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

Dip in Seattle home prices leads nationwide slowdown


07292019_mad_105227-768x540

For months, Seattle-area home prices have been teetering between growth and decline.

They just dropped over the edge.

The cost of a single-family home in May dipped 1.2% from 12 months earlier, the first negative change in a major U.S. city in a number of years, according to the latest S&P CoreLogic Case-Shiller data.

“Whether negative YOY (year-over-year) rates of change spread to other cities remains to be seen,” said Philip Murphy, managing director at S&P Dow Jones Indices, in a statement. “For now, there is still substantial diversity in local trends.”

Nationwide, home prices have been slowing their gains for the past year — even in the Southwest, where the market is growing fastest. Las Vegas, which overtook Seattle as the nation’s hottest housing market last June, saw gains of 6.4%, still a slight decline over last year.

But an overall fall in Seattle-area prices masks the trend that north and south of Seattle, the market is only getting hotter. In Tacoma and Pierce County, median house prices rose 7.3% in June from 12 months earlier, according to data from the Northwest Multiple Listing Service. (The Case-Shiller index lags by one month and is a composite of prices in King, Pierce and Snohomish counties.) And prices in Kitsap and Skagit County both posted double-digit price increases.

Some of that variation is because prices for less expensive homes, which tend to be outside of Seattle, are still rising.

The Case-Shiller index divides homes into three even tiers: homes that cost more than $625,000, those that cost less than $400,000 and those in between. Of the three, in the Seattle metro area only homes in the least expensive tier posted price increases in May, a 2.74% jump since last year.

Northerly Skagit County, where median home prices hover in the low tier at $380,000, saw an 11.8% increase in prices from June 2018, according to the Northwest Multiple Listing Service data. Realtor Duane Gish, who’s been selling homes in Skagit County for 19 years, said that five years ago the homes he sold were in the $300-400,000 range. Now, they’re closer to $500,000.

While the Northwest Multiple Listing Service data charts growth in some ritzy suburbs like Bellevue and Mercer Island, that’s not the case for the city itself. Prices in the middle tier of real estate are stagnant, the Case-Shiller data shows, while the top tier has been losing value since early this year.

Those top two tiers include almost all the single-family real estate in Seattle proper, where the median home price is $714,600, according to Zillow.

Kelly Meister, a broker at Compass in Seattle, said buyers “don’t have the sense of urgency they did last year,” when prices for top-tier real estate were growing in the double digits.

Right now, she said, “the Seattle market is like a microwave: Super hot in some spots and cold in others.” Houses that would have been “a major grab” last year in neighborhoods like the Central District and Columbia City aren’t getting as much attention in a slower market.

Meanwhile, in tony neighborhoods like Mount Baker, Magnolia and Laurelhurst, there’s still a great deal of demand for “homes that check all the boxes,” said Barbara Shikiar, a Windermere broker working primarily in Northeast Seattle.

“But homes that are more idiosyncratic, in this type of market,” she said, “those tend to linger.”

Nationwide, the Case-Shiller index showed gains of 3.4% over the past 12 months. Growth is slowing because “buyers are no longer willing to pay any price,” Zillow economist Matthew Speakman said in a statement.

Buyers, he said, “took a breather … The fact that buyers — and prices — slowed their roll right through the middle of home-buying season indicates just how few homes are on the market.” And, he said, high land and labor costs mean builders aren’t putting up inexpensive homes fast enough to woo first-time buyers.

Even though home prices in Seattle are dropping, they remain high. A typical home in Las Vegas, the nation’s hottest market, might sell for $274,000, according to Zillow’s Home Value Index, less than half the median Seattle value.

~Katherine Kashimova Long, Seattle Times

After a brief pause, Seattle-area rents headed back up

Unknown

Last October, when Taylor and Ally Condrin went looking for an apartment in the Issaquah area, the rental market seemed almost friendly. The young couple found a 3-bedroom, 2-bath unit that was advertised for $2,200, but the property manager was so eager to sign a lease that they got a free month’s rent.

What a difference a year makes. Today, identical units in the complex are renting for around $2,800, says Taylor, a 27-year-old who owns his own digital-marketing agency.

Starting around last summer, much of the Seattle-King County market seemed to hit a pause in rent increases. So many new apartment buildings had come on line that supplies were finally catching up to demand. In dozens of neighborhoods, rents leveled off or actually began falling.

Between June 2017 and June 2018, according to Zillow, the median price across all rental properties — from apartments to rental homes — in King County fell by 0.5%, to $2,383. In Seattle, median rent fell by 1.5%, to $2,486, with the median 2-bedroom unit going for $2,100.

But that pause is now history. Aside from a few pockets of oversupply — found mostly in high-end neighborhoods such as Belltown and downtown Seattle — the regional rental market is swinging back in favor of landlords.

