The Gardner Report – Third Quarter 2018

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 your Windermere Agent. 

Economic Overview

Washington State continues to be one of the fastest growing states in the nation and there is little to suggest that there will be any marked slowdown in the foreseeable future. Over the past year, the state has added 105,900 new jobs, representing an annual growth rate of 3.2%. This remains well above the national rate of 1.65%. Private sector employment gains continue to be robust, increasing at an annual rate of 3.7%. The strongest growth sectors were Construction (+7.4%), Information (+6.2%), and Professional & Business Services (+6.1%). The state’s unemployment rate was 4.5%, down from 4.8% a year ago.

All year I’ve been predicting that Washington State’s annual job growth would outperform the nation as a whole, and we now know with certainty that this is going to be the case. Furthermore, I am now able to predict that statewide job growth in 2019 will be equally strong, with an expected increase of 2.6%.

Home Sales Activity

  • There were 22,310 home sales during the third quarter of 2018. This is a significant drop of 12.7% compared to the third quarter of 2017.

  • The number of homes for sale last quarter was up 14.5% compared to the third quarter of 2017, continuing a trend that started earlier in the year. However, the increase in listings was only in Seattle’s tri-county area (King, Pierce, and Snohomish Counties) while listing activity was down across the balance of the region.

  • Only two counties had a year-over-year increase in home sales, while the rest of Western Washington saw sales decrease.

  • The region has reached an inflection point. With the increase in the number of homes for sale, buyers now have more choices and time to make​ a decision about what home to buy.

Home Prices

  • Home prices, although higher than a year ago, continue to slow due to the significant increase in the number of homes for sale. This, in my opinion, is a very good thing.​​

  • When compared to the same period a year ago, price growth was strongest in Lewis County, where home prices were up 15.3%. Six other counties experienced double-digit price increases.

  • Slowing price growth was inevitable; we simply could not sustain the increases we’ve experienced in recent years. Lower rates of appreciation will continue until wage growth catches up.

Days on Market

  • The average number of days it took to sell a home dropped by four days compared to the same quarter of 2017.

  • Across the entire region, it took an average of 39 days to sell a home in the third quarter of this year. This is down from 43 days in the third quarter of 2017 and down 2 days when compared to the second quarter of 2018.​
  • King County continues to be the tightest market in Western Washington, with homes taking an average of only 19 days to sell. Every county in the region other than Skagit and King — which both saw the time on the market rise by 2 days — saw the length of time it took to sell a home drop when compared to the same period a year ago.

  • More choice in the market would normally suggest that the length of time it takes to sell a home should rise, but the data has yet to show that. That said, compared to last quarter, we are seeing some marked increases in days on market in several counties, which will be reflected in future reports.

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 started to move the needle toward buyers last quarter and have moved it even further this quarter. Price growth continues to slow, but more significant is the rise in listings, which I expect to continue as we move toward the quieter winter period.

I believe that psychology will start to play a part in the housing market going forward. It has been more than 15 years since we’ve experienced a “balanced” market, so many home buyers and sellers have a hard time remembering what one looks like. Concerns over price drops are overrated and the length of time it’s taking to sell a home is simply trending back to where it used to be in the early 2000s.

 

Matthew Gardner is the Chief Economist for Windermere Real Estate, specializing in residential market analysis, commercial/industrial market analysis, financial analysis, and land use and regional economics. He is the former Principal of Gardner Economics, and has more than 30 years of professional experience both in the U.S. and U.K.

 

This post originally appeared on the Windermere.com Blog.

Posted on October 29, 2018 at 2:02 pm
Sandy Nicholls | Category: Home Buying, Housing Market News, Local Market Updates, Selling Your Home, Uncategorized | Tagged , , , ,

How Interest Rates Affect Buying Power

Whether you are thinking about buying or selling a home, interest rate trends are an important factor to consider. Mortgage interest rates have been rising and experts, including Windermere Chief Economist Matthew Gardner, predict that they will continue to increase in 2019.

Interest Rates and Buying Power

The chart below shows the impact rising interest rates would have if you planned to purchase a $675,000 home while keeping your principal and interest payments at $3,500 a month.

Every time interest rates increase by a quarter of a percent, your buying power decreases by about 3 percent.

What this means for buyers:

With prices moderating and interest rates slated to rise again, now is a good time to buy. If you’re betting on prices falling, you need to consider the strong possibility that an increase in interest rates would offset any potential price savings.

