As we experience the fall equinox, when the length of a day is equal to the night, we are also experiencing a similar balance in the real estate market. We define a balanced market to have 2-4 months of available inventory. This means that if no new homes came to market, we would be sold out of homes in that amount of time. Month-to-date in September, we have 2.1 months of inventory in King County and 1.7 months in Snohomish County, after having 1.6 months in King and 1.5 months in Snohomish in August. This has been a stark contrast to the spring months when we bottomed out at 0.3 months in both counties in March.

How we navigate the changing environment is key! The reasons why people buy and sell real estate is often rooted in life changes. Yes, real estate is an investment and often leads to financial gain, but moves are more likely motivated by life circumstances that create a desired change in housing. So how do you find success in a market approaching or already in balance, versus an extreme seller’s market?

First, market preparation should not be taken lightly. How a home is presented to the market is instrumental in setting it apart from the increase in the competition (more inventory), so it stands out and sells quicker. As a part of my process (in all markets), I walk through the property with my sellers and we devise a plan to improve, clean, and sometimes update the property so it shows as favorably as possible in order to attract the largest pool of buyers possible. With more selection, this preparation is paramount to getting the highest return and shortest market time.

I will often refer to my preferred list of contractors to help take on our prep list and I can also consult on what items are of the highest priority to improve, so we do not cut into profit. Windermere even has a no-upfront, low-cost loan program, The Windermere Ready Program that allows for quick and inexpensive access to funds in order to get property preparation done seamlessly.

The second key element is pricing. In King County, prices are up 10% complete year-over-year and up 18% in Snohomish County. However, prices are down 10% from the spring 2022 peak in King County and 12% in Snohomish. Price appreciation has started to decelerate (slow down) year-over-year, but we still have above-average price gains when we compare 2021 to 2022. Not to mention, we are sitting on top of a decade of positive price appreciation. The long-term equity growth a seller has is a healthy perspective to set their expectations on rather than holding on to the extreme environment of the spring market that is not returning.

With that said, sellers have amazing gains to enjoy, and not overshooting their price will lead to the most profitable and drama-free outcome. In King County in August, 37% of homes sold at or above the list price, and 34% in Snohomish County; that is 1 in 3 homes! These homes were brought to market with accurate pricing that attracted a buyer pool that understood the value and was motivated to offer. Market time was also shorter. Homes in King and Snohomish Counties that sold in 15 days or less averaged a list-to-sale price ratio of 100% and homes that sold in 15-30 days took close to a 5% hit on list price. When the days on market get longer the hit on list price gets even higher. It is important to get the pricing right in the beginning. Thorough research, properly focused perspective, and clear communication all play into this success.

Lastly, negotiations have changed. In the extreme seller’s market, it was all about buyers waiving all their contingencies and a willingness to pay high amounts over the list price to win a home because the selection was low and money was cheap. Now that interest rates have increased, prices have been tempered by the cost of a loan, putting downward pressure on the peak prices from the spring. This is a sign of the market coming into balance. All of these financial factors hinge on one another and are related. We must understand this when we establish a price and head into negotiations. We need to know when to lean into the data and draw a line in the sand on our value, and when to be open and acquiesce to a solution. Having the emotional intelligence to see the big picture and work towards win-win outcomes serves everyone well. This muscle is being rebuilt across the industry; make sure you are aligning with a professional who is well-researched, calm and confident.

What has been really positive about this shift is the ability for a buyer to be a bit more nimble with their move, especially if they have a home to sell. Before, there was a stop-gap in the market because if a seller who was a buyer had to sell their home in order to buy, they were fearful that they would not find a place to live and would have to move twice. Now we are seeing home sale contingencies happen, and buyers whose homes are under contract are making offers subject to those successful closings. It has also allowed for less-rushed due diligence, which is much more comfortable and reduces risk.

