell 2.8%. Compared to the third quarter of 2022, prices were lower across all markets other than Los Angeles County, where they rose .2%.

❱ Mortgage rates have started to pull back. If this continues, I am hopeful that the second half of 2023 will be more active, resulting in rising sales and home prices.

A map showing the real estate home prices percentage changes for various counties in Southern California. Different colors correspond to different tiers of percentage change. Orange County have a percentage change in the -3% to -0.1% range, Los Angeles and Riverside are in the 0.5% to 0.9% change range, and San Diego and San Bernardino are in the 1.5%+ change range.

Mortgage Rates

Southern California Days on Market

❱ In the final quarter of 2022, the average time it took to sell a home in the region was 37 days, which was 15 more than the same period the year prior and 11 more than in the third quarter of 2022.

❱ Compared to the third quarter of 2022, market time rose in all counties covered by this report.

❱ Homes in San Diego County continue to sell at a faster rate than other markets in the region, but market time increased in all counties year over year.

❱ More choice and higher mortgage rates appear to be sidelining some buyers. Whether they resume their search for a home in the spring may depend on the direction of mortgage rates and whether prices start to stabilize.

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.

Job growth has slowed, which may be at least partly attributable to businesses expecting to see the economy slow as we move through this year. The housing market is very susceptible to economic turbulence. This, combined with higher financing costs and softening prices, has caused a lull in the market.

There is no doubt that regional home values are resetting following the frenetic market during the pandemic when mortgage rates were artificially low. I expect prices to move modestly lower this spring before stabilizing and starting to rise again in the second half of the year. All things considered, I have moved the needle to a neutral position, favoring neither buyers nor sellers.

About Matthew Gardner

Market News • January 27, 2023

Q4 2022 Central and Southern Oregon Real Estate Market Update

by Windermere Economics

The following analysis of select counties of the Central and Southern Oregon 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

The Central and Southern Oregon areas covered by this report have now recovered all of the jobs that were shed due to the pandemic and added 720 new ones. Although the Medford metro area is still lagging, the other markets contained in this report have made up for the shortfall. The area’s unemployment rate was 4.8%, matching the level of a year ago. That said, the number of unemployed has started to trend a little higher across the board. By area, the lowest jobless rate was in Deschutes County (4.1%) and the highest was in Klamath County, where 6.1% of the labor force is still without a job.

Central and Southern Oregon Home Sales

❱ In the final quarter of 2022, 1,721 homes sold, which represented a drop of more than 42% compared to the same period the prior year. Sales were 29.4% lower than in the third quarter of 2022.

❱ Home sales fell in all counties relative to the third quarter of 2022. Only Josephine County saw a decline in sales of less than 10%.

❱ Sales fell significantly in all counties compared to the fourth quarter of 2021.

❱ The reason for the drop in home sales is likely because higher inventory levels gave buyers more choice. It also appears that many buyers are waiting to make a move in the hopes that prices and mortgages will fall further in the coming months.

Central and Southern Oregon Home Prices

❱ The average home sale price in the region rose 1% year over year to $557,517, but it was down 8.4% from the third quarter of 2022.

❱ Compared to the third quarter of 2022, average prices fell in every county other than Jefferson, where they rose 3.4%.

❱ All counties contained in this report saw prices rise year over year, but prices in Deschutes and Jackson counties were essentially unchanged. It doesn’t appear that home prices have been significantly influenced by the increase in mortgage rates yet.

❱ Compared to the third quarter, median listing prices fell in Deschutes, Jackson, Crook, and Josephine counties, but rose in Klamath and Jefferson counties.

A map showing the real estate home prices percentage changes for various counties in Central and Southern Oregon. Different colors correspond to different tiers of percentage change. Deschutes and Jackson Counties have a percentage change in the 0% to 1.9% range, Klamath and Josephine are in the 2% to 3.9% change range, Crook is in the 6% to 7.9% change range, and Jefferson County is in the 8%+ change range.

Mortgage Rates

Central and Southern Oregon Days on Market

❱ The average time it took to sell a home in the region rose 26 days year over year. It took 21 more days for a home to sell compared to the third quarter of 2022.

❱ The average time it took to sell a home in the final quarter of 2022 was 54 days.

❱ All counties saw market time rise compared to both the same period the year prior and the third quarter of 2022.

❱ It appears that buyers are being far more selective and taking their time when it comes to making an offer on a home.

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.

Sellers are adjusting to the changing market, as shown by the drop in asking prices in several markets, though this is not the case everywhere. The spring market will be a bellwether for the housing market in 2023. It appears as if mortgage rates have peaked, which should be good news for home buyers. Furthermore, sellers lowered their listing prices by almost 3% in the fourth quarter, demonstrating that they are aware that the market has shifted.