What this means for sellers:

Listing your home now means you will attract a larger buyer pool before interest rates rise.

Whether you’re thinking of buying or selling our brokers can provide you market data that will help you make the best decision for your circumstances. 

This post was originally on the Windermere Eastside Blog.

Posted on October 25, 2018 at 9:02 am
Sandy Nicholls | Category: For Your Home, Home Buying, Housing Market News, Local Market Updates, Selling Your Home, Uncategorized | Tagged , , , ,

Local Market Update – September 2018

 

The number of homes for sale in August increased dramatically over the same time a year ago. This is the result of a moderate increase in new listings and a much slower pace of sales. Homes are staying on the market longer, giving buyers more choices and more time to make an informed decision. While home prices are up compared to a year ago, the rate of increase was in the single digits rather than the double-digit surges of past months. It’s still a seller’s market, but sellers need to have realistic expectations about pricing their homes as the market softens.

Eastside

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The median price of a single-family home on the Eastside was up nearly 10 percent from the same time last year to $935,000. Home prices have declined each month from the all-time high of $977,759 set in June. Inventory increased 73 percent over last August. With supply soaring and home prices moderating, sellers need to work with their broker to price their home to meet the current market conditions. A year ago 47 percent of the homes on the Eastside sold for over list price. This August that number was down to 29 percent.

King County

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King County experienced yet another flood of inventory with the number of homes for sale jumping 65 percent over the previous year. Despite the growth, the county has just 1.9 months of inventory and remains a seller-oriented market. The market has slowed but it remains fast-paced, with 62 percent of the properties here selling in fewer than 15 days. While home prices were up 3 percent from a year ago, the median price of $669,000 represented the third straight month of declines from the record-high of $726,275 reached in May.

Seattle

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After leading the nation in home price growth for nearly two years, Seattle is finally cooling off. The median home price in August was $760,000, up just 4 percent from last year and down from the record $830,000 reached in May. Inventory soared in August, but the city still has just two months of supply, far short of the four to six months that is considered balanced. Bidding wars are becoming less common and price drops more common. Sellers must adjust their expectations to what appears to be a long waited moderating of the market.

Snohomish County

>>>Click image to view full report.

Mirroring the market slowdown in King County, Snohomish County also experienced a cooling off in August. The median price of a single-family home was $492,000, up 8 percent from a year ago but down from the record high of $511,000 two months prior. Inventory increased nearly 30 percent, but at just 1.6 months of supply the market remains very tight and sales are brisk. Sixty percent of homes here sold within 15 days.

This post originally appeared on the WindermereEastside.com Blog.

Posted on September 12, 2018 at 10:56 am
Sandy Nicholls | Category: For Your Home, Home Buying, Housing Market News, Local Market Updates, Selling Your Home, Uncategorized | Tagged , , , , , , , ,

How to Get Started in Real Estate Investing

Investing in real estate is one of the world’s most venerable pathways to building wealth. When properly managed, income from renting or real estate investment trusts can provide you with the financial security to plan out the rest of your life. The conclusion is easy to envision, but knowing where to begin can be overwhelming, particularly for anyone who has never previously owned a home.

As a real estate agent my goal is always to improve and support our communities, so I want to share few key things to keep in mind as you enter the world of real estate investment.

 

Know the right type of investment for you

Investing in real estate needn’t commit you to being a landlord. A Real Estate Investment Trust (REIT) is a low-maintenance way to get involved in real estate with next to none of the day-to-day monitoring required of direct property management. REITs are trusts that typically own multiple properties, and investors may purchase shares within the REIT. Typically, as the value of the property rises, so too do the values of your shares. If you’d like to dip a toe into real estate investing before diving in fully, a REIT is a great place to start.

 

Start with your own home

Owning the roof over your head is a basic step towards investing success. Even better, when you plan to live in the home you’re buying (rather than renting it out), you will likely benefit from lower mortgage rates and a cheaper down payment. The reasoning is straightforward – lenders see a loan to people purchasing the home they live in as an investment in people highly committed to the property.

Once you’ve owned your own house for a few years, you can look to purchase a new home to move into. By purchasing the new home with the intent to move in, you’ll be eligible to receive more favorable financing once again. After you’ve secured your new home, your first home is primed to be transformed into a rental property, and you can continue to see a return on your investment. If you’re seeking further support with buying a first, second, or third home, I am happy to help.

