As we continue to examine the shift in the market, it’s important to take a deep dive into interest rates. Since the first of the year, long-term mortgage interest rates have increased 2.7% from 3.11% on 12/30/21 to the peak of 5.81% on 6/23/22. Since then, rates have started to level out. For instance, on 8/4/22 rates were 4.99% which provided more opportunities for buyers and helped increase demand. Note that these are the base rates that are released but they can shift up based on the loan program or elements in the buyer’s application, like a credit score.

Affordability has been a challenge with the incredible price appreciation we have seen over the last two years. The median price is up 34% ($568,000 to $760,000) from July 2020 to July 2022 in Snohomish County and up 24% ($729,000 to $900,000) in King County. Average annual price gains are typically 3-5% making these last two years a time of significant growth. This is on top of 10 straight years of positive price growth. Homeowners are sitting on a ton of equity!

These recent extreme price escalations were directly connected to the historically low interest rates that were in the 3-4% range starting in the spring of 2019 and lasting until the spring of 2022. To combat inflation the Fed made the move they’ve been talking about for some time and started to raise interest rates. This took shape in April, peaked in June, and has begun to stabilize as we head into the dog days of summer. As rates start to normalize it is putting downward pressure on the peak prices. Bear in mind that we are well below the average interest rate over the last 30 years which is around 7.5%. This low-rate environment was also coupled with a scarcity of inventory and now we are starting to see more selection and a shift from a sellers’ market (0-2 months of inventory) to a balanced market (2-4 months of inventory).

Buyers often choose their price point based on the monthly payment they will need to sustain throughout the term of their loan, not necessarily the highest price they are qualified for. If you look at the chart below you can easily see what buyers are needing to consider financially and how that would price them out of the higher price points. This puts downward pressure on house prices to provide a monthly payment that is sustainable and affordable Compare the peak prices we saw in spring 2022 when rates were 3-4% with 2 weeks of available inventory in Snohomish and King counties to our current 2 months of available inventory for both counties – an indicator of a balanced market.

The sky is not falling, we are simply adjusting to the new normal of interest rates and getting used to additional selection and less competition. Prices are still up significantly year-over-year and homeowners are sitting on a mound of equity built over the last decade. Prices have come off the peak of April 2022 but are starting to recalibrate in relation to the cost of buyer’s debt service. We anticipate this correction to level out in the coming months. Experts are predicting rates to simmer in the 5% with the hopes of not rising to6% like we saw in June in response to inflation.

It is also important to understand that mortgage rates are long-term rates and when you hear in the news that the Fed is going to hike interest rates to combat inflation, that refers to short-term rates such as car loans, credit cards, and home equity lines of credit. The point of the short-term rate hikes is to get people to slow their spending and save more to hedge against inflation. In fact, the most recent short-term rate hike caused long-term mortgage rates to lower. Make sure you are consulting an expert and not just listening to the media.

I will continue to keep a close eye on rates, prices, and inventory so my clients are equipped with the most up-to-date information. All three of these elements are directly connected to each other and they will adjust and find balance. Our local job market is strong, home equity is high, interest rates are still well below the 30-year average, and there are other sectors that drive our economy. While we may be experiencing a recession, we are not experiencing a dismal housing market. Sales are maintaining at the same level as 2018 and 2019 which were very strong years in real estate, though a bit less than the pandemic-fueled years of 2020 and 2021 that saw a reorganization of our communities due to the work-from-home phenomenon.

Real estate has always been a long-term hold investment AND the place you call home. It’s best to approach real estate from both financial and lifestyle perspectives. We are starting to see some creative options in the market with rate buy-downs, even seller credits, and some buyers opting for ARMs (adjustable-rate mortgages) to get the payment that works for them.
If you are curious about the value of your home in today’s market or are considering a purchase, please reach out. No pressure and no obligation. I’m happy to simply chat about how these changes may affect your long-term goals and I am dedicated to providing you with information that helps you make the most informed decisions for your future.

In honor of Windermere’s 50th anniversary, we’ve set a goal to reach $50 million in total donations to the Windermere Foundation in 2022 for our 50 in 50 Campaign. To reach our goal, we need to raise $4 million in donations this year. So far this year, through the month of July, $2,011,963 in donations has been raised for the Windermere Foundation.

Our office is just finishing a Summer Food Drive that will help contribute to this total, but more importantly, will help keep the local food banks stocked. We have partnered with Volunteers of America of Snohomish County and they recently shared with us that their need is high due to the increase in the cost of groceries. We are always looking to direct our giving to areas of high need right in our own backyard. We will continue to support the food banks throughout the year with additional food drives around the holidays. Please let me know if you want to participate and I’ll help make that happen!