The market appears to be moving more toward buyers. As such, I have moved the needle closer to the center, but I cannot say definitively that the market completely favors buyers. The spring market will be very telling.

About Matthew Gardner

Market News • January 27, 2023

Q4 2022 Northwest Oregon and Southwest Washington Real Estate Market Update

by Windermere Economics

The following analysis of select counties of the Northwest Oregon and Southwest 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

Jobs continue to be added in Northwest Oregon. Though we continue to creep toward a full recovery of the jobs lost to the pandemic, employment levels are still down more than 38,000 jobs. The unemployment rate in the region was 5% and has been trending higher as the total number of jobs falls, albeit modestly. The Southwest Washington market also continues to perform well, but the pace of job growth has certainly tapered. Unemployment was on the decline through mid-summer but has started to rise again. The unemployment rate in November was 5.2%, which was the highest level since September 2021.

Northwest Oregon and Southwest Washington Home Sales

❱ In the final quarter of 2022, 8,434 homes sold, representing a drop of 43.4% from the same period in 2021.

❱ Year over year, listing activity was significantly higher but remained well below the long-term average. This suggests that high financing costs and affordability constraints are still impacting the market.

❱ Home sales fell across the board relative to the same time the previous year and the third quarter of 2022.

❱ Buyers have more homes to choose from than they have seen since 2019, yet many are still sitting on the fence. This may be because they are waiting for prices to fall further, mortgage rates to come down, or, likely, both. It will be interesting to see if buyer mentality changes in the spring.

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.

A map showing the real estate home prices percentage changes for various counties in Northwest Oregon and Southwest Washington. Different colors correspond to different tiers of percentage change. Klickitat County has a percentage change in the -17% to -11.6%+ range, Cowlitz, Hood River, and Yamhill counties are in the -11.5% to -6.1% change range, Clatsop, Columbia, Clark, Wasco, Lincoln, and Lane are in the -6% to -0.6% change range, Skamania, Washington, Multnomah, Clackamas, Polk, Benton, and Linn counties are in the -0.5% to 4.9% change range, and Marion County is in the 5%+ change range.

Mortgage Rates

Northwest Oregon and Southwest Washington Days on Market

❱ The average time it took to sell a home in the region rose 12 days compared to the same period the previous year. It took 11 more days for homes to sell than it did in the third quarter of 2022.

❱ The average time it took to sell a home in the final quarter of 2022 was 50 days.

❱ Skamania County was the only area where market time fell compared to the same period the prior year. Relative to the third quarter of 2022, market time fell in Benton and Skamania counties.

❱ Longer market time is a function of additional supply. While this gives buyers more choice, it also causes uncertainty in the housing market. As a result, buyers are significantly more cautious than they have been in quite some time.

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.

About Matthew Gardner

Market News • January 26, 2023

Q4 2022 Western Washington Real Estate Market Update

by Windermere Economics

The following analysis of select counties of the Western 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

Although the job market in Western Washington continues to grow, the pace has started to slow. The region added over 91,000 new jobs during the past year, but the 12-month growth rate is now below 100,000, a level we have not seen since the start of the post-COVID job recovery. That said, all but three counties have recovered completely from their pandemic job losses and total regional employment is up more than 52,000 jobs. The regional unemployment rate in November was 3.8%, which was marginally above the 3.7% level of a year ago. Many business owners across the country are pondering whether we are likely to enter a recession this year. As a result, it’s very possible that they will start to slow their expansion in anticipation of an economic contraction.

Western Washington Home Sales

❱ In the final quarter of 2022, 12,711 homes sold, representing a drop of 42% from the same period in 2021. Sales were 34.7% lower than in the third quarter of 2022.

❱ Listing activity rose in every market year over year but fell more than 26% compared to the third quarter, which is expected given the time of year.

❱ Home sales fell across the board relative to the fourth quarter of 2021 and the third quarter of 2022.

❱ Pending sales (demand) outpaced listings (supply) by a factor of 1:2. This was down from 1:6 in the third quarter. That ratio has been trending lower for the past year, which suggests that buyers are being more cautious and may be waiting for mortgage rates to drop.

Western Washington Home Prices

❱ Sale prices fell an average of 2% compared to the same period the year prior and were 6.1% lower than in the third quarter of 2022. The average sale price was $702,653.

❱ The median listing price in the fourth quarter of 2022 was 5% lower than in the third quarter. Only Skagit County experienced higher asking prices. Clearly, sellers are starting to be more realistic about the shift in the market.