In Seattle as a whole, the median rental price across all properties in June was up 3.3% year over year, to $2,569, according to Zillow. In Bellevue, median rent climbed 3.9%, to $2,835, in the same period, while in King County, the median rent jumped 3.6% over last June, to $2,469.

The market “has digested that extra supply,” says Zillow economist Jeff Tucker, and nearly all the data indicates “that rents are starting a slow march back upward.”

What’s not clear yet is whether that slow march will continue, or whether the region will snap back to the torrid hikes of 2014-2016, when many neighborhoods in the region endured yearly rent increases of 10% and more.

Certainly, in some parts of the broader Puget Sound region, renters are already seeing substantial increases, and many didn’t even see much of a break in 2018. In Bremerton, median June rent was up 6.4% year over year, to $1,641, according Zillow. In Tacoma, it was up 6.7%. to $1,714, while Everett saw a 7.4% increase, to $1,935.

In tiny Sultan, on State Highway 2, June rents were up 7.7% over last year, to $1,887. “It’s ridiculous,” said Debbie Copple, executive director of the Sultan-based Sky Valley Chamber of Commerce. Rentals “are almost impossible to find — almost as soon as they come on the market, they’re snapped up,” she said, adding that the scarcity means landlords “can pretty much charge anything they want.”

Whether Seattle and close-by cities follow suit depends on several factors, experts say.

One is how quickly apartment builders can keep bringing new apartments onto the market.

According to RealPage, a housing market data firm, as of June, Seattle had 19,345 apartment units in the construction pipeline, the fifth most of any city in the United States. But that’s a 19% decline from June 2018, when 24,000 apartment units were under construction, according to RealPage.

The bigger unknown is demand. There’s increasing evidence that last year’s dip in rents wasn’t just about new supply: Demand also appears to have tapered. Data from RealPage shows that the number of newly occupied, or “absorbed,” rental units during the first half of 2018 was down 19% from the same period in 2017.

That echoes census data showing that in 2018, for the first time this decade, more people left King County than moved here from within in the U.S. Similarly, 2018 marked the second annual decline in the number of driver’s licenses issued to new King County residents from out of state, according to an analysis by The Seattle Times.

And, significantly, 2018 also saw a sharp drop-off in completions of office space, which is often an indicator of expected job growth (the average employee represents 150 square feet of office space) and, by extension, housing demand.

In 2018, Seattle got 1.3 million square feet of new office space, which is roughly half of what the city averaged for each of the three prior years, according to the Seattle office of CBRE, a commercial real estate services and investment firm.

But that lull in demand is over. CBRE estimates that Seattle will see 3.3 million square feet of new office space in 2019 and another 2.8 million square feet in 2020.

Apartment absorption rates have also recovered, rising by 42% in the first half of 2019 over the same period in 2018, according to RealPage.

As demand for rentals has recovered, vacancy rates have plummeted. Between December 2018 and June 2019, Seattle’s vacancy rate fell from 3.7% to 2.7%, according to a regional rental survey by O’Connor Consulting Group and Commercial Analytics.
In some neighborhoods, demand has pushed vacancies even lower. In Greenwood, vacancy dropped from 4.7% last June to 1.0% this June, according to the O’Connor/Commercial Analytics survey. In Northgate, year-over-year vacancy fell from 3.4% to 1.5%. In Kirkland, it dropped from 4% to 1.8%

The shifting market is translating into higher rents, and, for many renters, a case of sticker shock. Julie Cooke says she and her husband decided to move from their 2-bedroom Shoreline apartment after learning rent would go up from $1,655 to $1,890. “It’s just too expensive,” said Cooke of the 14% increase.

Even in South Lake Union, which has seen a veritable explosion of apartment building in recent years, vacancies have fallen from 3.4% to 2.7%–a tightening that is gradually returning bargaining power to landlords.

Eduardo Esparza, a 30-year-old tech employee who lives in South Lake Union, says prospective tenants who want to live near where they work are once again resigned to paying $2,000 and more for “350 square feet [of studio] with tiny window looking out at another huge building.”

RealPage chief economist Greg Willett believes Seattle-area rent growth will remain “relatively sluggish” at around 2% to 3% over the next two to three years, roughly in line with national trends. “There will be too much new supply moving through lease-up for rent growth to accelerate to the robust levels sustained in 2011 through 2016,” he predicts.

Zillow forecasts somewhat sharper increases. By June 2020, Zillow expects median rents to jump by 4.4% in Seattle, 4.9% in Bremerton, 5.2% in Tacoma, and a painful 9.6% in Everett.

But housing experts are also keeping an eye on several possible wild-card factors.

One is future employment growth. Although companies in King, Pierce, and Snohomish counties are still adding jobs at a rapid clip, new job postings in June were actually down 4.5% from last June and 6.2% from June 2017, according to the state Employment Security Department.