One last element I will add is that market conditions vary from neighborhood to neighborhood and price point to price point. Another element we must be aware of as we move away from the extreme is that we cannot make sweeping statements about the market. Some markets are in balance, some are still a seller’s market, and some are leaning towards the favor of buyers. The detail and care that is required to properly educate our clients are more important than they have been in some time and one that I take great pride in.

The answer is often, “it depends” which is followed by a stockpile of research, discernment, and communication in order to formulate a strategic plan and create a successful outcome. It is always my goal to keep my clients well-informed and empower strong decisions. Please reach out if you are curious about the success you can find in our new market. As stated above, life changes often motivate moves, and helping people navigate these huge, life-changing moments is my passion.

Did you know Windermere is the official real estate company of the Seahawks?!

The best part of this partnership is our #TackleHomelessness campaign. For every defensive tackle made by the Hawks at their home games throughout the season, The Windermere Foundation donates $100 to Mary’s Place. Our current total is over $200k donated over the last 6 seasons of partnering with the Seahawks. 

Since 1999, Mary’s Place has helped thousands of women and families move out of homelessness into more stable situations. Across five emergency family shelters in King County, they keep families together, inside, and safe when they have no place else to go, providing resources, housing and employment services, community, and hope.

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

You see, 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% starting in the spring of 2019 and lasted 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 started to take shape in April, peaked in June, and has now started 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 the average interest rate over the last 30 years is around 7.5% which we are well below. 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. That has directed the demand to adjust to lower price points in order to provide a monthly payment that is sustainable and affordable. Hence, putting downward pressure on the peak prices we saw in spring 2022 when rates were in the 3-4% and there were only 2 weeks of available inventory in Snohomish and King counties. Now there is 2 months of available inventory for both counties, which is an indicator of a balanced market.

The sky is not falling, we are just adjusting to the new normal of interest rates and getting used to having additional selection and 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 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 entering into the 6% like we saw in June as the volatility of this adjustment was finding its way as a 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 it is often short-term rates they are referring to 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 last 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. We must understand 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 is a lot that is motivating the 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, but 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 also the place you call home. It must be looked at from a financial perspective and a lifestyle one as well. 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) in order to get the payment that works for them. Please reach out if you have questions or are curious about how your goals relate to today’s market. It is always my goal to help keep my clients well informed and empower strong decisions.

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!

“How’s the market?” is a question I am asked all the time. It is a common segue in casual conversation over the neighbor’s fence, at a party or family gathering. Now more than ever, the answer to this question is critical and detailed. You see, our market is experiencing a shift, a slowing down of price growth, if you will. Believe it or not, this is providing great opportunities for both buyers and sellers.

Let’s talk about what the slow down in price appreciation means first. What this means is when we get to the end of the year and average the last 12 months of median price and compare it to the previous 12 months of median price, we will still have a positive growth percentage, but that percentage will be lower than it was earlier in the year. You see, we had a very significant bump in prices in Q1 of 2022 that will level off as we complete 2022. Bear in mind that the long-term annual price appreciation rate is closer to 3-6% when comparing the growth that we’ve had recently.

Let me break this concept down for you with some 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 – this is 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 – this is a 38% increase in 2 years! That pace is unprecedented and unsustainable.

Let’s dig a little deeper! In Snohomish County, in December 2021 (the end of last year) the median price was $700,000 which was an above-average 35% increase from April 2020 (20 months). That means there was a 35% gain from April 2020 to December 2021 (20 months: $520,000 to $700,000 = 35%) but then a whopping 19% gain in 4 months, from December 2021 to April 2022 (4 months: $700,000 to $830,000 = 19%). This 4-month stretch of price growth is the root of the unsustainability and one that we will be leveling off of during this shift. It is very unlikely that we will return to prices below the December 2021 level, which was at an above-average growth rate of 35% from April 2020. The (unofficial) median price in May sits at $810,000 indicating the shift to settle somewhere between the April peak and where we landed at the end of last year. We must remember that we were celebrating price growth at the end of 2021!

