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.
Employment in Washington State continues to soften; it is currently at an annual growth rate of 1.7%. I believe that is a temporary slowdown and we will see the pace of employment growth improve as we move further into the new year. It’s clear that businesses are continuing to feel the effects of the trade war with China and this is impacting hiring practices. This is, of course, in addition to the issues that Boeing currently faces regarding the 737 MAX. In the fourth quarter of 2019 the state unemployment rate was 4.4%, marginally lower than the 4.5% level of a year ago. My most recent economic forecast suggests that statewide job growth in 2020 will rise 2.2%, with a total of 76,300 new jobs created.
- There were 18,322 home sales registered during the final quarter of 2019, representing an impressive increase of 4.7% from the same period in 2018.
- Readers may remember that listing activity spiked in the summer of 2018 but could not be sustained, with the average number of listings continuing to fall. Year-over-year, the number of homes for sale in Western Washington dropped 31.7%.
- Compared to the fourth quarter of 2018, sales rose in nine counties and dropped in six. The greatest growth was in Whatcom County. San Juan County had significant declines, but this is a very small market which makes it prone to extreme swings.
- Pending home sales — a barometer for future closings — dropped 31% between the third and fourth quarters of 2019, suggesting that we may well see a dip in the number of closed sales in the first quarter of 2020.
- Home price growth in Western Washington spiked during fourth quarter, with average prices 8.3% higher than a year ago. The average sale price in Western Washington was $526,564, 0.7% higher than in the third quarter of 2019.
- It’s worth noting that above-average price growth is happening in markets some distance from the primary job centers. I strongly feel this is due to affordability issues, which are forcing buyers farther out.
- Compared to the same period a year ago, price growth was strongest in San Juan County, where home prices were up 41.7%. Six additional counties also saw double-digit price increases.
- Home prices were higher in every county contained in this report. I expect this trend to continue in 2020, but we may see a softening in the pace of growth in some of the more expensive urban areas.
DAYS ON MARKET
- The average number of days it took to sell a home dropped four days compared to the third quarter of 2019.
- For the second quarter in a row, Thurston County was the tightest market in Western Washington, with homes taking an average of 29 days to sell. In nine counties, the length of time it took to sell a home dropped compared to the same period a year ago. Market time rose in four counties and two were unchanged.
- Across the entire region, it took an average of 47 days to sell a home in the fourth quarter. This was up nine days over the third quarter of this year.
- Market time remains below the long-term average across the region, a trend that will likely continue until we see more inventory come to market — possibly as we move through the spring.
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 housing market ended the year on a high note, with transactions and prices picking up steam. I believe the uncertainty of 2018 (when we saw significant inventory enter the market) has passed and home buyers are back in the market. Unfortunately, buyers’ desire for more inventory is not being met and I do not see any significant increase in listing activity on the horizon. As such, I have moved the needle more in favor of home sellers. 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.
Thanks to our lending partner Cheryl Gennaios for providing us the great in depth narrative about the NEW 2020 Real Estate Excise tax changes. It still took me a minute to wrap my brain around it….but I think I get it now.
2020 is here, and so are changes to our local tax code. Here’s the highlights:
- We’re moving from a state-wide flat real estate excise tax (REET) of 1.28% to a graduated system.
- STOP TRAFFIC! If the current excise tax is 1.28%, why did my clients just pay 1.78% when they sold their home? That’s because all cities are allowed to levy an additional .25% tax on property sales (REET 1). And cities and counties that are planning under the Growth Management Act are allowed to levy a second quarter percent tax if they want (REET 2). Therefore, King County’s Real Estate Excise Tax in 2019 was 1.28% + .25% + .25% = 1.78%, and not just the 1.28%.
- For the record, counties may also submit a ballot for ANOTHER 1% REET to be used for the acquisition and maintenance of conservation areas. The buyer pays this one though, and the only county that pays this tax is San Juan County (Soooo Oprah just paid $827,500 for conservation of the San Juan Islands natural beauty? YES! Damn, I love her).
- The REET that’s changing is the state level portion. The new rates will be:
- 1.1% on the first $500,000 of the selling price
- 1.28% on the portion of the selling price between $500k and $1.5m
- 2.75% on the portion of the selling price between $1.5m and $3m
- 3% on the portion of the selling price over $3m
- Great! Now that I know the state-level REETs, what’s MY excise tax owed if I decide to sell? Check out your local REET rate HERE
- $600,000 sale price example: 1.1% state REET on the first $500,000 + 1.28% state REET on the remaining $100,000 = blended state REET rate of 1.13% = savings of .15% (or $900) on a $600,000 sale price compared to previous REET rate.
- $3,250,000 sale price example: 1.1% state REET on the first $500,000 + 1.28% state REET on the portion between $500,000 and $1.5m + 2.75% state REET on the portion between $1.5m and $3m + 3% on the last $250,000 = blended state REET rate of 2.063% = additional tax of .783% (or $25,447.50) on a $3.25m sale price compared to previous REET rate.
