As of January 2025, Seattle’s housing market continues to exhibit dynamic trends, particularly in the realm of new construction. The city remains a focal point for both buyers and investors, driven by its robust economy and desirable living conditions.
Current Market Overview
According to Redfin, the median listing home price in Seattle stands at approximately $885,000, with properties typically spending around 75 days on the market.
This reflects a balanced market, offering opportunities for both buyers and sellers.
New Construction Trends
In 2023, Seattle achieved a significant milestone by completing 12,853 new homes, marking a 21% increase over the previous year and setting a new record for housing production.
Despite this surge, the city faces challenges in maintaining this momentum. Recent data indicates a decline in construction permits, suggesting potential slowdowns in future housing availability.
As of late 2024, builder sentiment in Seattle was measured at 44 out of 100, a notable decrease from the peak of 91 in March 2022, though slightly improved from the previous year. Additionally, the construction sector reported 129,300 jobs in November 2024, a reduction of 4,500 positions compared to the same month in 2023.
Several elements contribute to the current state of new construction in Seattle:
Geographic Constraints: Seattle’s unique topography, bordered by water and mountains, limits available land for development, inherently restricting housing supply.
Zoning Regulations: Existing zoning laws further constrain the development of new housing projects, particularly in central urban areas.
Economic Considerations: While construction costs have seen a slight decrease of 1.8% year-over-year, they remain elevated, impacting the feasibility of new projects.
The combination of high demand and limited supply continues to characterize Seattle’s housing market. The recent decline in construction permits may signal a future slowdown in housing availability, potentially leading to increased competition among buyers and sustained upward pressure on prices.
For stakeholders in the real estate sector, staying informed about these trends is crucial. Engaging with local policymakers, advocating for thoughtful zoning reforms, and exploring innovative construction methods could play pivotal roles in addressing the housing challenges facing Seattle in the coming years.
If you are interested in either buying or selling in Seattle, or just want to learn more about the housing market, feel free to reach out to me anytime. You can reach me at marnie@windermere.com or 206-659-8116.
If you’re holding out hope that the housing market is going to crash and bring home prices back down, here’s a look at what the data shows. And spoiler alert: that’s not in the cards. Instead, experts say home prices are going to keep going up.
Today’s market is very different than it was before the housing crash in 2008. Here’s why.
It’s Harder To Get a Loan Now – and That’s Actually a Good Thing
It was much easier to get a home loan during the lead-up to the 2008 housing crisis than it is today. Back then, banks had different lending standards, making it easy for just about anyone to qualify for a home loan or refinance an existing one.
Things are different today. Homebuyers face increasingly higher standards from mortgage companies. The graph below uses data from the Mortgage Bankers Association (MBA) to show this difference. The lower the number, the harder it is to get a mortgage. The higher the number, the easier it is:
The peak in the graph shows that, back then, lending standards weren’t as strict as they are now. That means lending institutions took on much greater risk in both the person and the mortgage products offered around the crash. That led to mass defaults and a flood of foreclosures coming onto the market.
There Are Far Fewer Homes for Sale Today, so Prices Won’t Crash
Because there were too many homes for sale during the housing crisis (many of which were short sales and foreclosures), that caused home prices to fall dramatically. But today, there’s an inventory shortage – not a surplus.
The graph below uses data from the National Association of Realtors (NAR) and the Federal Reserve to show how the months’ supply of homes available now (shown in blue) compares to the crash (shown in red):
Today, unsold inventory sits at just a 3.0-months’ supply. That’s compared to the peak of 10.4 month’s supply back in 2008. That means there’s nowhere near enough inventory on the market for home prices to come crashing down like they did back then.
People Are Not Using Their Homes as ATMs Like They Did in the Early 2000s
Back in the lead up to the housing crash, many homeowners were borrowing against the equity in their homes to finance new cars, boats, and vacations. So, when prices started to fall, as inventory rose too high, many of those homeowners found themselves underwater.
But today, homeowners are a lot more cautious. Even though prices have skyrocketed in the past few years, homeowners aren’t tapping into their equity the way they did back then.
Black Knightreports that tappable equity (the amount of equity available for homeowners to access before hitting a maximum 80% loan-to-value ratio, or LTV) has actually reached an all-time high:
That means, as a whole, homeowners have more equity available than ever before. And that’s great. Homeowners are in a much stronger position today than in the early 2000s. That same report from Black Knight goes on to explain:
“Only 1.1% of mortgage holders (582K) ended the year underwater, down from 1.5% (807K) at this time last year.”
