Real EstateReal Estate MarketWhidbey Island Real Estate Market May 4, 2022

MAY 2022 Whidbey Island Real Estate Market Update

🚨 Here it is folks! The MAY 2022 Whidbey Island Real Estate Market Update (rolling 12-month report). CLICK HERE TO GET THE PRINTABLE PDF!

 

🗺️ Stats are separated by area: South, Central, & North Whidbey, and incorporate data from the 12 months prior to our current month.

 

🏡All stats represent only the residential & condo sales, except for the ones specifically for vacant land. May not represent all market activity.

 

If you want help interpreting this data and what it means for you. Feel free to message us and setup a free buyers or sellers consultation.

 

📱 360 331 6006

✉️ whidbeyinfo@windermere.com

🤗 Enjoy!

 

#wearewhidbey #windermereEconomics

Created by Si Fisher

.

.

.

Data supplied by the NWMLS. Neither the

Board or its MLS guarantees its accuracy. May

not reflect all real estate activity in the market.

Real EstateReal Estate Market May 3, 2022

Q1 2022 Western Washington Real Estate Market Update

Q1 2022 Western Washington Real Estate Market Update

CLICK HERE FOR PRINTABLE PDF VERSION

 

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

The post-COVID job recovery continues. Though data showed the number of jobs dropped in January, February saw gains that almost offset the jobs lost the prior month. As of February (March data is not yet available), the region had recovered all but 47,000 of the more than 300,000 jobs lost due to the pandemic. Of note is that employment levels in Grays Harbor, Thurston, San Juan, and Clallam counties are now above their pre-pandemic levels. In February, the regional unemployment rate rose to 4.1% from 3.7% in December. Although this may be disconcerting, an improving economy has led more unemployed persons to start looking for a job, which has pushed the jobless rate higher. I expect the regional economy to continue expanding as we move into the spring and summer, with a full job recovery not far away.

Western Washington Home Sales

❱ In the first quarter of 2022, 15,134 homes sold, representing a drop of 5.8% from the same period a year ago, and down 31.7% from the fourth quarter.

❱ Yet again, supply-side constraints limited sales. Every county except Snohomish showed lower inventory levels than a year ago.

❱ Sales grew in five counties across the region but were lower across the balance of the counties contained in this report. Compared to the fourth quarter, sales were lower across all market areas.

❱ The ratio of pending sales (demand) to active listings (supply) showed pending sales outpacing listings by a factor of 6.7. Clearly, the significant jump in mortgage rates in the first quarter has not yet impacted demand. Rather it appears to have stimulated buyers partly due to FOMO (Fear of Missing Out)!

A bar graph showing the annual change in home sales for various counties in Western Washington between Q1 2021 and Q1 2022.

Western Washington Home Prices

❱ Although financing costs have jumped, this has yet to prove to be an obstacle to buyers, as prices rose 16.4% year-over-year to an average of $738,152. Naturally, there is a lag between rates rising and any impact on market prices. It will be interesting to see what, if any, effect this has in the next quarter’s report.

❱ Compared to the same period a year ago, price growth was again strongest in San Juan County, but all markets saw prices rising more than 10% from a year ago.

❱ Relative to the final quarter of 2021, all but Kitsap (-2.7%), Mason (-1.5%), Skagit (-1.8%), Jefferson (-6.3%), and Clallam (-0.1%) counties saw home prices rise.

❱ The market remains supply starved. While increases in “new” listings suggest that more choice is coming to market, it remains insufficient to meet demand.

A map showing the year-over-year real estate market percentage changes in various counties in Western Washington for Q1 2022.

A bar graph showing the annual change in home sale prices for various counties in Western Washington from Q1 2021 to Q1 2022.

Mortgage Rates

Average rates for a 30-year conforming mortgage were 3.11% at the end of 2021, but since then have jumped over 1.5%—the largest increase since 1987. The surge in rates is because the market is anticipating a seven- to eight-point increase from the Federal Reserve later this year.

Because the mortgage market has priced this into the rates they are offering today, my forecast suggests that we are getting close to a ceiling in rates, and it is my belief that they will rise modestly in the second quarter before stabilizing for the balance of the year.

A map showing the real estate market percentage changes in various counties in Utah during the third quarter of 2021.

