The following analysis of the Western Washington real estate market is provided by Windermere Real Estate Chief Economist, Matthew Gardner. I hope that this information may assist you in making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact me.
A MESSAGE FROM MATTHEW GARDNER
Needless to say, any discussion about the U.S. economy, state economy, or housing markets in the first quarter of this year is almost meaningless given events surrounding the COVID-19 virus.
Although you will see below data regarding housing activity in the region, many markets came close to halting transactions in March and many remain in some level of paralysis. As such, drawing conclusions from the data is almost a futile effort. I would say, though, it is my belief that the national and state housing markets were in good shape before the virus hit and will be in good shape again, once we come out on the other side. In a similar fashion, I anticipate the national and regional economies will start to thaw, and that many of the jobs lost will return with relative speed. Of course, all of these statements are wholly dependent on the country seeing a peak in new infections in the relatively near future. I stand by my contention that the housing market will survive the current economic crisis and it is likely we will resume a more normalized pattern of home sales in the second half of the year.
- There were 13,378 home sales during the first quarter of 2020, a drop of only 0.2% from the same period in 2019, but 27% lower than in the final quarter of 2019.
- The number of homes for sale was 32% lower than a year ago and was also 32% lower than in the fourth quarter of 2019.
- When compared to the first quarter of 2019 sales rose in eight counties and dropped in seven. The greatest growth was in Cowlitz and Lewis counties. The largest declines were in Island and Snohomish counties.
- Pending sales — a good gauge of future closings — rose 0.7% compared to the final quarter of 2019. We can be assured that closed sales in the second quarter of this year will be lower due to COVID-19.
- Home-price growth in Western Washington rose compared to a year ago, with average prices up 8.7%. The average sale price in Western Washington was $524,392, and prices were 0.4% higher than in the fourth quarter of 2019.
- Home prices were higher in every county except San Juan, which is prone to significant swings in average sale prices because of its size.
- When compared to the same period a year ago, price growth was strongest in Clallam County, where home prices were up 21.7%. Double-digit price increases were also seen in Kitsap, Skagit, Mason, Thurston, and Snohomish counties.
- Affordability issues remain and, even given the current uncertain environment, I believe it is highly unlikely we will see any form of downward price pressures once the region reopens.
DAYS ON MARKET
- The average number of days it took to sell a home in the first quarter of this year dropped seven days compared to the first quarter of 2019.
- Pierce County was the tightest market in Western Washington, with homes taking an average of only 29 days to sell. All but two counties — San Juan and Clallam — saw the length of time it took to sell a home drop compared to the same period a year ago.
- Across the entire region, it took an average of 54 days to sell a home in the first quarter of the year — up 8 days compared to the fourth quarter of 2019.
- Market time remains below the long-term average across the region. This is likely to change, albeit temporarily, in the second quarter due to COVID-19.
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.
Given the current economic environment, I have decided to freeze the needle in place until we see a restart in the economy. Once we have resumed “normal” economic activity, there will be a period of adjustment with regard to housing. Therefore, it is appropriate to wait until later in the year to offer my opinions about any quantitative impact the pandemic will have on the housing market.
ABOUT MATTHEW GARDNER
As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.
In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.
This post originally appeared on the Windermere.com Blog.
Spring has sprung in Seattle — and so has the coronavirus (the cause of the illness called COVID-19). If working from home and practicing social distancing has left you feeling stuck and uninspired, consider rolling up your sleeves and tackling a home improvement project or two.
From the simplest updates to sensational additions, these projects can keep you busy, enhance your curb appeal, and give you more ways to enjoy your home when warmer weather arrives.
1. Install a new mailbox
The simplest and easiest update of all, installing a new (or updating an old) mailbox can add a pop of personality and amp up your curb appeal, where first impressions really count!
Consider painting your mailbox a new color, planting flowers around the base, or installing a smart mailbox to protect your deliveries.