This post originally appeared on the Windermere.com blog.

Posted on June 7, 2018 at 2:48 pm
Sandy Nicholls | Category: Home Buying

Why You Shouldn’t Wait to Buy a Home

If you’ve been looking to buy a house, it’s easy to get discouraged. With our local real estate market still the hottest in the country, a lot of buyers have become frustrated after losing out to multiple offers and all-cash sales. While some buyers are considering waiting out the market, here is why that’s not a wise move.

1. Historically, this time of the year is the best time to buy a home.

The fourth quarter of the year has always seen the lowest demand for home sales. Kids are back in school. The holiday season is gearing up. It’s just not the time of year when people want to uproot their lives and move into a new home. That all changes in a few months. The market traditionally experiences the highest demand and the lowest inventory of the year between January and May. Your best bet is to make an offer now.

2. Home prices are expected to increase next year.

A booming economy, rising population, and an influx of highly-paid workers are all expected to sustain the strong demand for housing through 2018. While the sharp home price increases of the past few years are expected to moderate, Windermere Chief Economist Matthew Gardner predicts that home prices will increase by 9 percent next year.

3. Interest rates are predicted to rise.

Waiting means you’ll get less house for your money. It’s all about the One in Ten Rule. As Matthew Gardner explains, for every 1 percent increase in mortgage rates your buying power decreases by 10 percent. Even if home prices are flat a year from now (which is not expected), an increase in interest rates means you’ll have to borrow more money to buy the same house.

With home valuations at high levels today, buyers should consider three things before they purchase a home: Can I afford the monthly payments, do I like the location, and am I planning to live in the home for at least five years?

If you decide to move forward, your real estate agent can make the difference between winning the deal or not.

Here’s what sets Windermere Real Estate brokers apart:

  • We can position your offer to have the greatest appeal to the seller (and sometimes that’s not just a higher price).
  • We receive extensive training on how to create the most competitive offer and negotiate successfully in a multiple-offer situation.
  • Other agents are more confident in completing a transaction with an agent from Windermere than they are with any other real estate company.

Contact me today.

This post originally appeared on the Windermere Eastside blog.

Posted on September 28, 2017 at 2:37 pm
Sandy Nicholls | Category: Home Buying

Why Owning a Home is Such a Smart Investment

After succumbing to the “Great Recession” ten years ago, the stock market has made a comeback. So, does that mean you should forget about buying a new house and invest in stocks instead? The answer to that question, say experts, depends on your investing savvy, your financial discipline, your age, and your current financial situation.

The first question you need to ask yourself is, “Am I disciplined enough to invest in stocks?” According to two professors who recently studied 30 years of personal-finance performance, you need to be someone with exceptional financial discipline if you want to earn real money in the stock market. Or, you could simply buy a house.

When you buy real estate, the down payment and monthly mortgage payments force you to set aside a significant amount of your earnings on a regular basis. It’s automatic. But if you can’t summon the same discipline to invest that same amount of money in the stock market on an equally regular basis, then stocks are probably going to be a losing proposition, according to the professors’ study.

“We find that if people don’t invest all the money, actually about 90% of the time, you’re better off buying real estate,” says Professor Eli Beracha, co-author of the study.

 

Other issues that make stock investing risky

Investing guru James Altucher wrote a column in The Wall St. Journal titled, “8 Reasons You Stink at Trading Stocks.” In it, he argues that most non-professionals don’t have the investing savvy required to be successful in the stock market. Here are a few telling excerpts:

  • “Nine out of 10 people think they are above-average drivers. Nine out of 10 people think they are above-average investors. Both are mathematically impossible.”
  • “Most people sell at the bottom and buy at the top—the opposite of what you want to do as an investor—because they let emotions get in the way of patience and strategy.”
  • “It’s really hard to own stocks. It’s not just picking a stock and watching it go up 1,000%. It’s buying it and sometimes watching it go down 80% before it ends up rising 20% above your purchase price. It’s waiting. It’s patience. Psychology is at least 80% of the game. And knowing when to sell? Even harder.”

 

Age matters

When you’re young, many financial advisors encourage investing in things like individual stocks. With a long career ahead, you have time to wait for any bad investments to turn around before you may really need the money. But once you’re a little older, with a family, and starting to focus on your financial future, that’s when advisers recommend you buy things like real estate—a conservative investment with a long history of stable, predictable earnings.