Likewise, office-space completions in Seattle are expected to drop somewhat in 2021, to 2.3 million square feet, according to CBRE. That drop is partly a reflection of the longer timeframe, as not all developers know what they’ll be building two or three years out, says Jon Hallgrimson, vice-chair at CRBE’s Seattle office.

But Hallgrimson says the predicted drop-off may also reflect a desire by many large Seattle employers, including Amazon, Facebook, and Google, to move some business operations to the Eastside.

~According to CBRE, the Eastside now has a stunning 11.8 million square feet of new office space in the construction pipeline — 6.2 million square feet in Bellevue alone. That’s a huge increase for a region that has averaged around half a million square feet a year for the last decade, says Hallgrimson.

Another unknown: How many renters will decide to keep renting, as opposed to taking the plunge into homeownership.

Brian O’Connor with O’Connor Consulting says that the percentage of Seattle-area residents looking to buy instead of rent has grown from almost nothing in the aftermath of the recession, when few people wanted to buy, to 50% today.

As this growing population of prospective homebuyers moves out of the rental market, their departures may be sufficient to help blunt rental demand and keep rents from soaring.

But outside Seattle and the Eastside, chances for a kinder, gentler rental market may not be as good. In many outlying communities, existing rental stock is now being snapped up by newcomers, many of them residents priced out of the big urban markets.

~Paul Roberts, Seattle Times

 

 

Key Indicators Point to Strong Summer Housing Market

e2473723-f702-4d53-9f18-3c4951e876d5-large16x9_1e839d225df94d518a931de7b7a25874large16x9_181205_ap_home_prices_for_sale_mortgage_986

KIRKLAND, Washington (July 8, 2019) – Inventory, pending sales and prices all increased during June compared to a year ago, according to the latest report from Northwest Multiple Listing Service. The same report, which covers 23 counties in Washington state, shows year-over-year drops area-wide in both the volume of new listings and closed sales.

“Clearly we now see that the market is moderating – that is we’re definitely moving from a ‘hyper-market’ to one where a correction is underway compared to last year,” remarked Mike Grady, president and COO of Coldwell Banker Bain. “While it’s the best time to buy that we’ve seen in some time, and buyers are getting some relief, it is still a seller’s market,” he added, noting some buyers are experiencing multiple offer situations, or considering inspection waivers, or are even forced to consider markets outside King County for affordability.

Three Northwest MLS directors from Pierce and Kitsap counties suggest their counties are attracting some of the frustrated buyers from King County.

“The darling of the Puget Sound real estate market is Tacoma/Pierce County,” stated Dick Beeson, principal managing broker at RE/MAX Northwest Realtors in Gig Harbor, pointing to low inventory and appreciating values. “The secret is out about Pierce County,” agreed Mike Larson, the president at ALLEN Realtors in Lakewood. “You can buy twice the house for about half the price. You just have to be willing to deal with the traffic if you work north or south of here,” he proclaimed.

“The Kitsap market continues to be robust and is maintaining its velocity in sales,” added Frank C. Leach, broker/owner at RE/MAX Platinum Services in Silverdale. He believes Kitsap County will continue to be strong given its economic foundation together with its affordability factor and quick access to Seattle, but noted it is constrained by available inventory (currently at 1.4 months of supply).

MLS figures show the median price for single family homes and condos that sold last month in King County was $637,675. In Pierce County it was $372,500, about 58 percent of the King County price, and in Kitsap County it was $387,000, about 60 percent of the sales price in King County.

System-wide prices increased more than 3.5 percent from a year ago, from $425,000 to $440,000, although four counties registered declines, including Douglas, Ferry, Jefferson, and King. June’s median price was unchanged from May.

At midyear, the overall median price was $424,517, which compares to $405,000 for the first six months of 2018, an increase of 4.82 percent.

“As long as interest rates stay low and people seek value outside of King and Snohomish counties, house prices should continue their upward momentum,” stated James Young, director of the Washington Center for Real Estate Research (WCRER) at the University of Washington.

House hunters had a broader selection to consider as inventory at month end totaled 16,800 active listings, about 9.5 percent larger than at the same time a year ago. Brokers added 11,977 new listings during the month, a drop from both a year ago when they added, 13,153 new listings, and from May, when they added 14,689 new listings.

About half the counties reported gains in inventory, led by King County where the selection grew nearly 32 percent from a year ago.

“June listing inventory in King County exceeded the levels posted for this month over the past six years,” said John Deely, principal managing broker at Coldwell Banker Bain. “Currently, we are approaching 2012 listing inventory levels,” he noted.

Northwest MLS figures for King County show there were 5,931 active listings at the end June, the highest for that month since 2012 when the selection totaled 6,500 listings.