2. Update your address display
Another quick and easy project, updating your address can add flair to your front door. This article from realtor.com offers plenty of crafty and creative ways to display your house numbers.
If you have an HOA, it’s a good idea to check with them first to know what (if any) limitations you might have.
3. Add a new railing to your porch
If your front porch is looking a little ho-hum or drab, a new railing can make a world of difference. For a natural feel, consider a classic wood-tone railing for a natural feel, or add a pop of visual interest with a colored railing. If you’re looking for more, check out the Chippendale railing (it’s currently a hot trend on HGTV).
4. Stain your deck
if your deck is looking a little shabby, one easy improvement is to stain it—to either change the color or just accentuate the wood grain. Staining is also good for your deck, and many builders recommend staining or sealing once a year.
If you don’t yet have a deck, building one could be a great new project to tackle before summer arrives. Plus, according to Remodeling Magazine’s Cost vs. Value Report, a new wooden deck will net you a 69% return on investment when you decide to sell.
5. Build a fire pit
Backyard fire pits are perfect for adding a cozy ambiance to your yard and are certain to be a highlight of a weekend gathering (especially when you bust out those marshmallows).
This guide from realtor.com is a great resource if you want to DIY your new fire pit.
6. Upgrade your garden
Now’s the time to start planning your planting! Consider skipping the typical tulips or daisies, and investigate other greenery. Adding edible plants is a smart way to save money and indulge in the farm-to-table dining trend. Or you can build a butterfly garden, which is good for the environment. (Plus, what’s more beautiful than seeing butterflies flit around your yard?)
Working from home is an aspiration for many of us, but to do so effectively takes effort. A disorganized space at home can be just as troublesome as a hectic office. The most disciplined telecommuters will tell you that you need a structured routine and organization in order to be successful.
Having a designated workspace is one of the most important elements to your success when you make the switch to telecommuting. Even if you live in a small space, you need to find a balance between home and office. People who work from home often have a difficult time separating their work hours from their non-work hours because it’s so easy to keep at it late into the night. But maintaining a balance and shutting down the computer is important for overall wellbeing. What are some other must-haves for a successful home office? Here are the top five:
- Natural Light – Study upon study tells us that natural light is needed to boost productivity and mood. Make sure to set your desk up as close to a window as you can. If being near a window isn’t an option, a natural light lamp is the next best thing. It helps balance your body clock and leaves you feeling rested and refreshed.
- To-Do List or Planner – Start each day off by making a to-do list outlining what you need to get done before the end of the workday. Make sure to set a realistic time frame in which all of that should be completed, so you can check each one off the list and feel immense accomplishment once you’ve completed them all.
- Storage – If you have a big enough space, put in a large bookshelf where you can organize everything (think storage boxes). It reduces clutter and looks stylish. Using your walls and cabinetry is the most efficient use of space.
- Calendar – Many people tend to rely on digital calendars these days because of their convenience. When all of your devices sync together and pop up with reminders, you never have to worry about missing an appointment. However, many people find that it helps to keep a paper calendar handy too so you can easily view your whole month at a glance. Choose which options works best for you by playing with both options, or something in between and see which one lets you be more productive with the least amount of stress.
- Space for Inspiration – It doesn’t matter what field you work in, having a source of inspiration in your workspace is essential. Whether it’s a photo of your family, your dream car, or that vacation you’ve been dying to take, having that inspiration right in front of you provides a constant reminder of why you do what you do.
This post originally appeared on the Windermere.com Blog.
The condo a quarter-mile away from the Life Care Center of Kirkland — the long-term care facility at the epicenter of the U.S. novel coronavirus outbreak — hit the market at $365,000 last week, one day after the first resident of the nearby facility died of the flulike illness.
By Monday, roughly 34 groups of home shoppers and looky-loos had toured the property, not one expressing concern about the viral disease, according to the listing agent.
The condo sold five days after it was listed, with the winning offer of nearly $400,000 waiving all contingencies.