- So that’s a lot of additional tax revenue on more expensive homes… What does this money go towards anyway?
- State Level: 1.3% of the state tax collected by counties is retained to cover administration costs. Of the net proceeds to the state, 2% goes into the public works assistance account, 4.1% to the education legacy account, with remaining amounts going the general fund.
- City Level: In Seattle (for example), the additional REET 1 and REET 2 funds discussed above go towards: Parks/Trails, Streets/Highways, Sidewalks, Street Lighting, Traffic Signals, Bridges, Water Systems, Sewer Systems, Judicial Facilities, Administrative Facilities, Law Enforcement Facilities, Fire Protection Facilities, Recreational Facilities, Libraries
- I heard there’s a Controlling Interest thing too? What’s that? Under current law, REET is imposed on the transfer or acquisition of a controlling interest (50% or more) in an entity that owned real property in Washington within any 12-month period. The new REET legislation expands the period for measuring whether a controlling interest has been transferred or acquired to 36 months. I don’t understand… Fear Not! Perkins Coie can explain:
- For example, in January 2020, Member A sells her 25% interest in an LLC that owns $10 million of real property in Seattle to Member C for $2.5 million. No REET applies because Member A has not sold 50%+ and Member C has not purchased 50%+ of said LLC. Two years later, Member B sells his 25% interest in the LLC to Member C for $2.5 million. UH OH! Now REET applies because Member C acquired a combined 50% of LLC within a 36-month period (25% from Member A in 2020, and another 25% from Member B in 2022). Members A and B would be liable for $319,050 in REET— 6.39% of the consideration received for their membership interests.
It now costs slightly less to sell a cheaper home, and quite a bit more to sell an expensive home. But because the REET is marginally dependent on the sale price, and moving up the graduated scale doesn’t change the effective tax rate for the entire sale, sellers will still try to maximize their sale price; which means I don’t see any downward pressure on prices. If anything, higher end list prices could increase ~$20,000 – $30,000 to accommodate the higher excise tax they pay. Sorta like how soda simply got more expensive at McDonalds when we enacted the soda tax.
Favorable interest rates and soaring rents boosted activity in the housing market in November. More buyers competing for less inventory kept home prices strong. With the supply of homes far short of demand, sellers can expect well-priced properties to sell quickly this winter.
With just over a month of available inventory, demand on Eastside remains very strong. Sales are brisk, with 45% of single-family homes selling in 15 days or less and 20% of homes selling for over list price. The median single-family home price in November rose 2% from a year ago to $900,000 and was unchanged from October.
With more buyers vying for fewer homes, King County remains a solid seller’s market. While inventory traditionally shrinks in the winter, this November saw the number of new listings at historic lows. Demand was strong, with the number of closed sales up 12% over the same time last year. The median home price ticked up 3% over the prior year to $661,000 and was unchanged from October. The strong market sent prices higher in the more affordable price ranges, with some areas in South King County seeing double-digit increases.
Activity in Seattle was very strong in November. The number of closed sales was up 29% over the same time last year. With just over one month of homes available for sale, the city is starved for inventory. Seattle homes prices have ebbed and flowed slightly from month to month for much of this year. The median price of a single-family home sold in November was off 3% from a year ago to $735,000.
With an increasing number of buyers driving to affordability, the Snohomish County housing market remains robust. Inventory is very tight and continues to fall. The county finished November with just over one month of supply. The median price of a single-family home rose 5% over a year ago to $495,000. That figure is unchanged from October.
This post originally appeared on GetTheWReport.com
It’s that time of year when Windermere’s Chief Economist, Matthew Gardner, dusts off his crystal ball and peers into the future to give us his predictions for the 2020 economy and housing market.
Washington State employment has softened slightly to an annual growth rate of 2%, which is still a respectable number compared to other West Coast states and the country as a whole. In all, I expect that Washington will continue to add jobs at a reasonable rate though it is clear that businesses are starting to feel the effects of the trade war with China and this is impacting hiring practices. The state unemployment rate was 4.6%, marginally higher than the 4.4% level of a year ago. My most recent economic forecast suggests that statewide job growth in 2019 will rise by 2.2%, with a total of 88,400 new jobs created.
- There were 22,685 home sales during the third quarter of 2019, representing a slight increase of 0.8% from the same period in 2018 and essentially at the same level as in the second quarter.
- Listing activity — which rose substantially from the middle of last year — appears to have settled down. This is likely to slow sales as there is less choice in the market.
- Compared to the third quarter of 2018, sales rose in five counties, remained static in one, and dropped in nine. The greatest growth was in Skagit and Clallam counties. Jefferson, Kitsap, and Cowlitz counties experienced significant declines.
