First American says low mortgage rates are driving home price growth

In September, home prices rose 0.9%, declining 7.6% year over year, First American said in its Real House Price Index. According to the company, unadjusted house prices sit 8.1% above the housing boom peak.

Consumer buying power, which measures the influence of income and interest rate changes on house-hold spending, increased by 0.2% between August and September, rising 15.8% year over year.

When consumer house-buying power is factored in, home prices are actually 42.2% below their 2006 peak and 18.8% below prices from January 2000.

Although housing affordability improved during the month, Mark Fleming, First American’s chief economist said the growth just wasn’t enough.

“Two of the three key drivers of the Real House Price Index, household income and mortgage rates, modestly swung in favor of increased affordability in September, yet affordability declined month over month,” Fleming said.

This is because September’s home price growth outpaced improvements in overall affordability, according to Fleming.

“The 30-year, fixed-rate mortgage fell by 0.01 percentage points and household income increased 0.03 % compared with August 2019,” Fleming said. “When household income rises, consumer house-buying power increases. Declining mortgage rates have a similar impact on consumer house-buying power.”

“However, nominal house price appreciation jumped 1.1% in September, outpacing the benefits of rising house-buying power on affordability,” Fleming said. “Accordingly, the RHPI increased 0.9% month over month.”

Increases in the RHPI indicate a decline in affordability, and September ‘s was the largest month-over-month affordability decline since November 2018, Fleming said.

While declining mortgage rates have increased house-buying power throughout the year, Fleming said it has also led to a greater demand of supply, which has put pressure on the nation’s home prices.

“When demand increases for a scarce (limited or low supply) good, prices will rise faster,” Fleming said. “While year-over-year, the RHPI shows an improvement in affordability, the increase in house-buying power in September was not enough to offset nominal house price gains compared with August.”

~Alcynna Lloyd, Housing Wire

Your home may not be a mansion. But you might still have to pay a ‘mansion tax’

Beginning in January, homeowners in Washington state will soon pay a real estate tax that increases based on the sale price of their home.

Under the new provision, the tax rate on properties that sell above $1.5 million will more than double, rising from 1.28% to 2.75%. Homes that sell for more than $3 million will be taxed at 3%.

And Washington isn’t the only state changing the way it taxes real estate. New York also recently expanded its “mansion tax” — an additional tax that targets higher-end home sales.

Most real estate deals in the US trigger what is known as a transfer tax. But certain states — including Connecticut, Hawaii, New Jersey, Vermont and New York — also levy a mansion tax on homes that sell above a certain price.

What is a mansion tax?

The aim of a mansion tax is to make the state and local tax systems fairer and to raise money, says Samantha Waxman, a policy analyst at the Center for Budget and Policy Priorities. The additional taxes can be used to fund things like schools or roads, or can be specifically targeted toward things like affordable housing projects.

“Mansion taxes are one way for states to provide for their long-term future,” she said.

But how expensive does a home have to be to trigger a mansion tax?

Washington state made its transfer tax progressive in 2019, according to CBPP, with graduated rates that increase for homes sold that are worth over $500,000, $1.5 million, and $3 million. These new rates will apply as of January 1, 2020. The state cut the rate for homes worth less than $500,000.

Who pays a mansion tax?

Using transfer taxes to raise public funds is nothing new, says Kim S. Rueben, director of the State and Local Finance Initiative at the Urban-Brookings Tax Policy Center. But more recently, some states and cities are adopting tax rates that go up as the value of the property increases, similar to income tax rates that go up as your income increases, rather than a flat tax.

In deciding who should pay these taxes, lawmakers are considering two things, said Rueben.

First: How badly does the state need the money?

“If you need the money for basic services, like Vermont, you need a lower threshold to get more people to pay,” Rueben said.

The second factor is income inequality and how housing prices in the area are widening the gap.

In Washington state, the real estate excise tax is typically paid by the seller of the property, although the buyer is liable for the tax if it is not paid, according to the state Department of Revenue.

~Q13 Fox News

Rapid growth in jobs and office rents puts Seattle among leaders in top 30 tech markets

Another new report is shining a light on Seattle’s rapid growth among leading tech hubs.

CBRE’s annual Tech-30 report, which measures the tech industry’s impact on North American office real estate markets, shows Seattle is the sixth fastest growing tech market in overall office rent growth. Rents jumped 12.4 percent between Q2 2017 and Q2 2019, up from 11.7 percent in the previous two-year period, CBRE reported.