Even as concern over the rapid spread of the novel coronavirus mounts, the most recent data on area home sales from the Northwest Multiple Listing Service (NWMLS) shows the market for Seattle-area residential realty remains hot.
It’s too early to tell just what the impact of the novel coronavirus will be in the coming weeks, but all else being equal, low inventory and price increases are expected to continue into the spring, brokers said.
An emergency interest-rate cut Tuesday — the first time the Federal Reserve has used emergency powers since the depths of the 2008 financial crisis — could add further fuel to property markets around Puget Sound, brokers said.
“Our agents aren’t yet seeing any impact on open house attendance due to the COVID-19 outbreak,” said Mike Grady, president and COO of Coldwell Banker Bain in Bellevue, in a statement. “We continue to be bullish on the Puget Sound economy and real estate market.”
In February, median home prices in King County spiked 7% over the previous month, to $675,000, representing a 3% gain year-over-year. There were also more new listings in King County, 2,271, than any time since September.
Meanwhile, inventory plunged even lower than January’s already-tight market, by one metric. There were 40% fewer homes on the market in King County in February than there were in January, the NWMLS data shows.
But months of inventory — a measure of how long it would take to sell all the homes currently on the market — stayed constant at 1.2 between January and February, indicating that homes weren’t moving quite at January’s greased-lightning pace.
Prices rose more slowly in Seattle than anywhere else in King County, to $730,500, a less-than-1% bump over this time last year. Elsewhere in the county, from the tonier neighborhoods of the Eastside to less-expensive parts of Southwest King, price growth saw an increase of roughly 10% compared to last year.
Elsewhere in Puget Sound, home prices continued a meteoric rise, especially in Kitsap County, where they rose by an eyeball-popping 18% year-over-year. Growth in Pierce and Snohomish counties hovered around 10% compared to last year, with median prices hitting $395,000 and $515,000, respectively.
Seattle’s condo market saw rocket-powered growth in sales compared to last year, with a 47% increase in closed sales and a corresponding 8.4% rise in median sale price, to $481,225.
It was joined by the Eastside condo market, with a 25% rise in closed sales and a 6.7% jump in prices, to $475,000. Together, those two markets account for one-third of condo sales in Western Washington.
Brokers said they planned to wait and see how the spread of the coronavirus impacts Puget Sound’s sweltering home markets, with most predicting it would have little to no effect on home sales.
At the condo down the road from Life Care, “people were coming and going” at open houses last weekend, said listing agent Alena Pushkina, of Skyline Properties.
At least nine people associated with the center have died of the new coronavirus, and more than a dozen other cases have been linked to the nursing home.
Realogics Sotheby’s International Realty broker Mei Yang said foot traffic at open houses during the upcoming weekend would show whether area home shoppers are caught up in the worries over the virus.
She’s preparing to list a house next week, she said, and out of an abundance of caution asked colleagues whether they thought she should postpone the open house until after the progress of the disease had slowed.
“Their sentiment was to just go ahead,” she said. “So I plan to go ahead.”
Some brokers, though, are taking precautionary measures to protect themselves and their clients from disease.
The National Association of Realtors issued novel coronavirus guidance Thursday advising brokers to require all visitors to open houses to disinfect their hands and inquire about their clients’ travel histories before meeting in person.
Engel & Völkers agent Freddy Delgadillo, who toured the Kirkland condo near Life Care with a client, said they wore masks while in the unit.
Delgadillo said he also wore a pair of black leather gloves while in the condo. As for his client, “I didn’t have her touch anything,” he said, “just in case.”
Classic Blue has officially been anointed Pantone’s 2020 “Color of the Year”. Pantone says it picked this color because of its ability to instill calm, confidence, and connection as we cross the threshold into a new decade. A dependable color, Classic Blue is timeless, and enduring, making it a great addition to just about any room in your home.