❱ Even though the region saw aggregate prices fall, prices rose in six counties year over year.

❱ Much will be said about the drop in prices, but I am not overly concerned. Like most of the country, the Western Washington market went through a period of artificially low borrowing costs, which caused home values to soar. But now prices are trending back to more normalized levels, which I believe is a good thing.

A map showing the real estate home prices percentage changes for various counties in Western Washington. Different colors correspond to different tiers of percentage change. Grays Harbor and Whatcom Counties have a percentage change in the -6.5% to -3.6%+ range, Clallam, Jefferson, King, and Skagit counties are in the -3.5% to -0.6% change range, Snohomish and Pierce are in the -0.5% to 2.4% change range, Mason, Thurston, Island, and Lewis counties are in the 2.5% to 5.4% change range, and San Juan County is in the 5.5%+ change range.

Mortgage Rates

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 such as Western Washington will probably fall a bit more to compensate for rates that will likely hold above 6% until early summer.

Western Washington Days on Market

❱ It took an average of 41 days for homes to sell in the fourth quarter of 2022. This was 17 more days than in the same quarter of 2021, and 16 days more than in the third quarter of 2022.

❱ King County was again the tightest market in Western Washington, with homes taking an average of 31 days to find a buyer.

❱ All counties contained in this report saw the average time on market rise from the same period a year ago.

❱ Year over year, the greatest increase in market time was Snohomish County, where it took an average of 23 more days to find a buyer. Compared to the third quarter of 2022, San Juan County saw average market time rise the most (from 34 to 74 days).

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.

The regional economy is still growing, but it is showing signs of slowing. Although this is not an immediate concern, if employees start to worry about job security, they may decide to wait before making the decision to buy or sell a home. As we move through the spring I believe the market will be fairly soft, but I would caution buyers who think conditions are completely shifting in their direction. Due to the large number of homeowners who have a mortgage at 3% or lower, I simply don’t believe the market will become oversupplied with inventory, which will keep home values from dropping too significantly.

Ultimately, however, the market will benefit buyers more than sellers, at least for the time being. As such, I have moved the needle as close to the balance line as we have seen in a very long time.

About Matthew Gardner

Buying • January 25, 2023

How to Reduce Your Interest Rate: Mortgage Buydowns

by Windermere Staff

A man and woman homeowner couple review financial paperwork with their mortgage broker in a modern office.

This blog post contains contributions from Penrith Home Loans.

When mortgage rates are up, prospective buyers can often feel like they’re at a disadvantage as they go about securing a home loan. Fortunately, there are ways to lower your interest rate to make your monthly mortgage payments more affordable.

What are mortgage buydowns?

A mortgage rate buydown is a form of financing that allows you to secure a lower interest rate on your mortgage by paying more money upfront in the form of discount points, also known as mortgage points, at closing. Each discount point is equal to one percent of your total loan amount. Especially attractive in times of high mortgage rates, buydowns are offered by sellers, builders, or lenders depending on the transaction. There are two main types of mortgage interest rate buydowns: permanent and temporary.

Permanent Mortgage Buydowns

With a permanent interest rate buydown, typically the borrower, seller, or builder will contribute to the cost of buying down the rate permanently. In this situation, the borrower qualifies at the bought-down rate for the life of the loan.

Temporary Mortgage Buydowns

A temporary interest rate buydown provides cash flow for the borrower during the temporary period, but they still qualify at the higher note rate. Typically, the seller or builder will contribute to the cost of buying the rate down temporarily.

Use our Home Monthly Payment Calculator to experiment with different down payments, principal amounts, interest rates, taxes, and more for any listing price.

How do temporary mortgage buydowns work?

Temporary mortgage interest rate buydowns have their own unique structure. Below are three common types:

1-0 Buydown Mortgage: The borrower gets a 1% discounted interest rate for the first year.
2-1 Buydown Mortgage: The borrower gets a discounted interest rate for the first two years of the loan. The first year, the interest rate is 2% lower, decreasing to 1% lower the second year.
3-2-1 Buydown Mortgage: The borrower gets a 3% discounted rate the first year, dropping to 2% in the second year and 1% in the third year.

Although they share certain characteristics with adjustable-rate mortgages (ARMs), temporary mortgage buydowns are slightly different. ARMs initially have a fixed interest rate period. Once the adjustable-rate period kicks in, both the interest rate and monthly payments are subject to change. With buydowns, the buyer’s interest rate doesn’t change; either the seller or lender covers part of the interest payments as outlined by the buydown’s structure.