Seattle is also fourth in tech employment growth, with a rate of 23.7 percent during 2017 and 2018. The 34,000 new jobs added in the market were the highest number among any of the Tech-30 cities.

Vancouver, B.C., San Francisco and Toronto were the top three markets ahead of Seattle in the overall ranking of the 30 markets.

“Seattle’s tech industry is among the largest in North America and is growing at a rapid pace,” said CBRE’s John Miller, senior managing director of the firm’s Seattle office. “This growth, combined with the second strongest tech labor pool in North America, means we’re going to continue to attract tech firms looking to take advantage of our intellectual capital, which will continue to strengthen office fundamentals.”

Major technology companies have leased nearly 2.8 million square feet of office space in the past year, accounting for 45 percent of all leasing activity in the Puget Sound market, CBRE reported. Much of this space is for expansion purposes, which will add even more jobs to the tech industry in the near-term. And perhaps they will be filled by area tech grads, whose number grew by more than 60 percent.

The report also looked at rent gains, rent premiums and net absorption in submarkets that are hot tech spots in the larger overall markets. South Lake Union, home to Amazon and major tech outposts for Facebook, Google and Apple, showed a 6.4 percent rent growth in the past two years and commands a 13.4 percent premium over the overall market average, CBRE reported.

CBRE’s report comes on the heels of last week’s Q3 2019 PayScale Index, which tracks quarterly and annual trends in compensation, and found that wages increased 4 percent year over year in Seattle. The city outpaced the national average of 2.6 percent and only trailed San Francisco, at 4.3 percent.

~Kurt Schlosser, GeekWire

U.S. Real Estate Predictions for 2020 Suggest More of the Same, Mostly

According to Freddie Mac’s latest set of predictions, issued on October 31, the U.S. real estate market will “continue to firm” as home sales increase. In fact, they believe housing is currently one of the brighter spots in the U.S. economy.

Their chief economist, Sam Khater, said that despite a global economic slowdown the U.S. real estate market “remains on solid ground with housing starts, building permits, existing home sales, and new home sales all outperforming the broader economy.”

Home Sales Expected to Increase Slightly

The first and most notable prediction has to do with home sales in 2019 and 2020. The group issued a mostly positive outlook for residential real estate sales activity in 2020. Home sales nationwide are expected to reach 6 million by the end of this year, and then rise to 6.1 million during 2020.

This contradicts some of the previous predictions for the U.S. real estate market, which suggested that the market could actually cool down next year.

A growing chorus of voices are now predicting that real estate sales activity could actually ramp up next year, partly due to low mortgage rates (see below).

Inventory Challenges Will Carry Over to Next Year

Home sales nationwide would likely be higher right now (and in 2020) if there was more inventory available. But most real estate markets across the country are still experiencing a shortage of homes for sale relative to the demand from buyers. This has constrained the housing market.

Robert Dietz, chief economist for the National Association of Home Builders, called it a “perfect storm of supply side challenges.” He told CNBC that the residential construction industry has been grappling with a prolonged labor shortage, along with a scarcity of buildable land.

Supply is especially tight at the lower end of the pricing spectrum, where many first-time home buyers tend to shop. As a result, buyers seeking an entry-level or “starter home” in 2020 should start early and pack their patience. (See: Biggest challenges for first-time buyers.)

Mortgage Rates Could Be Slightly Higher in 2020

Real estate predictions for 2020 suggest we could see more of the same next year, in terms of home sales and price growth. A similar “status quo” forecast has been issued for mortgage rates.

In their latest round of economic and housing predictions, Freddie Mac said they don’t expect to see a major increase in rates between now and next year.

In October 2019, the company’s research team predicted that 30-year fixed-rate mortgages would end up averaging 3.7% for 2019, and then “tick up slightly” to 3.8% in 2020.

Granted, this is just a prediction. It’s the equivalent of an educated guess. But if it’s even close to being accurate, it’s a pretty big deal from a home buyer’s perspective. It removes the sense of urgency that’s usually associated with a period of very low mortgage rates.

If rates continue to hover within their current sub-4% range through the end of 2019 and into 2020, home buyers would be able to benefit for the foreseeable future.

Home Prices Expected to Keep Rising, in Most Markets

Freddie Mac’s latest real estate predictions suggest that home prices across the U.S. could rise more slowly in 2020 than they did in 2019.

And that’s not surprising. House values in most U.S. cities have been rising at an above-average pace for the past few years. That has created affordability problems for buyers in many cities. So a slowdown is to be expected at this point.

According to their October 2019 forecast:

“The house price forecast is expected to appreciate 3.3 percent in 2019 and 2.8 percent in 2020.”