And since homeowners are on more solid footing today, they’ll have options to avoid foreclosure. That limits the number of distressed properties coming onto the market. And without a flood of inventory, prices won’t come tumbling down.
Bottom Line
While you may be hoping for something that brings prices down, that’s not what the data tells us is going to happen. The most current research clearly shows that today’s market is nothing like it was last time.
Why There Won’t Be a Recession That Tanks the Housing Market
There’s been a lot of recession talk over the past couple of years. And that may leave you worried we’re headed for a repeat of what we saw back in 2008. Here’s a look at the latest expert projections to show you why that isn’t going to happen.
According to Jacob Channel, Senior Economist at LendingTree, the economy’s pretty strong:
“At least right now, the fundamentals of the economy, despite some hiccups, are doing pretty good. While things are far from perfect, the economy is probably doing better than people want to give it credit for.”
That might be why a recent survey from the Wall Street Journal shows only 39% of economists think there’ll be a recession in the next year. That’s way down from 61% projecting a recession just one year ago (see graph below):
Most experts believe there won’t be a recession in the next 12 months. One reason why is the current unemployment rate. Let’s compare where we are now with historical data from Macrotrends, the Bureau of Labor Statistics (BLS), and Trading Economics. When we do, it’s clear the unemployment rate today is still very low (see graph below):
The orange bar shows the average unemployment rate since 1948 is about 5.7%. The red bar shows that right after the financial crisis in 2008, when the housing market crashed, the unemployment rate was up to 8.3%. Both of those numbers are much larger than the unemployment rate this January (shown in blue).
But will the unemployment rate go up? To answer that, look at the graph below. It uses data from that same Wall Street Journalsurvey to show what the experts are projecting for unemployment over the next three years compared to the long-term average (see graph below):
As you can see, economists don’t expect the unemployment rate to even come close to the long-term average over the next three years – much less the 8.3% we saw when the market last crashed.
Still, if these projections are correct, there will be people who lose their jobs next year. Anytime someone’s out of work, that’s a tough situation, not just for the individual, but also for their friends and loved ones. But the big question is: will enough people lose their jobs to create a flood of foreclosures that could crash the housing market?
Looking ahead, projections show the unemployment rate will likely stay below the 75-year average. That means you shouldn’t expect a wave of foreclosures that would impact the housing market in a big way.
Bottom Line
Most experts now think we won’t have a recession in the next year. They also don’t expect a big jump in the unemployment rate. That means you don’t need to fear a flood of foreclosures that would cause the housing market to crash.
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 me.
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.
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)!
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.
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.
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.
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.
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.
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.
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 me.
REGIONAL ECONOMIC OVERVIEW
Just when we thought COVID was starting to pull back, the Omicron variant made its presence known. It is still too early to suggest that this has affected the region’s economic recovery—we won’t likely know for certain until we get more job data. I remain hopeful that this latest spike in infections will not have too much of an impact, but only time will tell. To date, the region has recovered all but 51,000 of the 297,000 jobs that were lost due to the pandemic. Some of the region’s smaller counties, including Grays Harbor, Cowlitz, Thurston, San Juan, and Clallam, have seen a full job recovery. The most recent data (November) shows the regional unemployment rate at a very respectable 3.3%, which is below the pre-pandemic low of 3.7%. The lowest unemployment rates were in King and San Juan Counties, where 2.9% of the labor force was out of work. The highest rate was in Grays Harbor County, which registered 5.1%. I still expect to see a full job recovery by this summer. However, there is a growing labor shortage holding the area back. Hopefully, this will change, but some industry sectors—especially hospitality—continue to find it hard to attract workers.
WESTERN WASHINGTON HOME SALES
❱ In the final quarter of the year, 22,161 homes sold, representing a drop of 5.2% compared to the same period in 2020 and down 18.8% from the third quarter.
❱ The reason there were lower year-over-year sales is simply because the number of homes for sale was down more than 30%. The drop between third and fourth quarters is likely due to seasonality changes in the market.
❱ Although home sales were lower in most markets, there was a significant uptick in Grays Harbor and Thurston counties. The number of homes sold dropped across the board compared to the third quarter.
❱ The ratio of pending sales (demand) to active listings (supply) showed sales outpacing listings by a factor of 5.2. The market is supply starved and unfortunately, it’s unlikely enough homes will be listed this spring to satisfy demand.