Every year since 1984, Windermere has designated one day to help make a positive difference in the communities where we work and live.

2022 is the 7th year that my office has spent this day working to put fresh produce on the tables of local families who need a little help.

On June 10th, my office spent our annual Windermere Community Service Day with the Snohomish Garden Club constructing trellises, weeding and staking beds, and planting and labeling a half-acre of produce! The Snohomish Garden Club will harvest this half-acre, which will yield close to 10,000 pounds of fresh produce to be donated to local food banks in Snohomish County.

In tandem with this project, we are also holding a Food Drive through the month of July, with a goal to donate $5,000 to the Volunteers of America Food Banks across Snohomish County. You can donate here, or bring non-perishable donations to my office through the month of July.

“How’s the market?” is a question I am asked all the time. It is a common and understandable topic in casual conversation over the neighbor’s fence, at a party or family gathering. Our market is currently shifting…inventory is increasing, days on market are lengthening and we are seeing a slowdown in price appreciation. Believe it or not, this is providing great opportunities for both buyers and sellers.

What does a slowdown in price appreciation mean? At the end of the year, we average the last 12 months of median price and compare it to the previous 12 months of median price. For 2022, we will show a positive growth percentage, but that percentage will be lower than it was earlier in the year. We had a very significant bump in prices in Q1 of 2022 that will level off as we complete 2022.

Breaking down the numbers in Snohomish County, in April of 2020, the median price was $520,000 and in April of 2022 the median price was $830,000, a 60% increase in 2 years! In King County, in April of 2020, the median price was $720,000 and in April of 2022 the median price was $995,000, a 38% increase in 2 years! That pace is unprecedented and unsustainable.

To dig a little deeper, Snohomish County had a 35% increase in median price from April 2020 to December 2021 (a period of 20 months). The next 4 months, December 2021 to April 2022 Snohomish median price rose 19%. This 4-month stretch of price growth is highly unusual and unsustainable. Prices will continue to rise, just at a slower pace and it is very unlikely that we will return to prices below the December 2021 level. The median price in May 2022 is $810,000 indicating the median will settle somewhere between the April 2022 peak and where we landed at the end of 2021.

We must remember that we were celebrating price growth at the end of 2021!

In King County the numbers are similar but not as extreme, and still well above average with a 22% gain from April 2020 to August 2021 and then a 14% gain in 9 months, from August 2021 to April 2022.

This is where perspective comes in and where pricing can get a little tricky for sellers. These market changes show why it would be unrealistic to expect the peak prices of Q1 2022 in the current spring market. The combination of the lowest inventory levels and lowest interest rates in history that took place in Q1 2022 was the perfect storm that created intense price growth over a short period of time. Now we must navigate the new environment as we chart our real estate goals. Three main factors have led to this much-needed tempering in price growth: inventory, interest rates/inflation, and affordability.

Inventory has finally started to grow although it is still a seller’s market. In Snohomish County, 2021 was an extreme seller’s market that never crested over 0.6 months of inventory; that’s just over two weeks! A seller’s market is defined as 0-3 months of inventory, a balanced market as 3-6 months, and a buyer’s market as 6 months plus. In May 2022, we had 0.9 months of inventory. We have started to see more homes come to market, providing buyers with more selection. For example, in April 2020 there were 996 new listings; in December 2021 there were 525 new listings; in April 2022 there were 1,503 new listings (almost 3x as much over December), and in May there were 1,654 new listings. This additional selection is providing buyers the long-awaited option to find housing and has started to reduce the number of multiple offers which has put downward pressure on prices. When there is more selection, prices do not escalate as quickly.

In King County, for May 2022, we had 0.9 months of inventory. In April 2020 there were 2,138 new listings; in December 2021 there were 1,103 new listings; in April 2022 there were 3,353 new listings (just over 3x as much over December), and in May 2022 there were 3,698 new listings.

Interest rates have also grown over the last two years and even more specifically since the first of the year. We are currently hovering around 5.5%-6%. At the start of 2022 we were hovering around 3%. The Fed finally gave way to the promise that rates would rise, which was a necessary tool to combat inflation. While 3%-4% rates were a dream, they were not a long-term reality. The 30-year average for interest rates is 7% which highlights that 5-6% is still a great rate!

It is understandable that a 5-6% interest rate pales in comparison to the historic lows we had, but we are unlikely to see 3-4% again soon. Rates as low as 3% in Q1 2022 played into the rapid acceleration in price because it made the buyer audience larger when we had the least amount of inventory available. The good news is that while rates had a quick 2-point increase from March 2022 to May 2022, they have seemed to stabilize. This is our new normal for now, while future increases in 2023 are expected. The good news for buyers who secured a home in Q1 is they also secured the lowest debt service in history, so they should be very happy.