This closely resembles a similar prediction issued by the real estate information company Zillow. In October of this year, Zillow’s economists wrote: “United States home values have gone up 4.8% over the past year and Zillow predicts they will rise 2.8% within the next year.”

So here we have two separate research teams making an identical prediction for U.S. home prices in 2020. Both groups expect the median home price to rise by around 2.8% next year.

But real estate predictions for the nation as a whole don’t always tell the full story. Both companies predicted that the nation’s median home value will continue to climb in 2020, albeit at a slower pace than previous years.

But that’s the median (or midpoint) for all home values nationwide. This means they expect prices in most cities to continue rising in 2020, as they did in 2019.

When you drill down to the city level, however, it’s more of a mixed bag. Some local housing markets are actually seeing a steady drop in home prices right now. And that could continue in 2020 as well.

(This is something we’ve written about in the past. In July, we published a report on local housing markets that might be a bad investment due to ongoing price declines. And in September, we published a “crash alert” for nearly two-dozen California cities where home values were dropping.)

A Lot of Homeowners Will Refinance in 2020

Home prices in the U.S. have risen steadily over the past few years. And mortgage rates are currently hovering below 4%. As a result of those two trends, refinancing activity picked up during the fall of 2019.

During the last week of October 2019, the Mortgage Bankers Association reported that their “Refinance Index” had increased by 134% over the same week in 2018. Low rates and rising home values have a lot to do with that.

This ties into one of Freddie Mac’s real estate market predictions for 2020. They expect to see a continuation of the current “surge” in refinancing activity, as homeowners take advantage of low rates and increased equity.

To quote their forecast: “The surge in [mortgage] refinance activity will carry over into next year, with a projected $789 billion and $785 billion in single-family refinance mortgage originations in 2019 and 2020, respectively.”

The bottom line to all of this is that 2020 could look a lot like 2019.

~Brandon Cornett, HBI

Northwest MLS Brokers Say Transition to Fall Creating Opportunities for Buyers

Northwest Multiple Listing Service brokers reported year-over-year gains in pending sales, closed sales and prices, but its report summarizing September activity also showed an 18% drop in inventory compared to a year ago.

“The transition into the fall housing market creates opportunities for homebuyers,” suggested J. Lennox Scott, chairman and CEO of John L. Scott Real Estate. “Although there are fewer listings than what buyers find during peak summer months, there is also less competition” for the available inventory, he added.

Scott noted “It appears we are headed toward a more intense winter market than last year.” He said he expects the number of unsold listings will continue to decrease once the winter “clean-up” of inventory begins.

At the end of September, MLS brokers reported 15,982 total active listings, down more than 18% from the same month a year ago when the selection totaled 19,526 listings. Only three of the 23 counties served by Northwest MLS – Clark, San Juan and Whatcom – had year-over-year gains in inventory, while 18 counties had double-digit drops. Thurston County reported the sharpest shrinkage, at nearly 35%.

“September’s housing market was a bit of a roller coaster, up in certain areas and down in others,” commented OB Jacobi, president of Windermere Real Estate.. Within the four-county Puget Sound region, Pierce County prices rose more than 10% thanks to high demand and low inventory, he noted. “Buyers continue to be drawn to the area thanks to more affordable housing costs, but this influx is also driving up prices,” he remarked.

MLS data show the median price for last month’s home sales in Pierce County ($379,950) was $213,800 less than the median price in King County ($593,750). A comparison of single family prices (excluding condos) reveals a $275,500 difference between the two counties.

“In King County, prices were down nearly 2.7% while pending sales rose nearly 10%. This tells us there is no shortage of buyers in the Greater Seattle area,” stated Jacobi. He also said home prices normally start to taper off this time of year, “so this isn’t a major cause for concern.” Within King County, prices rose in four of the six sub-markets; only Seattle (down 3.2%) and Vashon (down almost 28%) reported drops.

The median price for single family homes and condos that sold last month in King County was $593,750, down from the year-ago figure of $610,000 and the first time it dipped below $600,000 since January. Three other counties, Okanogan, Pacific, and Clallam, also reported year-over-year price drops. Joining Pierce County with double-digit price increases from a year ago were eight other counties.

System-wide, prices were up 5%, rising from $400,000 a year ago to $420,000. The volume of closed sales increased about 4.4% from a year ago (7,962 versus 7,630).

“Home prices have stabilized, creating good opportunities for purchasers,” said Dean Rebhuhn, the owner of Village Homes and Properties in Woodinville. He expects prices to stay stable through the fall and winter markets.