WESTERN WASHINGTON HOME PRICES
❱ Home prices rose 15.1% compared to a year ago, with an average sale price of $711,008. This was 2.1% lower than in the third quarter of 2021.
❱ When compared to the same period a year ago, price growth was strongest in San Juan and Jefferson counties. All but two markets saw prices rise more than 10% from a year ago.
❱ Relative to the third quarter, every county except Island (-8.6%), Mason (-5.2%), Lewis (-2.9%), King (-2.1%), Cowlitz (-1.7%), and Kitsap (-0.9%) saw sale prices rise.
❱ Mortgage rates rose more than .2% between the third and fourth quarters, which may have impacted prices. Affordability constraints continue to grow, which is also likely to have played a part in slowing gains.
DAYS ON MARKET
❱ It took an average of 23 days for homes to sell in the final quarter of 2021. This was 8 fewer days than in the same quarter of 2020, but 6 more days than in the third quarter of last year.
❱ Snohomish, Thurston, King, and Kitsap counties were the tightest markets in Western Washington, with homes taking an average of between 13 and 16 days to sell. The greatest drop in market time compared to a year ago was in San Juan County, where it took 33 fewer days for a seller to find a buyer.
❱ All counties contained in this report saw the average time on market drop from the same period a year ago. Every county except Whatcom saw market time rise compared to the third quarter.
❱ Longer days on market might suggest that things are starting to slow, but I don’t actually think this is the case. I believe buyers are being a little more selective before making offers, and many may be waiting in the hope that supply levels will improve in the spring.
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 housing market remains in a state of imbalance, but, as I look at the data, I believe the frenetic pace of sales and price appreciation may start to soften in 2022.
This will likely be due to financing costs and affordability acting as headwinds to price growth. Mortgage rates have started to rise again, and I have forecasted them to reach 3.7% by fourth quarter. This alone will slow price growth as affordability in many areas declines.
One thing that remains unknown that could have a significant impact on the market is long-term work-from-home policies. Many businesses have not yet determined their plans for remote working, but once they do, potential home buyers who have been waiting to see how frequently they have to commute to work could immediately start their search. In addition to boosting sales, this could add inventory to the market as well.
All things considered, I am moving the needle just a notch toward buyers. However, as you can see, we are still in a market that heavily favors home sellers.
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.
For further information about the housing market or discuss real estate in your area, please don’t hesitate to contact me.
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 Real Estate’s Chief Economist, Matthew Gardner, and welcome to the latest episode of Mondays with Matthew.
Before I get started, I wanted to let you know that this will be the final episode of Monday with Matthew for 2021 as I’m going to be taking Christmas off. So it’s time to offer you my forecasts for the U.S. economy and the country’s housing market in 2022.
Although many people – including myself – had hoped that COVID-19 would have become a somewhat distant memory by now, and that the economy would have recovered this was – sadly – not to be the case, and the pandemic’s influence on the economy is still being felt and all the datasets I track tell me that, although we are certainly healing, COVID continues to act as a drag on economic growth and I expect that to continue through the spring of next year – if not a little longer.
Economic Recovery & Growth
And it’s because of this that I – along with many other economists – have spent the last few months lowering our forecasts for economic growth – at least through the middle of 2022. So, let’s look at this a little closer.
Here is my forecast for economic growth through the end of next year and you will note that, even though I am cautious in regard to the economy as we move through the winter and into 2022, I am still expecting to see a fairly decent bounce back in the fourth quarter of this year following the very disappointing rate that we saw in Q-3.
And on an annualized basis, I believe that the economy will have expanded by just shy of 5% this year and come in a little below 4% in 2022.
Simply put, the impacts of COVID-19 are going to continue to act as a drag on virus sensitive consumer services next year and ongoing supply chain issues will also delay inventory restocking. Both of these impacts have a depressing effect, in more ways than one, on economic growth, but I don’t see any chance that we will fall back into a recession.
Looking at the employment picture this chart shows my forecast for average monthly growth in jobs during a quarter and to give you some context, over the last decade or so the country has added an average of around 200,000 jobs per month during any one quarter and my forecast is for more robust employment growth as we move through 2022 and, if correct, I expect to see the country return to pre-COVID employment levels in the second half of the year.