Affordability has been a challenge for many, especially first-time home buyers. Affordability challenges at December 2021 prices were real, but the rise to April 2022 levels simply removed buyers from the market. As price appreciation slows and prices level off due to the shift in market conditions, some buyers will be able to re-enter the market and start to secure their wealth-building asset that also augments their lifestyle.

So, what does this mean? The word that keeps coming to my mind is perspective. We have experienced one of the most extreme seller’s markets of our time, which resulted in rapid price growth for sellers and limited choices for buyers. That is starting to ease up and we need to celebrate this! We are heading toward historical norms and while that is happening, we will need to keep the crazy Q1 price growth in a box alongside the unicorns and rainbows for the lucky sellers that found the pot of gold and buyers who secured the lowest rates ever. Good for them, but still good for anyone who has owned their home for longer than two years, as the amount of seller equity is abundant.

Real estate has always been a long-hold investment and we have lost sight of that with the abnormality of the last two years. Most importantly, real estate is a lifestyle decision. Our homes provide us shelter, community, features, and benefits. We make memories, find comfort, and if we are lucky, we can match our home to our lifestyle needs and build wealth at the same time.

If you are curious about the value of your home in today’s market or are considering a purchase, please reach out. Even if you just want to talk these changes through and understand how they might affect your long-term goals, please reach out. I am dedicated to providing you with information that helps you make the most informed decisions for your future.

Every year, my office comes together to provide summer camp scholarships for local kids who may not otherwise have the opportunity to experience the adventures of overnight camp. This year we donated $16,300 to YMCA Camp Orkila and Camp Colman! Overall, since 1994, we are responsible for $230,000 in summer camp scholarships for local kids in need. I am so proud to be part of an office that cares so deeply for the community!

As we round out the first quarter of 2022 and head into the notorious Spring Market there are a handful of factors that should be considered whether you are a buyer or a seller. Paying attention to the anticipated increase in housing supply, monitoring buyer demand, and assessing the effects of rising interest rates on the market, are current influencers but also have some historical merit. How will these factors affect home prices, buyer opportunities, and overall market conditions? It is important that as we look forward, we also look back, as keeping a well-researched, educated perspective will lead to success.

HOUSING INVENTORY IN BLOOM
April through July historically have the most homes coming to market during a given year. We are sitting at the starting line of selection! Buyers who have been battling through the first quarter (Q1) and find themselves discouraged need to stay calm and carry on into these listing-heavy months. The increase in supply will provide opportunities to win a house as more selection will decrease the number of offers on each house. We are already starting to see the double-digit multiple offers temper to 3-6 offers and sometimes even just one, as the number of listings has grown month-over-month since January.

This increase in supply will also start to moderate price escalations. There were very large price escalations in Q1; the average list-to-sale price ratio in February 2022 in Snohomish County was 10% and 11% in King. Many new listings will come to market this spring on the shoulders of those price gains which will reduce the escalation amounts. We like to call this stair-stepping up the list price based on recent sales. We still anticipate price appreciation but expect the month-over-month growth to decelerate off of these high peaks in Q1. This will create some ease for buyers who stay engaged with their home search.

BUDDING BUYER DEMAND CONTINUES TO OUTPACE SUPPLY
As we track pending sales through March, they continue to track with or outpace new supply depending on which area. This is an indicator that there will continue to be buyer demand to sustain the increase in new listings that are coming this spring. Many buyers are still positioning their pandemic-influenced housing needs and making moves due to work-from-home options. In addition, there is a large population of Baby Boomers transitioning to their right-size homes and a wave of Millennials are poised to make their entrance into homeownership. Buyer demand will be met with more selection over the coming months.

Speaking of first-time buyers, it is extremely important that they understand that besides the lifestyle decision of owning a home, they are making an important investment. Real estate is one of the strongest, if not the strongest wealth-building assets available. Paying towards your own asset vs. your landlord’s will help build net worth as your home appreciates. As a first-time buyer, it is as much about securing the wealth-building asset as it is about choosing an ideal place to live. Buyers always need to make concessions on either price, location, or features, but in the end, will end up with an appreciating asset that will start to build their financial future.

GROWING INTEREST RATES
Interest rates have taken a ride up over the last month as the first increase by the Fed was made to help combat inflation. An increase in interest rates has been predicted for some time, and it is finally happening after several years at all-time historic lows. It will be critical that buyers monitor the rates closely to make sure they relate the monthly payment to the price they are able to and willing to pay. Also, buyers can get creative with their lender and choose to buy down their rate in order to secure a lower rate, hence a lower monthly payment. Aligning with a skilled lender to help navigate the changing environment will be critical.