“Every summer, we see the highest level of new listings and homes going under contract. After the surge of new listings in May, areas close to the job centers saw listings return to the normal seasonal pattern in June,” commented J. Lennox Scott, chairman and CEO of John L. Scott Real Estate.

The Northwest MLS report indicates there is 1.76 months of inventory area-wide (matching May), with eight counties having less than two months of supply.

OB Jacobi, president of Windermere Real Estate, commented on a “considerable rise” in the number of listings priced above $1.5 million in King County. “This could be because of the changes to the Washington State Real Estate Excise Tax (REET) that take effect in 2020, which will significantly impact the tax burden of sellers whose homes sell for more than $1.5 million. I suspect we’ll see even more owners of higher priced homes trying to sell in the coming months in order to avoid the hike in taxes they’ll have to pay starting next January,” he stated.

The new tax measure changes the REET rate from a flat 1.28 percent of the selling price to a graduated rate for real property sales, with exceptions for timberland and agricultural land.

Commenting on the latest report from Northwest MLS, WCRER’s Young said “The perfect storm of low interest rates and falling inventory continues along the I-5 corridor, with double-digit house price increases also continuing.”

Beeson says the “new normal” inventory levels of 2-to-3 months of supply, rather than the traditional 4-to-6 months, makes Puget Sound different than most of the rest of the nation. In Puget Sound, homes sell twice as quickly as a traditional ‘normal’ market,” he stated, but acknowledged, “It feels kinda like things have slowed down. Folks are taking deeper breaths.”

Several brokers commented that buyers are becoming more deliberate in their searches and offers.

“Market savvy buyers are taking advantage of premium location and value pricing due to increased inventory. Price reductions are more commonplace as sellers align their expectations with today’s market,” according to Deely. He said demand remains strong, but “buyers are methodical in their search, and taking more time to jump into an offer.” Also, he noted there have been fewer multiple offers and fewer all-cash buyers in the mix when a listing has several buyers lined up to compete.

Buyers are more “tuned-in” than ever before, Beeson remarked, adding, “Buyers today have educated themselves on the vagaries of the home buying process and are better prepared to meet sellers on firmer ground. They are attentive, vigilant, and discerning toward the marketplace, knowing what they want in a home – and they are willing to wait longer to get it.”

Leach concurred. “Buyers are being very careful about what they buy and at what price,” he stated.

Commenting on King County’s numbers for new listings and new pending sales, Dean Rebhuhn said multiple offers are still occurring in the median price range, noting the 1.9 percent dip in year-over-year prices. “Buyers are seeing higher home availability while taking advantage of low interest rates.” Rebhuhn, the owner of Village Homes and Properties in Woodinville, believes those factors, coupled with summer weather and job creation will “continue to create a very active market for buyers and sellers.”

Scott also expects a “quick-action market” for many buyers when new listings come on the market, especially with interest rates in the upper threes. Looking to the months ahead, Scott anticipates strong sales activity close to job centers, while the surrounding area will experience intense, “frenzy-level sales activity” in the more affordable to mid-price ranges.

Larson believes “the big three” – interest rates, the economy, and consumer confidence – all point to a strong summer for the housing market, while contrasting King and Pierce counties. “For years, King County has been a bit like a top fuel dragster – high performing, thrilling, but maybe a bit temperamental. It got the headlines and values skyrocketed, but now it’s experiencing a bit of a hangover. Pierce County’s market is more like a diesel truck – steady, consistent, and less prone to dramatic market changes.”

Larson also offered advice for passive and first-time house hunters. “Every buyer, particularly at the entry level, needs to understand they can’t simply dip their toe in the water when competing for a home. They need to do a belly flop. They need to put their best foot forward right out of the gate.” He also urged buyers to work with a Realtor who understands the market and who can guide them through the process.

Several representatives from Northwest MLS also suggested sellers need to learn the “new normal” as Beeson calls it. “If you overprice your home or fail to get it in good condition for selling, it will cost you time and money in the end, he stated, adding, “Seller’s can’t afford to be tuned out to what the market is saying.”

For sellers in Kitsap County, broker Frank Wilson says pricing is becoming more important. “Our county is starting to feel some of the changes King County has experienced. List price has to more accurately reflect what the home will sell for in today’s market,” explained Wilson, Kitsap regional manager and branch managing broker at John L. Scott Real Estate in Poulsbo. Although Wilson reported multiple offer situations and good traffic at open houses, he emphasized sellers “can no longer chance shooting for the moon, pricewise, or they risk getting stuck on the launch pad.”

Condo activity was mixed during June with year-over-year declines in the number of new listings added to inventory, as well as in the volume of pending and closed sales. Total inventory grew more than 41 percent, although at month-end there was only about 1.9 months of supply. Prices overall were nearly unchanged from a year ago. The median price for June’s sales was $367,000, up about a percentage point from a year ago when the median price was $363,500.

~NW Multiple Listing Service