“Continuing to drive the market are new jobs, lifestyle changes, and very low interest rates,” Rebhuhn remarked, adding, “FHA mortgages with 3.5% down payments are very popular with first-time homebuyers.”

The latest report from Northwest MLS shows pending sales were up about 9.8% from a year ago, with mutually accepted offers rising from 8,913 to 9,785. In the four-county Puget Sound region, Snohomish reported the largest gain at 18.3%, followed by Kitsap at nearly 11.9%, King at 9.8%, and Pierce at 5.4%.

Brokers were unable to replenish inventory to match demand as the volume of pending sales (9,785) outpaced new listings (9,435).

“Things were a bit different in September, but at this point it’s difficult to know if it’s an aberration or an actual trend,” stated Coldwell Banker Bain president and COO Mike Grady, pointing to “far fewer” new listings that were added last month compared to a year ago. Area-wide, Northwest MLS brokers added 9,435 new listings last month, a decline of 1,023 from the year-ago total (down nearly 9.8%).

“It’s still a seller’s market, and for more than a year we’ve seen only 1-to-2 months of inventory, so I’m starting to think we may be looking at a ‘new normal’ in relation to what a balanced market looks like,” commented Grady.. “With the international economy and trade issues continuing to be erratic, and interest rates staying low, these pressures will almost certainly be an influence, yet there’s no clear answer to how all of this will play out,” he added.

MLS figures show 2.01 months of inventory system-wide, with 12 of the counties reporting less than 2.5 months of supply. Real estate experts tend to use 4-to-6 months of inventory as an indicator of a balanced market.

Northwest MLS director Frank Leach, broker/owner of RE/MAX Platinum Services in Silverdale, said Kitsap County continues to have constrained inventory (down almost 25% from a year ago), with values stabilizing or increasing slightly. Homes priced around $350,000 and under sell quickly, while “inventory in upper ranges is taking a little longer to get traction and move to a sale,” according to Leach.

MLS figures show the median price of homes and condos that sold in Kitsap County last month was $384,000, up nearly 8.2% from the year-ago figure of $355,000.

Leach noted condominium inventory in Kitsap County rose more than 27% from a year ago, but the selection of single family homes dropped by the same percentage. He said several multifamily projects in the county have been submitted or approved, and those homes are expected to be absorbed in the market as soon as they’re available.

“Prices along the I-5 corridor between the Puget Sound and Portland once again outperformed as buyers seek value for money and job growth has expanded in the entire region,” observed James Young, director of the Washington Center for Real Estate Research (WCRER) at the University of Washington.

If millennials want to own houses, Young said the logical first step in the housing ladder is increasingly outside of King and Snohomish counties “and further afield along the I-5 corridor.” With interest rates near historic lows and employment levels at historic highs, first-time homebuyers are acting while they can to get on the housing ladder, “even though that may mean long commutes,” Young stated.

The September report from Northwest MLS shows single family activity outperforming condos. Year-over-year pending sales of single family homes jumped 11%, while condo sales were flat. Prices on last month’s closed sales of single family homes rose more than 5.5%, but condo prices declined by 1.2%.

~NW Multiple Listing Service

Fall real estate may bring big openings for Seattle buyers, experts say

While supply problems hamstrung most of the market during the end of summer — what’s normally known as the peak real estate season — September was a different beast entirely, more like a “roller coaster” where prices were up in certain areas and down in others.

But as the summer season gives way to fall, that can open up avenues for those trying to break in to the market.

“The transition into the fall housing market creates opportunities for homebuyers,” J. Lennox Scott, chairman and CEO of John L. Scott Real Estate, said in the latest Northwest Multiple Listing Service report. “Although there are fewer listings than what buyers find during peak summer months, there is also less competition.”

By the end of last month, NWMLS brokers reported 15,982 total active listings, more than 18% less than from the same time a year ago (in 2018 that number was 19,526). Only three of the 23 counties served by NWMLS — Clark, San Juan and Whatcom — reported year-over-year gains in inventory; 19 counties had double digit drops.

With that drop in both number of listings and competition comes a predicted drop in price as well; this is the time of year that home prices typically start to taper off a bit, given the drop in demand.

In King County, the median price for single family homes and condos sold in September was $593,750 — down from the September 2018 figure of $610,000 and the first time the median price dipped below $600,000 since January.

Unfortunately for hopeful homebuyers, OB Jacobi, president of Windermere Real Estate, says that’ doesn’t necessarily mean it’s going to be easy pickings in King County.