It is also important for consumers to understand that rates are still well below the 30-year average of 7.5%. This perspective is key, along with understanding that rates are probably not to their 2022 peak yet according to the experts. Acting sooner rather than later will help secure a lower debt service for your long-term investment. While the “tell-your-grandkids” rates of 2.75-4% may be gone, there is still an amazing story to tell where we sit now!

WHAT DOES THIS ALL MEAN FOR PRICES?
Seasonal increases in selection will start to temper the month-over-month increases in prices and higher rates may put downward pressure on price growth, but homeowners are still sitting on top of a heap of price appreciation. Price appreciation over the last 5 years has been formidable across our nation.

In Snohomish County, prices are up 23% complete year-over-year and up 73% from 5 years ago. In King County, prices are up 15% complete year-over-year and up 54% from 5 years ago. Historical average price appreciation is closer to 3-5% annually, so taking into account gains over the last handful of years is important to have a balanced perspective. The bottom line is sellers are equity rich and have advantageous options to make moves!

If you have been considering a move and are curious about the value of your home in today’s market, please reach out. I would be happy to assess your home’s value and help you start to formulate a plan. If you have been beaten up as a buyer in Q1, I urge you to stay in the game, you are at the cusp of opportunity. Buyers and sellers need each other now, more than ever. There will be more flexibility in the market with more selection. The inventory environment we have been in has been so intense. We are ready for the intensity to ease and for the market to be a bit more fluid.

All indicators point toward another positive year in real estate as we enter the spring market. It is always my goal to help keep my clients informed and empower strong decisions. Please reach out if I can help you or someone you know navigate their real estate goals.

You’re invited to our annual Paper Shredding Event & Food Drive. We partner with Confidential Data Disposal to provide a safe, eco-friendly way to reduce your paper trail and help prevent identity theft.

Saturday, April 9th, 10AM to 2PM*
4211 Alderwood Mall Blvd, Lynnwood
Bring your sensitive documents to be professionally destroyed on-site. Limit 10 file boxes per visitor.

This is a paper-only event. No x-rays, electronics, recyclables, or any other materials.

We will also be collecting non-perishable food and cash donations to benefit Volunteers of America Western Washington food banks. Donations are not required, but are appreciated. Hope to see you there! *Or until the trucks are full

A lot has happened in our world since the first of the year, specifically the rise in inflation and the recent Russian invasion of Ukraine. These factors can influence consumers and affect the housing and financial markets. Additionally, global unrest has had a clear influence on interest rates, driving them back down after a 1-point increase since November 2021.

Please listen to the latest video update from Windermere’s Chief Economist, Matthew Gardner (link below) that was released this Monday, 3/7/22. He provides updated insights and projections for the housing market and interest rates for 2022 and beyond, some of which have been adjusted since his January forecast.

It is always my goal to help keep my clients informed and empower strong decisions. At Windermere, we are so fortunate to have Matthew in our corner providing such expertise to help us help our clients strategically navigate the environment. Please reach out if you have any questions or if you would like to discuss how your goals relate to the market.

As Matthew stated in the video above, it is important that we keep interest rates in perspective. The chart below illustrates where rates are hovering today and where he and other experts expect to see them by the end of the year and how that affects monthly mortgage payments (principal & interest only).

We also have included the 30-year average rate to show the historical significance of today’s low rates. Even though rates have come up 1 point since the absolute bottom level in January 2021, they are still much lower than the historical average, and they are helping to offset affordability challenges.

However, at some point, rates could reach 5% which could put downward pressure on prices like the last time rates reached that level in the latter part of 2018. It is all about how the monthly payment pans out based on the rate. The variable effect of rates on prices will find its balance based on buyer appetites for monthly payment amounts.

You’re invited to our annual Paper Shredding Event & Food Drive. We partner with Confidential Data Disposal to provide a safe, eco-friendly way to reduce your paper trail and help prevent identity theft.

Saturday, April 9th, 10AM to 2PM*
4211 Alderwood Mall Blvd, Lynnwood
Bring your sensitive documents to be professionally destroyed on-site. Limit 10 file boxes per visitor.

This is a paper-only event. No x-rays, electronics, recyclables, or any other materials.

We will also be collecting non-perishable food and cash donations to benefit Volunteers of America Western Washington food banks. Donations are not required, but are appreciated. Hope to see you there!

*Or until the trucks are full