Here are some ways to add this stunning shade of blue to your home:
Add a splash of color to any room with Classic Blue furniture, such as these dining room chairs, which express a sense of tradition and elegance, as well as unexpected boldness.
Geometric patterns are all the rage this year, so why not liven up your kitchen backsplash with tiles that incorporate the color of the year? Here’s an example that achieves this through bold, colorful design that doubles as a piece of art.
If geometric tile isn’t your thing, the are other ways to bring your kitchen to life with this stunning shade of blue. If you’re not in a position to purchase all new cabinets, simply paint your current cabinets for a more affordable update.
Whether it’s built-ins, panels, or an accent wall, Classic Blue can make your furniture and décor pop. Consider this color when you paint your living room or bedroom as a way to encourage calm and confidence in your favorite spaces.
The Washington real estate excise tax, otherwise known as REET is faced changes January 1, 2020. What are the changes and how will it affect you? If you are planning on buying, selling, or transferring real estate, these are questions you need to know the answers to. This is your guide to how REET is changing and everything you need to be aware of in 2020.
What is the Real Estate Excise Tax?
The real estate excise tax (REET) is simply a tax on real estate when it is sold or interests are transferred. The seller of the home or piece of property is typically the party responsible for paying REET. However, this is a mandatory tax that the buyer is obligated to if the seller doesn’t pay. REET must also be paid when 50% or more of controlling interests are transferred to a different party. In cases where interests of real estate are transferred, the person transferring their share is liable for the tax.
What Changes are Being Made to the Real Estate Excise Tax?
REET is facing monumental changes come the first of the year. The most important change to be aware of is the fee structure. There will no longer be a flat rate percentage for REET. Instead there will be a graduated tier that is as follows:
- Real estate sales of $500,000 and below will pay 1.60% in REET
- Real estate sales between $500,001 and $1,500,000 will pay 1.78% in REET
- Real estate sales between $1,500,001 and $3,000,000 will pay 3.25% in REET
- Real estate sales $3,000,001 and above will pay 3.5% in REET
It is important to mention that the municipality tax of 0.50% is included in the above rates.
Agricultural real estate and timberland are exempt from the new tiered structure. Real estate sales on these two types of properties will continue to remain at 1.28% for REET.
Controlling Interest Transfer Changes
The transfer period will be extended from 12 months to 36 months. The second change is that any transfers of 16% or more will have to be reported during the annual corporate renewal cycle.
How Will REET Changes Affect You?
The changes will have significant impacts on both the sale of real estate and the transfer of controlling interests. Concerning the sale of real estate, valuable properties will see a significant tax hike. Even though the seller is responsible for paying REET, buyers need to beware of purchasing properties with a hidden tax lien for failure to pay REET. As the owner, you may very well be responsible for the unpaid tax.
In order for REET to apply to a controlling interest transfer, 50% or more of the interests must be transferred. However, REET doesn’t apply to just the percentage of interests transferred. It actually applies to 100% of the property’s value.
The Bottom Line on the New REET Changes
How much REET affects the sale of real estate will in most cases depend on the value of the property. Sellers of more valuable properties will feel the changes more than sellers in the first two tiers. Controlling interest transfers are in the same boat as property sellers, meanwhile, agricultural and timberland properties will not feel the effects at all.
If you are buying, selling, and transferring real estate it is important to stay in the know on all changes concerning the real estate transactions. Send me a message to help navigate the changes in the market and get you the most from your next real estate transaction.
This post originally appeared on the RainerTitle.com Blog.
The Eastside Market Review is now available for the fourth quarter of 2018.
Read the full report online by clicking the image below.
What a year it has been for both the U.S. economy and the national housing market. After several years of above-average economic and home price growth, 2018 marked the start of a slowdown in the residential real estate market. As the year comes to a close, it’s time for me to dust off my crystal ball to see what we can expect in 2019.