- The average number of homes for sale rose 11% between the second and third quarters. However, inventory is 14% lower than in the same quarter of 2018. In fact, no county contained in this report had more homes for sale in the third quarter than a year ago.
- Home price growth in Western Washington notched a little higher in the third quarter, with average prices 4.2% higher than a year ago. The average sales price in Western Washington was $523,016. It is worth noting, though, that prices were down 3.3% compared to the second quarter of this year.
- Home prices were higher in every county except Island, though the decline there was very small.
- When compared to the same period a year ago, price growth was strongest in Grays Harbor County, where home prices were up 22%. San Juan, Jefferson, and Cowlitz counties also saw double-digit price increases.
- Affordability issues are driving buyers further out which is resulting in above-average price growth in outlying markets. I expect home prices to continue appreciating as we move through 2020, but the pace of growth will continue to slow.
DAYS ON MARKET
- The average number of days it took to sell a home dropped one day when compared to the third quarter of 2018.
- Thurston County was the tightest market in Western Washington, with homes taking an average of only 20 days to sell. There were six counties where the length of time it took to sell a home dropped compared to the same period a year ago. Market time rose in six counties, while two counties were unchanged.
- Across the entire region, it took an average of 38 days to sell a home in the third quarter. This was down 3 days compared to the second quarter of this year.
- Market time remains below the long-term average across the region and this trend is likely to continue until more inventory comes to market, which I do not expect will happen until next spring.
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 am leaving the needle in the same position as the first and second quarters, as demand appears to still be strong.
The market continues to benefit from low mortgage rates. The average 30-year fixed rates is currently around 3.6% and is unlikely to rise significantly anytime soon. Even as borrowing costs remain very competitive, it’s clear buyers are not necessarily jumping at any home that comes on the market. Although it’s still a sellers’ market, buyers have become increasingly price-conscious which is reflected in slowing home price growth.
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.
4 Reasons to Sell Your Home This Fall
- Buyer demand is still strong
- There is less competition now – supply and demand
- There will never be a better time to move up
- Its time to move on with your life
Watch this video to hear more about why I think you should sell.
No — the sky is not falling! Signs may be pointing toward a recession but let’s look at some past stats re: home prices and appreciation.
- There is plenty of talk in the media about a pending economic slowdown.
- The good news is, home values actually increased in 3 of the last 5 U.S. recessions, and decreased by less than 2% in the 4th.
- Many experts predict a potential recession is on the horizon. However, housing will not be the trigger, and home values will still continue to appreciate. It will not be a repeat of the crash in the 2008 housing market
Source: Keeping Current Matters.
Another really important thing to take into consideration is our area. This infographic is national data. Our area is still flourishing with employment, companies hiring and out of the area folks moving in. Another great person to ask about this is Windermere’s own Matthew Gardener.
This is a brief summary of the Quarterly Gardner Report.
Things are still seeing positive growth from a Real Estate perspective.
In Western Washington YOY price growth is 2.8% higher. When compared to 1st Quarter it’s 12%. County by County is a bit different – for King County we saw a -0.4% price drop. This speaks directly to the affordability in that area. Days on market is still relatively low (21 Days in King County) and if a home is priced and marketed well – it will attract attention and sell rapidly. One strong take away is that interest rates are still at an all time low – with inventory up this is a great time to buy. And for those needing to sell before you can buy contingent offers are a viable possibility again!
Interest rates are at a two year low. Who knew!
There have been so many predictions over the past several years that rates were headed higher and higher and while they have fluctuated a bit – today it’s like free money! Our economy as well as the real estate market is unpredictable. But one thing is for certain, if you are or were on the fence about buying – either for the first time, selling and getting a bigger house or even ready to downsize and get into your retirement home – now could be a great time to make that happen. Most markets in our area are still great for sellers if the home is marketed and priced accordingly – and inventory is up (24.5% as of May) which means more for buyers to choose from.
Multiple offers are still the story again in some markets – but with more to choose from it’s doesn’t seem as frenetic. So why does all this hub-bub matter when it comes to interest rates – well it really can effect what you can buy. BUYING POWER is the answer – and with low interest rates you can afford more. And in our area – that makes a big difference. Which brings me to the information seen here – it’s a great depiction of what waiting, or what a changing interest rate can mean to you and your bottom line.
So when you’re ready to talk about finding your next community – let’s chat – I can help!
Wanted to quick share what’s happening in the Market. It’s been ticking up every month since February and is gradually catching last years numbers after the 4th quarter dip of 2018. Market times are down again and pairing that with sub 4% interest rates it is making the prospects of buying vs. renting very enticing! Sellers are now seeing increased traffic, but are also competing with additional homes for sale. Location, Location, Location is still the theme of todays market and the hotter marketplaces in June has been North Kirkland (Finn Hill), Mercer Island and Renton.
Click here to see the the stats in your area for June 2019