“In King County, prices were down nearly 2.7% while pending sales rose nearly 10%. This tells us there is no shortage of buyers in the Greater Seattle area,” Jacobi said in NWMLS report. “Buyers continue to be drawn to the area thanks to more affordable housing costs, but this influx is also driving up prices.”

Still, there’s opportunity to be had; as the market begins to hunker down for the winter, Jacobi and Scott both expect the number of unsold listings to continue to decrease once the “winter clean-up” of inventory begins. For some lucky homebuyers, this could be the perfect set of circumstances.

~Zosha Millman, Seattle PI

What to know about buying a co-op apartment in Seattle

Sunny Eckerle

Homebuying is time- and energy-consuming, and for the uninitiated, co-ops can be especially confusing. The extra designation of “co-op” is another murky term on an already lengthy list of unfamiliar vocabulary words. (We’re looking at you, PMI, escrow, and rate lock.)

For Seattle homebuyers considering their options, here’s what you need to know about co-ops.

What’s a housing co-op?
The National Cooperative Bank, which supports and advocates for American co-ops, defines housing co-ops as groups of people who own or control the buildings where they live together.

When someone buys a co-op, they’re buying stock—or a membership—in a cooperative corporation that owns the building, land and common areas. Buyers don’t receive a deed to the property like they would with other housing types. “Instead, they’re issued a stock certificate and proprietary lease for their shares within the co-op,” explains Tessa Gaines, loan officer at the National Cooperative Bank.

Typically, the bigger a co-op unit is, the more shares its owner(s) hold and the higher proportion of the building’s property taxes, utilities, and insurance they pay. Cooperative corporations are governed democratically with each member getting a say in decisions—from the furnace to the roof—that will impact the community.

Who are co-ops a fit for?
From first-timers to folks looking to downsize, there’s no typical co-op buyer, says Jeff Reynolds, a real estate broker with Windermere that runs the blog Urban Condo Spaces. “I encourage buyers to keep an open mind. Know the situation you’re buying into, and if it fits your objectives—buy it!”

One characteristic most co-op denizens do share is an interest in being active within their co-op community. Every member is vetted by the board and is expected to weigh in on matters related to the cooperative.

“Co-ops are hands-on, and that’s beneficial for people who truly want to be part of a community and to build better relationships and friendships,” says Val Gaifoulline, broker and realtor with Keller Williams Realty Greater Seattle.

What are some pros and cons of co-op ownership?
Co-ops are hands-on, and that’s beneficial for people who truly want to be part of a community and to build better relationships and friendships.
Like any condo, townhouse, or single-family home, there are pros and cons to co-op ownership that prospective buyers should consider. Reynolds says that related expenses—purchase price, price per square foot, closing costs and property taxes, for example—are typically lower at co-ops. If owners maintain the co-op themselves instead of hiring a staffer, that further lowers costs. As mentioned, co-ops can create an environment ripe for community in the city. If you’re looking for that, it can be another positive aspect of choosing a co-op.

On the flip side, getting into a co-op through its board can be difficult. Rules governing everything from renovations to bike parking and pets can be more stringent at co-op buildings, too. Reynolds says that cooperatives are responsible for paying the salaries of any employees through the owner-paid monthly maintenance fees, including doormen and cleaning staff. If funds are needed elsewhere or if most owners prefer it, residents can be on the hook for a larger portion of the building’s upkeep compared to condos.

What are some common misconceptions about co-ops?
One myth is that co-ops may be harder to sell, Gaines says, “but co-op owners are able to sell their units just like any other real estate transaction.” Reynolds agrees that issues associated with co-op resales are mostly just perception. “The challenge is getting over the misconception that ‘you don’t own it,’” he says.

Like other property types, co-op owners looking to sell set a list price and entertain offers, negotiated or not, from there. There are some unique aspects to selling a co-op though, including that all prospective buyers are thoroughly vetted and ultimately approved or denied by the co-op’s board. Many prohibit subleasing, too.

“That’s good for the long-term co-op tenants cut cuts out the portion of buyers that are investors,” Gaifoulline says. Both could add time to the process, though recent data suggests that on average, co-ops in Seattle spend only slightly more days on the market compared to condos—44 days for co-ops vs. 33 days for condos.

What else do prospective homebuyers need to know?
Financing a co-op is different than financing other property types and can be tricky, Gaifoulline says. “You’re buying shares, and most banks don’t provide that type of financing—called a share loan,” he says.