The U.S. Economy
Despite the turbulence that the ongoing trade wars with China are causing, I still expect the U.S. economy to have one more year of relatively solid growth before we likely enter a recession in 2020. Yes, it’s the dreaded “R” word, but before you panic, there are some things to bear in mind.
Firstly, any cyclical downturn will not be driven by housing. Although it is almost impossible to predict exactly what will be the “straw that breaks the camel’s back”, I believe it will likely be caused by one of the following three things: an ongoing trade war, the Federal Reserve raising interest rates too quickly, or excessive corporate debt levels. That said, we still have another year of solid growth ahead of us, so I think it’s more important to focus on 2019 for now.
The U.S. Housing Market
Existing Home Sales
This paper is being written well before the year-end numbers come out, but I expect 2018 home sales will be about 3.5% lower than the prior year. Sales started to slow last spring as we breached affordability limits and more homes came on the market. In 2019, I anticipate that home sales will rebound modestly and rise by 1.9% to a little over 5.4 million units.
Existing Home Prices
We will likely end 2018 with a median home price of about $260,000 – up 5.4% from 2017. In 2019 I expect prices to continue rising, but at a slower rate as we move toward a more balanced housing market. I’m forecasting the median home price to increase by 4.4% as rising mortgage rates continue to act as a headwind to home price growth.
New Home Sales
In a somewhat similar manner to existing home sales, new home sales started to slow in the spring of 2018, but the overall trend has been positive since 2011. I expect that to continue in 2019 with sales increasing by 6.9% to 695,000 units – the highest level seen since 2007.
That being said, the level of new construction remains well below the long-term average. Builders continue to struggle with land, labor, and material costs, and this is an issue that is not likely to be solved in 2019. Furthermore, these constraints are forcing developers to primarily build higher-priced homes, which does little to meet the substantial demand by first-time buyers.
In last year’s forecast I suggested that 5% interest rates would be a 2019 story, not a 2018 story. This prediction has proven accurate with the average 30-year conforming rates measured at 4.87% in November, and highly unlikely to breach the 5% barrier before the end of the year.
In 2019, I expect interest rates to continue trending higher, but we may see periods of modest contraction or leveling. We will likely end the year with the 30-year fixed rate at around 5.7%, which means that 6% interest rates are more apt to be a 2020 story.
I also believe that non-conforming (or jumbo) rates will remain remarkably competitive. Banks appear to be comfortable with the risk and ultimately, the return, that this product offers, so expect jumbo loan yields to track conforming loans quite closely.
There are still voices out there that seem to suggest the housing market is headed for calamity and that another housing bubble is forming, or in some cases, is already deflating. In all the data that I review, I just don’t see this happening. Credit quality for new mortgage holders remains very high and the median down payment (as a percentage of home price) is at its highest level since 2004.
That is not to say that there aren’t several markets around the country that are overpriced, but just because a market is overvalued, does not mean that a bubble is in place. It simply means that forward price growth in these markets will be lower to allow income levels to rise sufficiently.
Finally, if there is a big story for 2019, I believe it will be the ongoing resurgence of first-time buyers. While these buyers face challenges regarding student debt and the ability to save for a down payment, they are definitely on the comeback and likely to purchase more homes next year than any other buyer demographic.
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.
As we step forward into 2019, eco-friendly “green homes” are more popular than ever. Upgrading your home’s sustainability improves quality of life for those residing in it, but it is also a savvy long-term investment. As green homes become more popular, properties boasting sustainable features have become increasingly desirable targets for homebuyers. Whether designing a new home from scratch or preparing your current home for sale, accentuating a house with environmentally-friendly features can pay big dividends for everyone.
While the added value depends on the location of the home, its age, and whether it’s certified or not, three separate studies all found that newly constructed, Energy Star, or LEED-certified homes typically sell for about nine percent more than comparable, non-certified new homes. Plus, one of those studies discovered that existing homes retrofitted with green technologies, and certified as such, can command a whopping 30-percent sales-price boost.