 

The type of loan you choose also makes a difference

If you want to both own a home and invest in stocks, consider a 30-year home loan, which will significantly reduce your monthly payments and leave you with extra money for playing the market. (Just remember the tradeoff: You’ll end up paying thousands of dollars more in interest over the life of the loan.)

If you don’t have a burning desire to play the stock market, choose a 15-year home loan. You’ll pay less interest over the life of the loan, you’ll build equity faster, and, obviously, you’ll be mortgage-free 15 years sooner.

 

The tax advantages of owning real estate

As a homeowner, you’re entitled to a bevy of tax benefits you don’t get as a stock investor. You can deduct your mortgage interest and property taxes from your annual tax return. Plus, depending on your circumstances, you could also get a deduction or credit for any home-office expenses, moving expenses, capital gains, any “points” used to lower your interest rate, and more.

 

One caveat: investing in real estate takes time

No matter what some of those reality TV programs show, buying a home should not be viewed as a get-rich-quick scheme. But if you think you’re ready to put down roots for as long as seven years, chances are very good that any home you purchase will appreciate significantly during that time (even if the economy runs into some bumps along the way).

 

The non-financial benefits

Of course, not all of the benefits of owning a home are financial. For most Americans, their home is a source of tremendous pride, comfort, security and freedom. Most of us also use our homes to showcase our personality, through paint colors, furnishings, landscaping, yard signs, holiday decorations and so much more.

Yes, the stock market is on an upswing currently (depending on the week), but if you want an investment with a long-term track record of consistent returns—plus tax breaks and a variety of personal perks—you may want to buy a home instead.

 

If you have questions about the buying or selling process, or are looking for an experienced agent in your area, connect with me.

This post originally appeared on the Windermere.com blog.

Posted on August 30, 2017 at 8:23 am
Sandy Nicholls | Category: Home Buying

How People Buy Homes Today

Today’s buyers use a lot of resources in their home search – and 92% count on a real estate agent to help them purchase their home.

How People Buy Homes Today

If you’re looking to buy or sell your home, reach out to me to help you successfully navigate the Seattle housing market.

Posted on June 6, 2017 at 11:12 am
Sandy Nicholls | Category: Home Buying

What Buyers Want Today

The National Association of REALTORS® recently released their 2016 Profile of Home Buyers and Sellers. Here are a few items about buyers that we thought you’d find interesting.

If you’re looking to buy or sell your home, reach out to me so I can help you successfully navigate the Seattle housing market.

This post originally appeared on the Windermereeastside.com blog.

Posted on April 5, 2017 at 9:28 am
Sandy Nicholls | Category: Home Buying, Selling Your Home

New Features vs. Character

 

We are often asked, “Which is the better buy, a newer or older home?” Our answer: It all depends on your needs and personal preferences. We decided to put together a list of the six biggest differences between newer and older homes:

The neighborhood

Surprisingly, one of the biggest factors in choosing a new home isn’t the property itself, but rather the surrounding neighborhood. While new homes occasionally spring up in established communities, most are built in new developments. The settings are quite different, each with their own unique benefits.

Older neighborhoods often feature tree-lined streets; larger property lots; a wide array of architectural styles; easy walking access to mass transportation, restaurants and local shops; and more established relationships among neighbors.

New developments are better known for wider streets and quiet cul-de-sacs; controlled development; fewer aboveground utilities; more parks; and often newer public facilities (schools, libraries, pools, etc.). There are typically more children in newer communities, as well.

Consider your daily work commute, too. While not always true, older neighborhoods tend to be closer to major employment centers, mass transportation and multiple car routes (neighborhood arterials, highways and freeways).

Design and layout

If you like Victorian, Craftsman or Cape Cod style homes, it used to be that you would have to buy an older home from the appropriate era. But with new-home builders now offering modern takes on those classic designs, that’s no longer the case. There are even modern log homes available.

Have you given much thought to your floor plans? If you have your heart set on a family room, an entertainment kitchen, a home office and walk-in closets, you’ll likely want to buy a newer home—or plan to do some heavy remodeling of an older home. Unless they’ve already been remodeled, most older homes feature more basic layouts.

If you have a specific home-décor style in mind, you’ll want to take that into consideration, as well. Professional designers say it’s best if the style and era of your furnishings match the style and era of your house. But if you are willing to adapt, then the options are wide open.