And with jobs continuing to return I’m looking for the unemployment rate to continue trending lower and breaking south of 4% during the final quarter of the year. With the expiration of enhanced unemployment benefits – in concert with wages rising significantly in many face-to-face industries such as leisure and hospitality – prospects for people currently unemployed are looking rather good. That said, there are still millions of unemployed Americans who are not looking for work even with wages rising, the labor force still down by 3 million from its pre-pandemic peak, and this is worrying as businesses continue to have a hard time finding employees which raises the expectation that inflation will remain higher for longer than I would have liked to see.
Measures of Inflation
And that leads nicely into my final economic forecast and that is my outlook for inflation. As we have discussed, supply chain issues and labor shortages have increased prices significantly and this top chart shows annual changes in all consumer prices which I expect to remain around 5% until next spring, before gradually dropping down to below 3% by the end of the year.
But the core inflation rate – which excludes the volatile food and energy sectors – won’t peak until early next year before it too starts to gradually pull back and, at these levels, the Federal Reserve will undoubtedly have started to raise interest rates to counteract inflationary pressures. This is not pretty, but I absolutely do not believe that we are in some sort of inflationary spiral, or that “stagflation” will raise its ugly head again.
U.S. Housing Market
Okay! Now it’s time to turn our attention to the U.S. housing market which was a beacon of hope during the pandemic period and, given the massive spike in demand that started last June, I’m looking for a little more than 6 million existing homes will have changed hands in 2021, but I don’t see this level increasing in 2022 – mainly due to ongoing supply limitations as well as rising affordability issues, and I’m therefore forecasting sales to pull back – albeit very modestly – next year. That said, the country has never seen more than 6 million home selling in a single year since records were first kept so the number is still very impressive.
And with the market as tight as it has been so far this year, it shouldn’t be any surprise to see median sale prices skyrocketing and, even though we have 3 more months of sales data yet to be released, I still anticipate prices will have risen by almost 16 and a half % in 2021- a quite remarkable number. This pace of appreciation has never been seen before. In fact, the closest was back in 2005 – when the housing bubble was inflating rapidly – but even then, prices only rose by 12.2%.
But, as I mentioned in my sales forecast, this pace of growth is unsustainable and I am expecting to see some of the heat to come off the market next year but, a growth rate of 7.3% is certainly nothing to sniff at.
There are three major reasons why we will see the pace of growth slow. I have already mentioned my concerns regarding housing affordability, but mortgage rates and new supply will both influence the slowdown in sales and price growth in the resale arena.
Although I do not prepare a forecast for housing affordability, this is my where I expect to see mortgage rates through the end of next year and I am looking for them to continue “stair-stepping” higher but still ending 2022 below 4% – very low by historic standards given that the long-term average for a conventional 30-year mortgage is somewhere around 7 1/2%.
Obviously, as rates notch higher that starts to compress price growth as it puts a lower ceiling on how much a buyer can afford to pay for a home.
And slowing growth in existing home prices and sales will also be a function of additional supply and this chart shows my forecast for single-family starts this year and next. I expect more than a million homes to start construction in 2022 – continuing the trend that started in mid-2020 – but I am sure that some of you may be asking yourselves that if starts are already robust, how have existing home sales been able to increase so significantly if there has been solid supply coming from homebuilders – and that would be a great question.
And I would answer this by telling you that the way the Census gathers data on start is to count the number of home foundations that have been poured, but vertical construction has not necessarily started. And what we have been seeing is a lot of foundations but not so many homes actually being built – and we know this by looking at the number of homes that are for sale but have yet to be started. So, it’s important to look at a separate number that the Census Bureau also puts out which counts the number of units actually under construction, and that number has been growing significantly over the course of the last 18 months or so.
Builders have been hamstrung with rising labor and material costs which will lead new home sales this year to fall below the number seen in 2020; however, I do expect this to pick up significantly next year and my current forecast calls for 927,000 new homes to be sold in 2022.
So, there you have it, my economic and housing market forecast for 2022.
Of course, there are still a number of variables that could lead me to revise this forecast but, as an old economics professor of mine used to tell me, “Gardner, forecast well, but forecast often!”
If everything goes according to my plan, you should expect to see the housing market start to move towards some sort of balance next year, but I am afraid that it will still remain out of equilibrium until at least 2023.
And if you’re wondering, no, I don’t see a housing bubble forming and I’m also not at all concerned about homeowners currently in forbearance, but it would be silly to say that there aren’t any issues in the housing market that concern me because there are and the biggest of which is housing affordability and this will have a significant impact on the millennial generation who are continuing to get older, and they are all – well most – thinking about settling down and, possibly, having children, and I wonder how hard it will be for many of them to be able to afford to buy their first home because most really do want to become homeowners. Will builders figure out how to build to this massive pent-up demand? I guarantee you that whoever can solve this puzzle will do very, very well.