In King County the numbers are not as extreme, but still well above average growth rates. In August 2021, the median price was $875,000 which was an above-average 22% increase from April 2020 (15 months). That means there was a 22% gain from April 2020 to August 2021 (15 months: $720,000 to $875,000 = 22%) and then a 14% gain in 9 months, from August 2021 to April 2022 (9 months: $875,000 to $995,000 = 14%). This 9-month stretch of price growth is one that will be leveling off during this shift. It is very unlikely we will return to prices below the August 2021 level, which was still an above-average growth rate of 22% from April 2020.

This is where perspective comes in and where pricing can get a little tricky. Coaching potential sellers as to why it would be unrealistic to expect the peak prices of Q1 2022 requires explaining the market factors that have played into this shift. 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 sit at 0.9 months of inventory (unofficially). 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 (unofficially) 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 have put downward pressure on prices. When there is more selection, prices do not escalate as quickly.

In King County, for May 2022, we sit at 0.9 months of inventory (unofficially). 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 (unofficially) 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%. 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% is a great rate!

It is understandable that 5% pales in comparison to the historic lows we had, but those are most likely only going to be found in the history books in the foreseeable future. Rates being 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 they had a quick 2-point increase from March 2022 to May 2022, they have seemed to stabilize. They have even come down a bit, making this our new normal for now, as future increases into 2023 are predicted. 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 just plain 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 reenter the market and start to secure their wealth-building asset that also augments their lifestyle.

So, what does all of this mean? The word that keeps coming to my mind is perspective. We have walked through 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 towards 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 are able to match our home to our lifestyle needs and build wealth at the same time.

With more selection, still-low interest rates, and coming off the crazy prices of Q1, more buyers will be able to make these lifestyle pivots more comfortably, all while sellers will still make phenomenal returns. Perspective is key to help see the forest through the trees, and if not taken into consideration could stall one from reaching their goals.

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. It is always my goal to help keep my clients well informed and empower strong decisions.

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!

At Windermere, we are fortunate to have Matthew Gardner as our Chief Economist. In fact, we are one of the only real estate companies in the country to have such a well-respected expert sitting in this role. Not only is Matthew an asset to Windermere brokers and their clients, but he is a coveted resource within the industry. He is often called upon by major media outlets and industry think tanks for his insights and knowledge.

Every quarter Matthew produces The Gardner Report which explains statistics and trends and provides predictions for all of the market areas Windermere serves, see the links below. What is so great about this is you can read about where you live and also get a glimpse into other markets that may pique your interest.

Read the full Western Washington report here. Additionally, since Windermere spans the entire Western Region of the United States, he also provides this same report for Washington (Western, Central & Eastern), Oregon, Idaho, Montana, California (Southern & Northern), Utah, Colorado, and Nevada.

There has been a lot of state-to-state moves over the last few years. Many of these moves have been prompted by retirement, second home purchases, affordability, and remote working opportunities. This is a great way to research other markets you may be interested in. These reports update every quarter; please let me know if you’d like me to send them to you when they update. Also, I am connected to the Windermere-wide network of brokers and can easily find you a reputable broker who would be a stellar match for your real estate needs outside of my normal market area.

Further, I am also a part of a national and international network of real estate companies for referrals outside of the Windermere footprint. This is through Windermere’s affiliation with Leading Real Estate Companies of the World. Bottom line, I can help provide information and can help align you with a trusted real estate advisor anywhere in the world. Please reach out if I can help!

Lastly, Matthew also releases a monthly video that speaks to real estate market hot topics.  Here is his latest video that touches on the interest rates, inventory, inflation and more.

My office is working together with our entire Windermere family to hit $50 million raised for our 50th anniversary. Each dollar returns to our community through the Windermere Foundation, helping homeless and low-income families in the neighborhoods we serve.

Help us reach our goal by donating here!

Being part of an office and a company that cares deeply for the community is so important to me, and I’m excited to watch these numbers grow! We are currently wrapping up a donation drive among our Windermere North brokers to help send kids to YMCA summer camps. Look for those final numbers in the coming weeks!