There are dozens of eco-friendly features that can provide extra value for you as a seller. To name a few:
Cool roofs keep the houses they’re covering as much as 50 to 60 degrees cooler by reflecting the heat of the sun away from the interior, allowing the occupants to stay cooler and save on air-conditioning costs. The most common form is metal roofing. Other options include roof membranes and reflective asphalt shingles.
Fuel cells may soon offer an all-new source of electricity that would allow you to completely disconnect your home from all other sources of electricity. About the size of a dishwasher, a fuel cell connects to your home’s natural gas line and electrochemically converts methane to electricity. One unit would pack more than enough energy to power your whole home.
For many years, fuel cells have been far too expensive or unreliable. But as technology has improved, so too has reliability. Companies like Home Power Solutions and Redbox Power Systems have increased the reliability of these fuel sources while reducing their size. Much like we’ve seen computers and cell phones shrink in size while improving reliability and power, fuel cells continue to be refined.
A wind turbine (essentially a propeller spinning atop an 80- to 100-foot pole) collects kinetic energy from the wind and converts it to electricity for your home. And according to the Department of Energy, a small version can slash your electrical bill by 50 to 90 percent.
But before you get too excited, you need to know that the zoning laws in most urban areas don’t allow wind turbines. They’re too tall. The best prospects for this technology are homes located on at least an acre of land, well outside the city limits.
Another way to keep the interior of your house cooler—and save on air-conditioning costs—is to replace your traditional roof with a layer of vegetation (typically hardy groundcovers). This is more expensive than a cool roof and requires regular maintenance, but young, environmentally conscious homeowners are very attracted to the concept.
Combining a heat pump with a standard furnace to create what’s known as a “hybrid heating system” can save you somewhere between 15 and 35 percent on your heating and cooling bills.
Unlike a gas or oil furnace, a heat pump doesn’t use any fuel. Instead, the coils inside the unit absorb whatever heat exists naturally in the outside air, and distributes it via the same ductwork used by your furnace. When the outside air temperature gets too cold for the heat pump to work, the system switches over to your traditional furnace.
Geothermal heating units are like heat pumps, except instead of absorbing heat from the outside air, they absorb the heat in the soil next to your house via coils buried in the ground. The coils can be buried horizontally or, if you don’t have a wide enough yard, they can be buried vertically. While the installation price of a geothermal system can be several times that of a hybrid, air-sourced system, the cost savings on your energy bills can cover the installation costs in five to 10 years.
Solar panels capture light energy from the sun and convert it directly into electricity. Similarly to wind turbines, your geographical location may determine the feasibility of these installments. Even on cloudy days, however, solar panels typically produce 10-25% of their maximum energy output. For decades, you may have seen these panels sitting on sunny rooftops all across America. But it’s only recently that this energy-saving option has become truly affordable.
In 2010, installing a solar system on a typical mid-sized house would have set the homeowner back $30,000. But as of December 2018, the average cost after tax credits for solar panel installation was just $13,188! Plus, some companies are now offering to rent solar panels to homeowners (the company retains ownership of the panels and sells the homeowner access to the power at roughly 10 to 15 percent less than they would pay their local utility).
Solar water heaters
Rooftop solar panels can also be used to heat your home’s water. The Environmental Protection Agency estimates that the average homeowner who makes this switch should see their water bills shrink by 50 to 80 percent.
Many of the innovative solutions summarized above come with big price tags attached. However, federal, state and local rebates/tax credits can often slash those expenses by as much as 50 percent. So before ruling any of these ideas out, take some time to see which incentives you may qualify for at dsireusa.org and the “tax incentives” pages at Energy.Gov.
Regardless of which option you choose, these technologies will help to conserve valuable resources and reduce your monthly utility expenses. Just as importantly, they will also add resale value that you can leverage whenever you decide it’s time to sell and move on to a new home.
This post originally appeared on the Windermere.com blog.