Western Washington Days on Market

❱ It took an average of 25 days for a home to go pending in the first quarter of 2022. This was 4 fewer days than in the same quarter of 2020, but 2 days more than in the fourth quarter of 2021.

❱ Snohomish, King, and Pierce counties were the tightest markets in Western Washington, with homes taking an average of 11 to 15 days to sell. The greatest drop in market time compared to a year ago was in San Juan County, where it took 23 fewer days for homes to sell.

❱ All but five counties saw average time on market drop from the same period a year ago, but the markets where it took longer to sell a home saw the length of time increase only marginally.

❱ Quarter over quarter, market time dropped in Snohomish, King, and Pierce counties. Jefferson and Clallam counties also saw modest improvement. In the balance of the region the length of time a home was on the market rose, but seasonality undoubtedly played a part.

A bar graph showing the average days on market for homes in various counties in Utah during the third 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.

The numbers have yet to indicate that demand is waning amid rising interest rates, but this is sure to become a greater factor as we move into the spring. A leading indicator I pay attention to is changes to list prices and, in most counties, these continue to increase. This suggests that sellers remain confident they will be able to find a buyer even in the face of higher borrowing costs. If this pace of increase starts to soften, it may be an indication of an inflection point, but it does not appear to be that way yet.

A speedometer graph indicating a seller's market in Western Washington during Q1 2022.

Given all the factors discussed above, I have decided to leave the needle in the same position as the last quarter. The market still heavily favors sellers, but if rates rise much further, headwinds will likely increase.

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.

This Blog Entry Originally Appears on Windermere.com CLICK HERE TO VIEW

Real EstateReal Estate Market April 25, 2022

The Current State of the U.S. Housing Market | April 2022

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 Chief Economist Matthew Gardner, and welcome to this month’s episode of Monday with Matthew. With home prices continuing to defy gravity, mortgage rates spiking, the Fed raising interest rates significantly, a yield curve that is just keeping its nose above water, and some becoming vocal about the possibility that we are going to enter a recession sooner rather than later, it’s not at all surprising that many of you have been asking me whether the housing market is going to pull back significantly, and a few of you have asked whether we aren’t in some sort of “bubble” again.

Because this topic appears to be giving many of you heartburn, I decided that it’s a good time to reflect on where the housing market is today and give you my thoughts on the impact of rising mortgage rates on what has been an historically hot market.

The Current State of the U.S. Housing Market

Home Sale Prices

As usual, a little perspective. Between 1990 and the pre-bubble peak in 2006, home prices rose by 142%, which was a pretty impressive annual increase of 5.6% over a 16 1/2-year period. When the market crashed, prices dropped by 33%, but from the 2012 low to today, prices have risen by 131%, or at an even faster annual rate of 8.6% over a shorter period of time—10 years.

You may think that prices rising at an annual rate that exceeds the pace seen before the market crash is what has some brokers and home buyers concerned, but that really isn’t what has many people scared. It’s this.

Mortgage Rates in 2022

At the start of 2022, the average 30-year fixed mortgage rate was just a little above 3%. But, over a brief 15-week period, they have skyrocketed to 5%. This has led some to worry that the market is about to implode. Of course, nobody can say that the run-up in home prices hasn’t been phenomenal over the past few years, and it’s certainly human nature to think that “what goes up, must come down,” but is there really any reason to panic? I think not, and to explain my reasoning, let’s look back in time to periods when rates rose significantly and see how increasing mortgage rates impacted the marketplace.

Housing and Mortgage Markets During Times of Rising Rates

This table shows seven periods over the past 30 years when mortgage rates rose significantly. On average, rates trended higher for just over a year before pulling back, and the average increase was 1.4%. But now look at how it impacted home prices: it really didn’t. On average, during these periods of rising financing costs, home prices still rose by just over 5%.  Clearly, not what some might have expected. But there were some negatives from mortgage rates trending higher, and these came in the form of lower sales in all but one period and new housing starts also pulled back.

So, if history is any indicator, the impact of the current jump in mortgage rates is likely to be seen in the form of lower transactions rather than lower prices. And this makes sense. Although rising financing costs puts additional pressure on housing affordability, what people don’t appear to think about is that mortgage rates actually tend to rise during periods of economic prosperity. And what does a flourishing economy bring? That’s right. Rising wages. Increasing incomes can certainly offset at least some of the impacts of rising mortgage rates.