Are there other types of co-ops?
The term co-op can refer to more than the residential co-ops that house more than a million people in the U.S. Member-owned and controlled business and organizations exist across industries, services, and interests, including food and agricultural enterprises, insurance companies, banks, childcare providers, and more. Seattle co-ops unrelated to housing include Verity Credit Union, the grocery store Central Co-op, and the Flying Bike Cooperative Brewery in Greenwood.

~Kelly Knickerbocker, Curbed Seattle

The Most Affordable Cities in Washington–and They’re Charming Too

When you think of Washington, the first things that come to mind are usually apples, natural beauty and mild weather.

Yet, those who live in this Pacific Northwest state also know it offers great deals on housing, health care, groceries and utilities.

Using our tried-and-true methodology, Livability.com has come up with a list of the five most affordable cities in Washington. But this isn’t just a tally of cheap cities. Instead, quality of life was considered along with data from other cities to find the best bang for your residential buck.

Here’s a list of the most affordable cities in Washington state:

1.Olympia, Wash.

2.Richland, Wash.

3.Bothell, Wash.

4.Auburn, Wash.

5.Redmond, Wash.

1. Olympia
The state capital, Olympia has boating and fishing opportunities in Puget Sound, to-die-for seafood restaurants along the waterfront, and a growing arts community. On a clear day, you can even see Mount Rainier, which is a little more than an hour drive from the city.

Here the median household income is $52,834 with the median home price coming in at $240,800, which is lower than the state average.

2. Richland
A part of the Tri-Cities area, which includes Pasco and Kennewick, Richland’s history is wrapped up in the Manhattan Project facility at the Hanford nuclear site.

The city is still known as a technology hub. The median household income is an impressive $69,372, while the median home price is $200,800. Residents enjoy outdoor activities such as hiking and biking on an extensive trail system, golfing and water sports on the Columbia and Yakima rivers.

The area has some of the most fertile agricultural land in the state, which is good for growing crops such as wine grapes and potatoes.

Richland is home to a renaissance fair, a classic car and street rod event and music and arts festivals.

3. Bothell
Those who want to live close to Seattle but don’t want to pay its expensive cost of living prices often chose Bothell as a more affordable alternative.The median home price is $344,600 – not too bad for this area. The median household income is $75,643.

While logging is mostly in the past, Bothell residents celebrate their own culture such as walks in urban/rural parks, a 1880s Pioneer Cemetery and a lavish Fourth of July event known as the Freedom Festival.

4. Auburn
A little east of Tacoma and south of Seattle, Auburn provides a gateway to both major metropolitan areas. And that’s a good thing, as the city is a transportation hub with major roadways and the Transit Center, a station that provides bus, light rail and Sounder train service to the Puget Sound area. Those who live here can expect a median home price of $231,200, with a median household income of $57,635.

Thoroughbred horse racing at Emerald Downs, golf and performing arts are just some of the attractions that entertain residents.

5. Redmond
A high-tech city, Redmond is the home headquarters to computer software king Microsoft and videogaming systems company Nintendo of America. The city has also been recognized as a Best Place to Live and Top 99 Beer City.

In addition to the tech industry, Redmond is also known as the “Bicycle Capital of the Northwest.” The Redmond Bike Derby, which is held during the summer’s Derby Days, is the longest running bicycle race in North America. With an extensive network of off- and on-street bike lanes and trails, Redmond also boasts a large share of bicycling commuters, so residents save on automobile purchases, car insurance prices and gas.

The median home price is a robust $462,200. However, residents here also command higher salaries, with a median household income of $99,586. In fact, Redmond is so great that it landed a spot on the 2018 Top 100 Best Places to Live list.

~Bonnie Burch, Market Watch

Will the U.S. Housing Market Continue to Rise in 2020?

Many housing analysts are now predicting that home prices will continue rising in 2020, but at a slower pace than what we’ve seen over the past few years. In August, for example, Zillow made the following prediction about home prices nationwide:

“United States home values have gone up 5.2% over the past year and Zillow predicts they will rise 2.2% within the next year.”

The chart below shows the company’s proprietary “House Value Index” for the U.S., dating back ten years or so. It also shows their forecast for the next 12 months (in the green shaded area to the right). From a home-price perspective, the research team at Zillow expect the housing market to continue rising into 2020.

Home prices through August 2019

Granted, that’s just one forecast — and an educated guess, at that. But it’s part of a growing chorus of voices that are saying the same thing. The general consensus seems to be that the U.S. housing market, as a whole, will continue to rise into 2020. Though we probably won’t see the kinds of gains we saw in 2017 or 2018.