A man and woman homeowner couple discuss the terms of a mortgage buydown program with their mortgage broker in a modern office setting.

Image Source: Getty Images – Image Credit: kate_sept2004

Should I permanently buy down my mortgage?

Though buying down your mortgage interest rate permanently can make the payments more affordable, if you are contributing to this cost, make sure you can withstand the heavier financial load before proceeding. It also depends on how long you plan to live in the home. For example, if you plan to move shortly after buying, the short-term savings on your mortgage may not yet break even on your upfront costs by the time you’re ready to purchase again.

Pros of Mortgage Buydowns

Savings on monthly mortgage payments
A lower rate means you could qualify for a higher loan
Discount points = prepaid mortgage interest, which is often tax-deductible

Cons of Mortgage Buydowns

Higher upfront costs of buying a home
If payments increase, higher risk of foreclosure
Less cash available for remodeling, home improvements, etc.

A home office desk is filled with materials for a full day’s work; a full coffee cup, a smartphone, paperwork, and a laptop with a mortgage loan application form on the screen.

Image Source: Getty Images – Image Credit: cnythzl

How much can I save with a mortgage buydown?

Here’s an example of the savings you could see with a 3-2-1 temporary mortgage buydown. Let’s say you qualify for a 30-year mortgage with a $400,000 loan amount at an interest rate of 7%. With a 3-2-1 buydown, you’d pay a 4% interest rate the first year, 5% the second year, and 6% the third year. From year four on, you’d pay 7%.

Purchase Price	Down Payment	Loan Amount	Interest Rate	APR	Loan Term
$500,000	$100,000	$400,000	7%	7.125%	30 years

3-2-1 Temporary Mortgage Interest Rate Buydown

	Year 1	Year 2	Year 3	Years 4-30
Interest Rate	4%	5%	6%	7%
Number of Payments	12	12	12	336
Monthly P&I Payment	$1,909.66	$2,147.29	$2,398.20	$2,661.21
Total PITI Payment	$1,909.66	$2,147.29	$2,398.20	$2,661.21
Monthly Reduction	$751.55	$513.92	$263.01	–

Calculations provided by Penrith Home Loans
Temporary buydown cost as % of purchase price 3.67%

With this structure, you’d save $9,018.60 the first year, $6,167.04 the second, and $3,156.12 the third, for a total three-year savings of $18,341.76.

Thinking about buying a home? Connect with a local, experienced Windermere agent to begin your home buying journey:

Featured Image Source: Getty Images – Image Credit: kate_sept2004

Market News • January 23, 2023

2023 Real Estate Forecast: Why This Market Won’t Be Like 2008

by Windermere Economics

This video is the latest in our Monday with Matthew series with Windermere Chief Economist Matthew Gardner. Each month, he analyzes the most up-to-date U.S. housing data to keep you well-informed about what’s going on in the real estate market.

Hello there, I’m Windermere’s Real Estate’s Chief Economist Matthew Gardner and welcome to the first episode of “Monday with Matthew” for 2023. As has become tradition, this first episode of the year will be dedicated to my real estate forecast for the U.S. housing market, so let’s get straight to it.

2023 Real Estate Forecast

Existing Home Sales & Forecast

Image Source: Matthew Gardner

U.S. home sales trended lower through all of 2022 and, although I believe that sales will still have held above five million, this certainly won’t be the case in 2023. Affordability and higher financing costs will continue to act as headwinds when it comes to sales, but I think that the bigger issue will be that listing activity will not rise significantly as we move through the year.

As I have been saying for several months now, I don’t see why many households who don’t have to move will move and lose the historically low interest rate that they currently benefit from. That said, sales will still occur this year but at just 4.8 million, sales will be lower than we have seen since 2014.

Annual Change in Median Sale Prices

Image Source: Matthew Gardner

Much has been said about the future of home prices, with some forecasters even suggesting that housing prices will collapse in a similar fashion to that seen following the bursting of the housing bubble back in 2008. Now, although price growth through the pandemic period was clearly excessive, fundamentally speaking, the two periods cannot be considered to be similar at all.

It’s my opinion that sale prices in 2023 will be very modestly lower than last year and I certainly don’t expect to see a collapse in home values.

But not all markets are created equal. The pandemic created what has become known as “Zoom-Towns.” These were cheap markets that affluent buyers flocked to because of their newly found ability to work from home and this led sale prices there to soar. It’s these locations that will likely see prices fall more significantly. Ultimately, expect to see prices fall through the first half of this year before starting to recover in the second half.