Static Equilibrium Analysis – 1/3

To try and explain this, I’m using the median US sale price in February of this year, assuming a 20% down payment and the mortgage rate of 4%. And you can see that the monthly P&I payment would be $1,365. But as mortgage rates rise, and if buyers wanted to keep the same monthly payment, then they would have to buy a cheaper home. Using a rate of 5%, a buyer could afford a home that was 9% cheaper if they wanted to keep the payment the same as it would have been if rates were still at 4%.

But, as I mentioned earlier, an expanding economy brings higher wages, and this is being felt today more than usual, given the worker shortage that exists and businesses having to raise compensation. Average weekly wages have risen by over five-and-a-half percent over the past year—well above the pre-pandemic average of two-and-a-half percent. Although increasing incomes would not totally offset rising mortgage rates, it does have an impact.

Static Equilibrium Analysis – 2/3

To demonstrate this, let’s use the U.S. average household income of $70,611.  Assuming that they’ve put aside 20% of their gross income for a down payment, they could afford a home priced just under $360,000 if mortgage rates were at 4%. As rates rise—and assuming that their income doesn’t—their buying power is reduced by over 10%, or just over $38,000.

Static Equilibrium Analysis – 3/3

But if we believe that incomes will rise, then the picture looks very different. Assuming wages rise by 6%, their buying power drops by just 5% if rates rose from 4% to 5%, or a bit less than $19,000.

Although rates have risen dramatically in a short period, because they started from an historic low, the overall impacts are not yet very significant. If history is any indicator, mortgage rates increasing are likely to have a more significant impact on sales, but a far smaller impact on prices.

But there are other factors that come into play, too. Here I’m talking about demand. The only time since 1968 that home prices have dropped on an annualized basis was in 2007 through 2009 and in 2011, and this was due to a massive increase in the supply of homes for sale. When supply exceeds demand, prices drop.

So, how is it different this time around? Well, we know that the supply glut that we saw starting to build in mid-2006 was mainly not just because households were getting mortgages that, quite frankly, they should never have gotten in the first place, but a very large share held adjustable rate mortgages which, when the fixed interest rate floated, they found themselves faced with payments that they could not afford. Many homeowners either listed their homes for sale or simply walked away.

Although it’s true that over the past two or so months more buyers have started taking ARMs as rates rose, it’s not only a far smaller share than we saw before the bubble burst, but down payments and credit quality remained far higher than we saw back then.

So, if we aren’t faced with a surge of inventory, I simply don’t see any reason why the market will see prices pull back significantly. But even if we do see listing activity increase, I still anticipate that there will be more than enough demand from would-be buyers. I say this for several reasons, the first of which is inflation.

What a lot of people aren’t talking about is the proven fact that owning real estate is a significant hedge against rising inflation. You see, most buyers have a mortgage, and a vast majority use fixed-rate financing. This is the hedge because even as consumer prices are rising, a homeowner’s monthly payments aren’t.  They remain static and, more than that, their monthly payments actually become lower over time as the value of the dollar diminishes. Simply put, the value of a dollar in—let’s say 2025—will be lower than the value of a dollar today.

But this isn’t the only reason that inflation can actually stimulate the housing market. Home prices historically have grown at a faster pace than inflation.

Hedge Against Inflation

This chart looks at the annual change in total CPI going back to 1969. Now let’s overlay the annual change in median U.S. home prices over the same time period. Other than when home prices crashed with the bursting of the housing bubble, for more than fifty years home price growth has outpaced inflation. And this means we are offsetting high consumer prices because home values are increasing at an even faster rate.

But inflation has additional impacts on buyers. Now I’m talking about savings. As we all know, the interest paid on savings today is pretty abysmal. In fact, the best money market accounts I could find were offering interest rates between 0.5% and 0.7%. And given that this is significantly below the rate of inflation, it means that dollars saved continue to be worth less and less over time while inflation remains hot.

Now, rather than watching their money drop in value because of rising prices, it’s natural that households would look to put their cash to work by investing in assets where the return is above the rate of inflation—meaning that their money is no longer losing value—and where better place to put it than into a home.