Materials and craftsmanship

Homes built before material and labor costs spiked in the late 1950s have a reputation for higher-grade lumber and old-world craftsmanship (hardwood floors, old-growth timber supports, ornate siding, artistic molding, etc.).

However, newer homes have the benefit of modern materials and more advanced building codes (copper or polyurethane plumbing, better insulation, double-pane windows, modern electrical wiring, earthquake/ windstorm supports, etc.).

Current condition

The condition of a home for sale is always a top consideration for any buyer. However, age is a factor here, as well. For example, if the exterior of a newer home needs repainting, it’s a relatively easy task to determine the cost.  But if it’s a home built before the 1970s, you have to also consider the fact that the underlying paint is most likely lead0based, and that the wood siding may have rot or other structural issues that need to be addressed before it can be recoated.

On the flip side, the mechanicals in older homes (lights, heating systems, sump pump, etc.) tend to be better built and last longer.

Outdoor space

One of the great things about older homes is that they usually come with mature tress and bushes already in place. Buyers of new homes may have to wait years for ornamental trees, fruit trees, roses, ferns, cacti and other long-term vegetation to fill in a yard, create shade, provide privacy, and develop into an inviting outdoor space. However, maybe you’re one of the many homeowners who prefer the wide-open, low-maintenance benefits of a lightly planted yard.

Car considerations

Like it or not, most of us are extremely dependent on our cars for daily transportation. And here again, you’ll find a big difference between newer and older homes. Newer homes almost always feature ample off-street parking: usually a two-care garage and a wide driveway. An older home, depending on just how old it is, may not offer a garage—and if it does, there’s often only enough space for one car. For people who don’t feel comfortable leaving their car on the street, this alone can be a determining factor.

Finalizing your decision

While the differences between older and newer homes are striking, there’s certainly no right or wrong answer. It is a matter of personal taste, and what is available in your desired area. To quickly determine which direction your taste trends, use the information above to make a list of your most desired features, then categorize those according to the type of house in which they’re most likely to be found. The results can often be telling.

This blog originally appeared on the Windermere.com blog.

Posted on March 6, 2017 at 3:25 pm
Sandy Nicholls | Category: Home Buying, Selling Your Home

Million-Dollar Homes Are the New Normal in the Seattle Area

Not too long ago talk of million-dollar homes would conjure up images of lavish mansions owned by a small percentage of elite homebuyers – one percent, to be exact. Now, according to an article from The Seattle Times, seven-figure homes are becoming the norm across the Puget Sound region.

If you have been in the housing market recently, you have probably experienced the difficulty of finding a home under $1 million – especially if you are looking to find something significantly lower, such as around or under a quarter-million. That is because nearly 12 percent of all single-family houses sold in King County this year have sold for more than $1 million, which is double the average rate over the last decade. On the opposite end of the market spectrum, less than 5 percent of homes fit into the cheapest price bracket of less than $250,000. As of October the median cost of a single-family home in King County is $550,000, according to data from the Northwest Multiple Listing Service.

Windermere’s Chief Economist Matthew Gardner commented on the extreme shift stating, “It wasn’t that long ago, you start talking about seven figures, that was rarefied air. Now, it’s a more substantial market than we’ve ever seen before.”

Not surprisingly, Eastside neighborhoods have the biggest concentration of million-dollar homes, but they are also becoming more commonplace in several Seattle neighborhoods. The bulk of luxury home buyers are the expected tech executives, California and B.C. transplants, and foreign investors who are taking advantage of opportunities in Greater Seattle. However, the million-dollar market has also expanded to include home buyers outside of those sectors who never imagined they would be million-dollar homeowners – especially out of necessity. That being said…

How does this change how we define “luxury”?

The influx of million-dollar listings and homeowners has spurred a rebranding of “luxury” in our market. One Windermere agent reports, “What we used to consider luxury listings was anything over $2 million, and now that has scooted up to $3 million.” Windermere has responded to this redefinition with the W Collection, our newest brand in ultra-luxury that features homes worth at least $3 million. Our president OB Jacobi describes the program as “a sophisticated, yet humble, brand that evokes the understated expression of wealth that is unique to the Pacific Northwest.”

Find the full article at The Seattle Times.

Posted on November 28, 2016 at 1:52 pm
Sandy Nicholls | Category: Home Buying