New Home Starts & Forecast (Single Family)

From Matthew Gardner's 2023 real estate forecast, a bar graph of the single-family new home starts. The y-axis shows numbers in thousands from 0 to 1,200 and the x-axis shows the years 2015 through 2023. The numbers are as follows: 715 in 2015, 782 in 2016, 849 in 2017, 876 in 2018, 888 in 2019, 991 in 2020, 1,127 in 2021, 1,009 (forecasted) in 2022, and 837 (forecasted) in 2023.

Image Source: Matthew Gardner

Looking now at the new construction market, housing starts fell last year as construction costs remained high and mortgage rates rose which lowered demand. And I’m afraid that I do not see 2023 as being one where builders will deliver more inventory, with starts pulling back to a level the country hasn’t seen since 2016. That said, I am expecting a recovery in 2024 when new home starts will break back above the 1,000,000 level.

New Home Sales Forecast

From Matthew Gardner's 2023 real estate forecast, a bar graph showing the new home sales numbers from the U.S. housing market. The y-axis shows (in thousands) the numbers 200 to 900 and the x-axis shows the years 2015 through 2023. The number of new home sales are as follows (in thousands): 501 in 2015, 561 in 2016, 613 in 2017, 617 in 2018, 683 in 2019, 822 in 2020, 771 in 2021, 653 (forecasted) in 2022, and 584 (forecasted) in 2023.

Image Source: Matthew Gardner

New home sales in 2023 will fall further coming in below 600,000 but there is some light at the end of the tunnel with sales picking up fairly significantly again in 2024. We all understand that the country has a significant undersupply of ownership housing, but the costs associated with building new homes is still making it remarkably hard for builders even though they understand that demand will be significant for at least the next decade and a half given current demographics.

But the problem they will continue to face is that demand will primarily come from entry level buyers and, simply put, the cost to build a home precludes many developers from being able to meet this demand.

Average 30-Year Mortgage Rate & Forecast

A bar graph showing the average 30-year mortgage rate for the years 2015 through 2023. The y-axis shows percentages ranging from 0% to 7% and the years are displayed on the x-axis. The numbers are as follows: 3.9% in 2015, 3.7% in 2016, 4% in 2017, 4.5% in 2018, 3.9% in 2019, 3.1% in 2020, 3% in 2021, 5.4% in 2022, and 6.1% (forecasted) in 2023. This is the mortgage rate component of Matthew Gardner's 2023 real estate forecast.

Image Source: Matthew Gardner

And finally, my forecast for mortgage rates in 2023. Although this might not look good at all, as they say, “the devil is in the details.” Rates skyrocketed last year as the Fed stopped buying treasuries and mortgage-backed securities and, although they are off the highs we saw toward the end of last year, they are still significantly higher today than the market has become used to seeing.

As you can see here, I’m anticipating the average 30-year conventional rate to average 6.1% in 2023, but my forecast is actually a bit better than this shows.

Average 30-Year Mortgage Rate Forecast 2023

A bar graph showing the average 30-year mortgage rate in recent quarters, plus a forecast of the mortgage rate for each quarter in 2023. The y-axis displays percentages ranging from 0% to 7% and the x-axis displays the quarters from Q4 2021 to Q4 2023. The numbers are as follows: 3.1% in Q4 2021, 3.8% in Q1 2022, 5.3% in Q2 2022, 5.6% in Q3 2022, 6.8% in Q4 2022, 6.4% (forecasted) in Q1 2023, 6.1% (forecasted) in Q2 2023, 6% (forecasted) in Q3 2023, and 5.6% (forecasted) in Q4 2023. This is the mortgage rate component to Matthew Gardner's 2023 real estate forecast.

Image Source: Matthew Gardner

You see, my quarterly forecast suggests that rates have actually already peaked, and that they will trend lower as we move through this year and break below 6% by the fourth quarter. I would add that if anything my forecast may be a little pessimistic, and rates may end 2023 a little lower than I am showing here.

But that will depend on the Fed, and how long they will continue raising rates, and how long it will take before they start to lower them if the US enters a recession this year, which many forecasters including myself believe will be the case.

So, there you have it, my 2023 U.S. housing forecast. I will leave you with this one last thought. 2023 will be a transition year when the housing market will come off the “high” we saw during the pandemic and borrowing costs were artificially low.

I don’t see any reason for buyers or sellers to panic though. By the end of 2023, most markets will have corrected themselves and I believe we will see prices and demand start to pick up again toward the end of this year, but at a far more normalized pace.

As always, I look forward to your comments on my forecasts and I’ll see you all again next month. Take care now.

About Matthew Gardner