Housing as a Hedge Against Inflation

So, the bottom line here is that inflation supports demand from home buyers because:

  1. Most are borrowing at a fixed rate that will not be impacted by rising inflation
  2. Monthly payments are fixed, and these payments going forward become lower as incomes rise, unlike renters out there who continue to see their monthly housing costs increase
  3. With inflation at a level not seen since the early 1980s, borrowers facing 5% mortgage rates are still getting an amazing deal. In fact, by my calculations, mortgage rates would have to break above 7% to significantly slow demand, which I find highly unlikely, and
  4. If history holds true, home price appreciation will continue to outpace inflation

Demand appears to still be robust, and supply remains anemic. Although off the all-time low inventory levels we saw in January, the number of homes for sale in March was the lowest of any March since record keeping began in the early 1980’s.

But even though I’m not worried about the impact of rates rising on the market in general, I do worry about first-time buyers. These are households who have never seen mortgage rates above 5% and they just don’t know how to deal with it! Remember that the last time the 30-year fixed averaged more than 5% for a month was back in March of 2010!

And given the fact that these young would-be home buyers have not benefited from rising home prices as existing homeowners have, as well as the fact that they are faced with soaring rents, making it harder for them to save up for a down payment on their first home, many are in a rather tight spot and it’s likely that rising rates will lower their share of the market.

So, the bottom line as far as I am concerned is that mortgage rates normalizing should not lead you to feel any sort of panic, and that current rates are highly unlikely to be the cause of a market correction.

And I will leave you with this one thought. If you agree with me that a systemic drop in home prices has to be caused by a significant increase in supply, and that buyers who are currently taking out adjustable-rate mortgages are more qualified, and therefore able to manage to refinance their homes when rates do revert at some point in the future, then what will cause listings to rise to a point that can negatively impact prices?

It’s true that a significant increase in new home development might cause this, but that is unlikely. And as far as existing owners are concerned, I worry far more about a prolonged lack of inventory. I say this for one very simple reason and that is because a vast majority off homeowners either purchased when mortgage rates were at or near their historic lows, or they refinanced their current homes when rates dropped.

And this could be the biggest problem for the market. Even if rates don’t rise at all from current levels, I question how many owners would think about selling if they were to lose the historically low mortgage rates that they have locked into. It is quite possible that for this one reason, we may experience a tight housing market for several more years.

As always, if you have any questions or comments about this particular topic, please do reach out to me but, in the meantime, stay safe out there and I look forward to visiting with you all again next month.

Bye now.

This blog entry was originally posted on Windermere.com and can be viewed HERE

Real EstateReal Estate MarketWhidbey Island Real Estate Market April 6, 2022

APRIL 2022 Whidbey Island Real Estate Market Update

🚨 Here it is folks! The April 2022 Whidbey Island Real Estate Market Update (rolling 12-month report). CLICK HERE TO GET THE PRINTABLE PDF!

 

🗺️ Stats are separated by area: South, Central, & North Whidbey, and incorporate data from the 12 months prior to our current month.

 

🏡All stats represent only the residential & condo sales, except for the ones specifically for vacant land. May not represent all market activity.

 

If you want help interpreting this data and what it means for you. Feel free to message us and setup a free buyers or sellers consultation.

 

📱 360 331 6006

✉️ whidbeyinfo@windermere.com

🤗 Enjoy!

 

#wearewhidbey #windermereEconomics

Created by Si Fisher

.

.

.

Data supplied by the NWMLS. Neither the

Board or its MLS guarantees its accuracy. May

not reflect all real estate activity in the market.

Real EstateReal Estate MarketWhidbey Island Real Estate Market March 10, 2022

March 2022 Whidbey Island Real Estate Market Update

🚨 Here it is folks! The March 2022 Whidbey Island Real Estate Market Update (rolling 12-month report). CLICK HERE TO GET THE PRINTABLE PDF!

 

🗺️ Stats are separated by area: South, Central, & North Whidbey, and incorporate data from the 12 months prior to our current month.

 

🏡All stats represent only the residential & condo sales, except for the ones specifically for vacant land. May not represent all market activity.

 

If you want help interpreting this data and what it means for you. Feel free to message us and setup a free buyers or sellers consultation.

 

📱 360 331 6006

✉️ whidbeyinfo@windermere.com

🤗 Enjoy!