A July 2019 press release from S&P Dow Jones Indices stated: “Data released today for May 2019 shows that the rate of home price increases across the U.S. has continued to slow.”

Look at the latest real estate reports and studies, and you’ll see words like “slowing” and “cooling” come up repeatedly. That’s where we are right now, as of late summer 2019.

From an economic standpoint, we could actually benefit from a slowdown in home-price appreciation. House values have been rising abnormally fast over the past few years, outpacing wage growth along the way. This had created affordability problems for a lot of would-be buyers, often pricing them out of the market entirely.

If home prices rise more slowly in 2020, it could ease some of these problems and give wages a chance to “catch up.”

A Mixed Bag at the City Level

All of the above applies to the nation as a whole. When economists and analysts say they expect home prices to continue rising, they’re usually talking about the median price for the entire nation. But that figure isn’t very useful to a person buying a home in Charlotte, North Carolina or Portland, Oregon.

Local real estate conditions can vary quite a bit. We might say the housing market in general will continue to rise in 2020. But when you drill down to the city level, the outlook is more mixed.

As of August 2019, some local housing markets across the country were experiencing a drop in prices. And that trend could carry over into 2020 as well.

Back in July, we reported the home values were dropping in several major cities and leveling off in others. In those kinds of real estate markets, now might not be the best time to buy a house. The market might not continue rising into 2020. It might be the start of a sustained downturn, during which home buyers are better off taking a wait-and-see approach.

To quote the S&P Dow Jones Indices report again:

“Though home price gains seem generally sustainable for the time being, there are significant variations between YOY rates of change in individual cities. Seattle’s home price index is now 1.2% lower than it was in May 2018, the first negative YOY change recorded in a major city in a number of years. On the other hand, Las Vegas and Phoenix, while cooler than they were during 2018, remain quite strong at 6.4% and 5.7% YOY gains, respectively.”
So, will the real estate market continue to rise in 2020? That depends on which one you’re referring to. This is why it’s so important for home buyers to conduct plenty of localized research before making a purchase.

A Look Back: The Rise & Fall of Home Prices

To understand where we are — and where we might be going — it helps to look back at where we’ve been. Real estate markets tend to follow cycles, after all. And from a real estate context, the past 12 years could be summed up as follows:

Early 2000s: In the early 2000s, the U.S. real estate market was on fire. Demand for homes soared. Builders built new properties at a record pace. And house prices rose rapidly on a wave of strong demand.

2005 – 2007: Unfortunately, much of the housing market activity mentioned above was fueled by “shady” mortgage loans offered to people who couldn’t afford them. The first half of the 2000s saw the rise of all kinds of high-risk mortgage products, such as the “stated-income” loan and the payment option ARM loan.

2008: The U.S. housing market collapse began in earnest in late 2007 to early 2008. It was largely caused by the risky loans mentioned above. Suddenly, millions of Americans could no longer afford their mortgage payments. So they stopped making them. The mortgage industry ground to a halt. Home prices plummeted. And the U.S. economy plunged into a deep recession.

2008 – 2011: When the housing market crashed, home prices fell in most U.S. cities. Some cities saw a mild dip in prices, while other cities (like Phoenix, Las Vegas, and most of California) experienced a tremendous drop in home values.

2012 – 2018: There is no official “start date” for the U.S. housing market recovery. After falling steadily for several years, the nation’s median home price turned north again in 2012. So that’s as good a date as any to mark the start of the recovery. From 2012 to 2018, home prices in most U.S. cities rose steadily — and sometimes significantly. House values rose so fast during those years that many cities (particularly those along the West Coast) began to experience affordability problems.

Late 2018 – early 2019: By the start of 2019, home prices in most parts of the country had fully recovered from the housing bust (and then some).

Late 2019: And that brings us up to the present. We are now into the second half of 2019. The economy is in pretty good shape again. Unemployment is down. The job market is robust. But the real estate market is undergoing a kind of shift. It’s not a strong “seller’s market” anymore. In most cities, homes are now taking longer to sell. Price reductions are more common. Home prices have slowed in some cities, plateaued in others, and started to drop in some places.

2020: No one can predict future housing market trends with complete accuracy. But we can make an educated guess. Here’s ours. We expect home prices nationwide to rise more slowly in 2020 than in 2019. We expect to see more local real estate markets shifting to favor buyers over the coming months. We expect 30-year mortgage rates to remain below 4%, on average, for the foreseeable future.