COVID-19 caused an unparalleled shock to the US economy and the rise of the delta variant has certainly impacted the speed of our recovery but, rest assured, this particular forecaster firmly believes that we will recover and that the economy will continue to grow.
Demand for ownership housing remains remarkably buoyant and, in fact, it is quite likely that demand may actually increase with the work from home paradigm that will start to gain momentum next year. It will be fascinating to watch how this impacts not just demand, but where these buyers will ultimately choose to live.
In closing, I very much hope that you have all enjoyed the videos that I have shared this year as much as I have enjoyed making them.
As always if you have any questions or comments about this topic, please do reach out to me but, in the meantime, stay safe out there and I look forward the visiting with you all again next year.
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 Real Estate agent.
REGIONAL ECONOMIC OVERVIEW
The emergence of the of COVID-19 Delta variant had a palpable impact on the region’s economy, which, naturally, impacted the job recovery. Employment levels in Western Washington had been picking up steam in the spring but started to slow quite dramatically over the summer. To date, the region has recovered more than 201,000 of the jobs that were lost due to the pandemic, but we appear to be in a bit of a holding pattern. That said, the ending of enhanced unemployment benefits has led many business owners to see more applicants for open positions, so I am hopeful the numbers will pick back up as we move into the winter months. The most recent data (August) shows the region’s unemployment rate at a respectable 5%, but we still have a way to go before we reach the pre-pandemic low of 3.7%. On a county level, the lowest unemployment rate was in Kitsap County (4.4%) and the highest was in Grays Harbor County (6.6%). There are still many hurdles in front of us, but I believe we will continue to add jobs and reach full employment recovery by mid-2022.
WESTERN WASHINGTON HOME SALES
❱ Sales in the third quarter rose 6.4% year over year, with a total of 27,280 homes sold. The increase matched what we saw in the second quarter of this year.
❱ I was pleased to see sales growth continue. This rise was supported by a 28.4% increase in the number of homes for sale. Listings rose the most in Grays Harbor (+62.6%), Lewis (+53.6%), and Skagit (+52.0%) counties.
❱ Sales activity was mixed. Nine counties saw year-over-year growth, but sales slowed in six counties. That said, sales were up in every county other than King and San Juan compared to the second quarter of 2021.
❱ The ratio of pending sales (demand) to active listings (supply) showed pending sales outpacing listings by a factor of 4.6. Even with the increase in the number of new listings, the market is far from balanced.
WESTERN WASHINGTON HOME PRICES
❱ Home prices rose 18.9% compared to a year ago, with an average sale price of $726,168—another all-time record.
❱ When compared to the same period a year ago, price growth was strongest in Clallam, San Juan, and Jefferson counties, but all markets saw prices rise more than 12% from a year ago.
❱ Average sale prices pulled back 1.1% compared to the second quarter of this year. Given the massive increase in value over the past few years, it is not at all surprising. The key indicator has been a softening in list prices and that naturally translates to slower price growth. This is nothing to be worried about. It simply suggests that the market may finally be heading back to some sort of balance.
❱ Relative to the second quarter of this year, all counties except San Juan (-0.1%), Island (-0.5%), and Whatcom (-0.5%) saw higher sale prices.
DAYS ON MARKET
❱ It took an average of 17 days for a home to sell in the third quarter. This was 19 fewer days than in the same quarter of 2020, and 1 fewer day than in the second quarter of this year.
❱ Mirroring the second quarter, Snohomish, Kitsap, Thurston, and Pierce counties were the tightest markets in Western Washington, with homes taking an average of 9 days to sell in Snohomish County and 11 days in the other three counties. The greatest reduction in market time compared to a year ago was in San Juan County where it took 102 fewer days for homes to sell.
❱ All counties contained in this report saw the average time on market drop from the same period a year ago, but eight counties saw market time rise from the second quarter; however, the increases were minimal.
❱ Even with inventory levels increasing in most markets, the region’s housing market remains remarkably tight. That said, I do see some of the heat dissipating and I am hopeful that if inventory levels continue rising, we will start a slow move back toward a balanced market.
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.