 

#wearewhidbey #windermereEconomics

Created by Si Fisher

.

.

.

Data supplied by the NWMLS. Neither the

Board or its MLS guarantees its accuracy. May

not reflect all real estate activity in the market.

Real EstateReal Estate MarketWhidbey Island Real Estate Market January 5, 2022

December 2021 Whidbey Island Real Estate Market Update

🚨 Here it is folks! Your year-to-date Whidbey Island Real Estate Market Update.  CLICK HERE TO GET THE PRINTABLE PDF!

 

🗺️ Stats are separated by area: South, Central, & North Whidbey.

 

🏡All stats represent only the residential & condo sales, except for the ones specifically for vacant land. May not represent all market activity.

 

If you want help interpreting this data and what it means for you. Feel free to message us and setup a free buyers or sellers consultation.

 

📱 360 331 6006

✉️ whidbeyinfo@windermere.com

🤗 Enjoy!

 

#wearewhidbey #windermereEconomics

Created by Si Fisher

.

.

.

Data supplied by the NWMLS. Neither the

Board or its MLS guarantees its accuracy. May

not reflect all real estate activity in the market.

Real EstateReal Estate MarketWhidbey Island Real Estate Market December 9, 2021

November 2021 Whidbey Island Real Estate Market Update

🚨 Here it is folks! Your year-to-date Whidbey Island Real Estate Market Update.  CLICK HERE TO GET THE PRINTABLE PDF!

 

🗺️ Stats are separated by area: South, Central, & North Whidbey.

 

🏡All stats represent only the residential & condo sales, except for the ones specifically for vacant land. May not represent all market activity.

 

If you want help interpreting this data and what it means for you. Feel free to message us and setup a free buyers or sellers consultation.

 

📱 360 331 6006

✉️ whidbeyinfo@windermere.com

🤗 Enjoy!

 

#wearewhidbey #windermereEconomics

Created by Si Fisher

.

.

.

Data supplied by the NWMLS. Neither the

Board or its MLS guarantees its accuracy. May

not reflect all real estate activity in the market.

Real EstateReal Estate MarketWhidbey Island Real Estate Market November 3, 2021

October 2021 Whidbey Island Real Estate Market Update

🚨 Here it is folks! Your year-to-date Whidbey Island Real Estate Market Update.  CLICK HERE TO GET THE PRINTABLE PDF!

 

🗺️ Stats are separated by area: South, Central, & North Whidbey.

 

🏡All stats represent only the residential & condo sales, except for the ones specifically for vacant land. May not represent all market activity.

 

If you want help interpreting this data and what it means for you. Feel free to message us and setup a free buyers or sellers consultation.

 

📱 360 331 6006

✉️ whidbeyinfo@windermere.com

🤗 Enjoy!

 

#wearewhidbey #windermereEconomics

Created by Si Fisher

.

.

.

Data supplied by the NWMLS. Neither the

Board or its MLS guarantees its accuracy. May

not reflect all real estate activity in the market.

Real EstateReal Estate Market October 27, 2021

The Q3 2021 Western Washington Gardner Report

The following analysis 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 us.

Download the report HERE

Do not hesitate to ask us anything. We will be certain to respond. Email us directly WhidbeyInfo@Windermere.com or call us at 360.331.6006.  

Follow us on our social media platforms.

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Real EstateReal Estate MarketWhidbey Island Real Estate Market October 5, 2021

SEPTEMBER 2021 Whidbey Island Real Estate Market Update

🚨 Here it is folks! Your year-to-date Whidbey Island Real Estate Market Update.  CLICK HERE TO GET THE PRINTABLE PDF!

 

🗺️ Stats are separated by area: South, Central, & North Whidbey.

 

🏡All stats represent only the residential & condo sales, except for the ones specifically for vacant land. May not represent all market activity.

 

If you want help interpreting this data and what it means for you. Feel free to message us and setup a free buyers or sellers consultation.

 

📱 360 331 6006

✉️ whidbeyinfo@windermere.com

🤗 Enjoy!

 

#wearewhidbey #windermereEconomics

Created by Si Fisher

.

.

.

Data supplied by the NWMLS. Neither the

Board or its MLS guarantees its accuracy. May

not reflect all real estate activity in the market.