~Brandon Cornett, HBI

Buying a home in Seattle was the hardest thing I’ve ever done


In many ways, it’s never been easier to move through the home-buying process, given the tools and resources that are now available. At least personally, though, it was also the most trying few months of my entire life.

When my wife and I decided it was time to be homeowners, a million different pieces had to fall perfectly into place. We were both extremely lucky and privileged to be able to do this in the first place, so keep in mind that the typical experience of home-buying can be more difficult than what I’m about to describe.

The lease on our apartment was almost up, and the market was slowly shifting away from “oppressively difficult and insanely expensive” to “a normal amount of difficult and slightly less but still significantly expensive.” Essentially, it was the perfect time to buy in Seattle. According to a recent Redfin report, just 12 percent of offers on Seattle homes faced competition in 2019, a massive drop-off from 2018, when that number was as high as 50 percent.

After meeting with a banker and receiving a veritable deluge of information on the intricacies of home loans, we set up an appointment with a realtor for a massive 101 explainer on everything we didn’t know about home-buying (hint: It was a lot). Through all that, I remember thinking one thing to myself: Why did no one teach me about this?

Between the six or so math classes I took between high school and college, somebody, at some point could have taught me the relative advantages and disadvantages of going with a 30-year fixed-rate mortgage over an FHA loan. Maybe there could have been just one day in class devoted to teaching us about how long it it takes to recoup our money buying down points on an interest rate.

For the uninitiated like my wife and I, we were basically subject to a crash course from our bank, realtor, and the internet that highlighted the million different things we didn’t know. That had us stuck wondering if we really should send that eighth email to our lender in a single day because we still couldn’t quite wrap our heads around something. Meanwhile, all this was happening on a hyper-rigid timeline, where a hundred different things going wrong could have sent us all the way back to square one.

Eventually we did get a better understanding, but that came about largely at the expense of hundreds of questions over text, phone, and email to people familiar with the home-buying process — our lender, broker, and homeowner friends.

Unless you’re working somewhere in the real estate sector, you’re stuck learning some of the most important information of your life for the first time, just as it comes up.

The questions persisted all the way until we signed the final papers on closing day. That’s when we made our way through three quarters of a 70-plus page stack, only to have our notary inform us that because we had used two different colors of ink, we had to start over. Halfway through the second round of signing, the notary then saw fit to let us know that if our signatures drifted too far off of the line into the left margin, we might have to repeat the whole ordeal for a third time (mercifully, we didn’t).

All of this is universal for whatever market you’re buying in, whether it’s Seattle or Nashville. Enter into the equation buying in one of the nation’s most difficult, competitive, and expensive markets like Seattle, though, and it’s clear why some assistance is needed to come out the other end in one piece.

That’s where the resources available to buyers now give the modern buyer a huge leg up. Back before the age of Redfin, Open Listing, and Zillow, it was you and your broker against the world. They would have a list of houses, you’d hop in their car, and you’d hope to God something you saw was remotely appealing.

Today, available technology makes it so you can book virtually any amount of tours day-of, and sort by specific parameters you yourself get to dictate.

Even with more tools available for the newest generation of buyers, there’s a chasm-sized knowledge gap the average person simply can’t bridge without a significant investment of time, energy, and sanity.

So with that, a few very simple tips should you decide to embark on this journey yourself:

  • Don’t be afraid to ask a lot of questions: The people you enlist to help you along in the home-buying process are quite literally paid to provide you with information. That said, they won’t offer that information unless you’re asking them the right questions. If you’re ever uncertain about anything — no matter how small — just ask, and they’ll be more than happy to answer.
  • Get advice from friends and family: Outside of professionals that actually get this process moving, the best input you can get is from people who’ve gone through this before. Talk to the people in your life who have actually bought a home, ask them what they wish they had done different, and learn as much as you can from their experiences.
  • Assemble a trustworthy team: You need two things to start this process in earnest — a realtor, and a lender. Talk to a realtor first. Typically they will recommend a few knowledgeable lenders for you to choose from.
  • Understand what you want: Know what you absolutely need in a house, versus what you want. Maybe a two-car garage and a gas range isn’t a necessity, but don’t budge if a house in the Sea-Tac Airport flight path is something you really can’t live with.
  • Understand what you can afford: Once you start shopping above a certain square footage, prices start to jump up. Understand your absolute limit, and then be prepared to exceed that slightly.
  • Budget for more money than you think you’ll spend: When it comes to home-buying, costs will almost certainly rack up. Set aside more money than you think you’ll need, and then be at peace with ultimately being forced to spend it.

~Nick Bowman, MyNorthwest.com