Even given the speedbump that hit the region’s economy with the emergence of the Delta variant, the housing market remains remarkably resilient. Demand from buyers continues to be very strong, and modestly increasing inventory levels appear to have—at least for the time being—reduced some of the fever from the market. Mortgage rates remain very favorable, and my current forecast is for them to stay in the low- to mid-3% range until next summer. Rising inventory levels have led price growth to slow and days on market to start increasing, which may be a sign that the market is retreating from a prolonged period of exuberance.
As we move through the balance of the year, I believe demand will remain solid, but we will continue to see price growth soften as more listings compete for the buyers that are out there. That is not to say price growth will turn negative; rather it suggests that we are slowly moving back toward a more balanced market. That said, the market certainly still favors home sellers. As such, I am leaving the needle in the same position as the second quarter. I may move it a little in the direction of buyers next quarter if the current trend continues through the winter months.
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 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 Real Estate’s Chief Economist, Matthew Gardner, and welcome to the latest episode of Mondays with Matthew.
This month, we are going to take another look at forbearance activity across the U.S. Now I know that we have talked about this subject several times over the past year, but it is worthwhile to look at it again if only for the fact that the program stopped taking new applications for forbearance at the end of June.
So, let’s take a look at where we were when the forbearance program started and where we are today.
And as you can see from this first chart, the situation today is a vast improvement from where we were last May when there were more than 4.76 million homes in the program. For context, that meant that more than 9% of all homes with a mortgage were in the program last May – a huge number.
But the latest data from Black Knight Financial shows that – by mid-July of this year – the number had dropped to just over 1.86 million homes, or roughly 3.5% of houses with a mortgage.
This is certainly a pretty impressive recovery, as it means that 2.9 million homeowners left the program between May of 2020 and mid-July 2021.
And when we look at the makeup of mortgages in forbearance, the largest share came from loans backed by Fannie Mae and Freddie Mac – not surprising given the size of their mortgage portfolio – with, at the peak, just shy of two million homes in the program – roughly 7.2% of their total portfolio.
But that number has now dropped to 582,000 or just 2.1% of loans outstanding.
Loans backed by the FHA or VA also peaked last May at about 1.53 million or 12.6% of their portfolio.
But today that number has dropped to 755,000 or 6.2% of the mortgages they hold.
And finally, loans showed here as “other” represent private label securities or portfolio loans, and it’s interesting to see that their numbers didn’t peak until late June when just short of 1.25 million homes – or 9.6% of their portfolio – were in the program.
However, today that number had dropped to 524,000, or 4% of mortgages backed by these entities.
What I see from the slides that we have looked at is that the number of active forbearance plans continues to fall; however, the pace of the drop has certainly slowed over the last quarter or so.
After seeing a monthly drop of 12% in April – as a large volume all plans hit their 12-month review date – the pace of improvement has since slowed to just 5% over the past 30 days.
Although the number of homes in forbearance is still higher than I would like to see, fewer than 4% of all mortgages are in the program and we haven’t seen this level since April of 2020, just as the pandemic was kicking in.
As we look forward, you can see that almost 600,000 homes currently in forbearance are coming up for review so the potential for a greater rate of improvement in the overall number of homes in the program is certainly possible – but not guaranteed.
Unsurprisingly the number of homes entering the program for the first time as well as repeat plan starts is lower than we saw last summer but again the pace of improvement has slowed. That said, overall starts are down by 3% on the month and when we combine new and repeat starts the number is 3 to 4% lower.
Of the roughly 460,000 homes in forbearance that were reviewed for either extension or removal from the program in the first two weeks of June, 33% left the program while 67% had the term extended. This is a lower removal rate than we saw during the first two weeks of either April or May, but I expect to see more homeowners come out of the program, but only as long as the country continues to reopen, and that is not a certainty given the rise of the Delta and Lambda variants of the COVID-19 virus.
I actually found this chart to be very interesting. Of the more than two million active forbearance plans, approximately half are scheduled to reach their 18-month terminal expiration date in September and October of this year.
And if we take this data, and then project a fairly modest 3% monthly rate of homeowners leaving the forbearance program, it means that over 900,000 homes would exit the program in the third and fourth quarters of this year.
And with 575,000 thousand plans scheduled to expire in September and October alone – that means that mortgage services will be faced with the daunting task of having to process nearly 15,000 plans per business day during that time. It’s going to be a lot of work!
Roughly 7.25 million borrowers have used the forbearance program at one time or another through the course of the pandemic and that represents roughly 14% of all homeowners in the country.
Of that 7.25 million, the chart here shows that 72% have left the plan, and 28% remain in active forbearance, but you can also see that loan performance remains pretty robust among homeowners who have left the program with 46% of them getting things squared away with their lenders in regard to missed payments, and 18% having paid off their loan in full – likely from selling or refinancing with a different lender.
You will also see that the number of borrowers in post forbearance loss mitigation is down a tad to 333,000, while those who have left forbearance but still remain delinquent and not in loss mitigation accounts for roughly 3% of total loans in the program or just 195,000.
So, the way I see it, although the number of homes leaving the program has certainly slowed which, quite frankly, doesn’t surprise me, I still expect further improvement as we move through the year not just because the economy continues to reopen and people are getting reestablished at work, but also because we won’t be seeing any new owners enter the program.
And finally, I want to show you what parts of the country have a high share of homes in forbearance.
I must tell you first off, that this data isn’t that timely – in fact these numbers are from March as the data I get at the State and County grain is subject to a three month lag.
Anyway, as you can see from this map, not all states are created equal, with the share of homes in forbearance still elevated in Louisiana, Texas and, to a lesser degree, New York State.
Out here in the West, the rate in Nevada is still high, and California and New Mexico are both somewhat higher than I would like to have seen but, as I just said, this data is a little old, and I believe that the share of homes in forbearance in both Nevada and California is lower today than you see here.
Given everything that we’ve looked at today, there are a couple of conclusions that can be drawn.
The first, and most obvious, is that anyone believing but there will be a flood of homes that will be foreclosed on either toward the end of this year or in 2022, is likely to be disappointed. Even if every home still in the program does enter foreclosure which, by the way, is basically impossible, the number of homes that would be foreclosed on would be minimal when compared to the fallout following the financial crisis of more than a decade ago.
And when I say that it’s virtually impossible to expect to see all homes will be foreclosed on, it’s mainly because of the remarkable run up in home values that the country has seen since 2012.
The buildup of equity that all homeowners have seen whether they bought before 2012, or even as recently as the past 2 or 3 years, suggests that if, for whatever circumstance, owners in forbearance can’t get their heads back above water, they will choose to sell their home – in order to keep the equity that they have accumulated.
A typical homeowner in forbearance has a sizeable equity in their home, with median equity of a homeowner in the program measured at just over $100,000. And this significant amount of cash in their homes would allow them to pay the bank back any missed payments, sell, and still walk away with a sizable amount of equity.
The bottom line is that have the forbearance program was needed and it can be said that it has been successful so far in warding off home foreclosures because of the remarkable impact of the pandemic.
Although it would be naïve to suggest that foreclosure rates won’t rise at all, as the forbearance program winds down, I do see them ticking higher but, given all the data that I’ve been looking at, I would be very surprised to see overall foreclosure rates rise to a level significantly above the long-term average.
Well, I hope that you have found this month’s discussion to be interesting. As always if you have any questions or comments about this topic, please do reach out to me but, in the meantime, stay safe out there and I look forward the visiting with you all again, next month.
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 Real Estate agent.
REGIONAL ECONOMIC OVERVIEW
Employment levels in Western Washington picked up in the late spring and early summer months. The region has now recovered 168,800 of the 297,210 jobs that were lost due to the pandemic. Although the recovery is palpable, there are still 128,000 fewer jobs than there were at the pre-COVID peak in February 2020. The most recent data (May) shows the region’s unemployment rate at a respectable 5.2%. This is significantly lower than the April 2020 high of 16.8%, but still not close to the 2020 low of 3.7%. The jobless rate was lowest in King County (4.8%) and highest in Grays Harbor County (7.6%). Although unemployment levels continue to drop, we cannot attribute all the improvement to job creation: a shrinking labor force also lowers the jobless rate. In short, job recovery continues but we still have a way to go.
WESTERN WASHINGTON HOME SALES
❱ Regardless of low levels of supply, sales in the second quarter rose 45.6% year-over year, with a total of 25,640 homes sold. Although comparisons to the same quarter a year ago are not informative due to the pandemic, I was pleased to see sales increase 61.3% from the first quarter of this year.
❱ Listing activity was 42.8% higher than in the first quarter, which was a pleasant surprise. Listings rose the most in Kitsap, Clallam, Island, and Mason counties, but there were solid increases across the region.
❱ Sales were up across the board, with sizable increases in San Juan, King, Whatcom, and Snohomish counties. Only Mason County experienced sales growth below 10%.
❱ Pending sales (demand) outpaced active listings (supply) by a factor of 6. Even with the increase in the number of homes for sale, the market is far from being balanced.
WESTERN WASHINGTON HOME PRICES
❱ Home prices rose 31.4% compared to a year ago. The average sale price was $734,567—another all-time record.
❱ Year-over-year price growth was strongest in San Juan and Jefferson counties, but all markets saw prices rise more than 23% from a year ago.
❱ Home prices were a remarkable 15.7% higher than in the first quarter of this year, possibly due in part to the drop in 30-year fixed mortgage rates between the end of the first and second quarters. That said, the modest decline in mortgage rates is certainly not the primary driver of price growth; the culprit remains inadequate supply.
❱ Relative to the first quarter of the year, San Juan (+33%), Jefferson (+24.7%), and Island (+20.5%) counties saw the fastest rate of home-price appreciation.
DAYS ON MARKET
❱ It took an average of only 18 days for a listed home to go pending. This was 22 fewer days than a year ago, and 11 fewer days than in the first quarter of 2021.
❱ Snohomish, Kitsap, Thurston, and Pierce counties were the tightest markets in Western Washington, with homes taking an average of only 7 days to sell in Snohomish County and 9 days in the other three counties. The greatest drop in market time compared to a year ago was in San Juan County, where it took 84 fewer days to sell a home.
❱ All counties contained in this report saw the average time on market drop from the same period a year ago. The same can be said when comparing market time in the current quarter with the first quarter.
❱ It’s widely known that the area’s housing market is very tight and unfortunately, I don’t expect the number of listings to increase enough to satisfy demand in the near term. Furthermore, I’m seeing rapid growth in demand in the counties surrounding King County which is likely proof that buyers are willing to move further out given the work-from-home paradigm shift.
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.
Demand is maintaining its momentum, and, even with supply levels modestly improving, the market remains extraordinarily tight.
Mortgage rates are still hovering around 3%, but the specter of them starting to rise at some point is clearly motivating buyers. I am very interested to see significant interest outside of the Seattle metro area, although King County is certainly still performing well. I will be monitoring whether this “move to the ‘burbs” is endemic, or a temporary phenomenon. My gut tells me that it is the former.
At some point, the remarkable run up in home values will slow. Affordability constraints are becoming more widespread, and even a modest uptick in mortgage rates will start to slow down price increases. It’s worth noting that list-price growth is starting to taper in some markets. This is a leading indicator that may point to a market that is starting to lose a little momentum.
The bottom line is that the market still heavily favors sellers and, as such, I am moving the needle even more in their favor.
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.
Originally published on the Windermere Blog by Sandy Dodge
Of all the questions that arise during the selling process, “What’s my home worth?” is the first for most sellers. By using home valuation tools and understanding local market conditions, sellers can educate themselves on how much their home could potentially fetch on the market, but that’s just the tip of the iceberg.
Best Ways to Determine Home Value
Windermere’s home value estimator is a great starting point for sellers. Free to use, it will provide you with an instant home value and an expected price range, a heat map of buyer interest near you, and recent home sales in your area. Click the link below to get started.
Though tools like home value estimators provide some data on what sellers can expect when pricing their home, nothing compares to the expertise a professional real estate agent offers. Various factors influence home prices including seasonality, market conditions, and location, and agents have the means to account for these factors to accurately price your home by conducting a Comparative Market Analysis (CMA).
A CMA compares your home to others in your area that have either recently sold, are currently on the market, or had previously listed but have since expired. Depending on the conditions of the market, an agent will gather data for the past three to six months. When conducting a CMA, they’ll take into account recent market trends, competing properties, your home’s amenities, and its overall marketability. The analysis also considers aspects of the home such as lot size, condition, age, square footage, bedrooms and bathrooms, and the terms of financing. A thorough CMA will provide information on what homes in your area are selling for, how long they were on the market, and the difference between their listed and sold price.
So why is a CMA important? A CMA helps price the home more accurately, keeping the property competitive in the current market. For example, in a seller’s market where demand is driving up home values, an agent will work with their seller to account for the elevated prices before listing their home. Doing so allows you to avoid overpricing which usually results in a longer sale period. CMAs can also help buyers negotiate their asking price by having a data-backed analysis of the home’s value based on current market trends.
The key to a successful sale begins with pricing your home correctly, and having an experienced agent conduct a Comparative Market Analysis is critical to this process. I’d love to help you start this process and provide you with a free CMA for your home, feel free to send me an email and we can get the process started.
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