Economists Predict: Recession Coming

Recession Coming

The local economy is booming, and nationally we are experiencing the second-longest bull market in history. That’s great news, but it can’t last forever. The economy runs in cycles and we’re long overdue for our overheated market to cool down a bit. According to a survey of top economists by Zillow, almost half of experts said they expect the next recession to begin some time in 2020.

Experts Say Recession Could Hit by Early 2020

Recession Prediction Chart

A Recession Means a Slow-Down, Not a Crisis

A recession means the economy has slowed down. It does not mean we are experiencing another housing crisis. The housing crash of 2008 caused the last recession. However, that crash was primarily due to faulty lending practices that encouraged people to purchase homes they could not afford. Current lending practices make that unlikely to occur today.

Housing Won’t Be the Problem 

According to economists, monetary and trade policy are the most likely triggers for the next recession, not housing.

“If a recession is to occur, it is unlikely to be caused by housing-related activity, and therefore the housing sector should be one of the leading sources to come out of the recession.”  – Mark Fleming, chief economist for First American

The last recession that was caused by the housing crash was an anomaly. During the previous five recessions home values actually appreciated. If the US experiences a recession you can expect a slow-down of home price increases, not a housing crisis.

Whether you’re thinking about buying or selling, it’s important to have the most current information about the market. Our skilled Windermere Brokers can provide you with statistics and economic forecasts, as well as answers to any questions you may have.

Commute vs. Home Price Trade-Off: How Far Are You Willing To Drive?

Would you be willing to swap a longer commute time for a lower monthly mortgage payment? With prices of homes near city centers skyrocketing, many buyers are rethinking their priorities and choosing to “keep driving until they can afford it.”

Housing Search Trade-Off: Price vs. Commute Time

We examined active listing on the Northwest Multiple Listing Service and their drive-time proximity to downtown Seattle. Looking at homes within a 30-minute radius from downtown, the median home price was $1,612,500. Homes located within a 31 to 60-minute commute from downtown had a median price of $890,000–that’s 45 percent less. This means if you are willing to commute over an hour, the price of the average home in the area would be $1 million less than if you lived close to the city.

Search for Homes by Commute Time on Windermere.com

The Drive Time Search function on Windermere.com and our Windermere brokers’ websites allows you to customize the search criteria with your work address, time of day that you commute, and maximum amount of time you want to spend driving to and from work. The results will exclusively show homes for sale within your preferred drive time. 
Search By Drive Time
Are you ready to look for a home?
One of our qualified Windermere brokers can help you choose the right area, narrow down your criteria, and create a strategy for getting you the home you want at a price you can afford.

 

Community Service Day 2018

On Friday, June 8th our Windermere offices closed their doors for our annual Community Service Day. Since 1984, Windermere has dedicated a day to giving back to the community and assisting with neighborhood improvement initiatives.

We’re proud to share these projects completed by our East, Inc. offices:

Jubilee Reach

The Bellevue and Bellevue West offices teamed up to lend a hand at Jubilee REACH. This local organization supports the social and emotional needs of children and their families through mentoring, tutoring, and after-school clubs and sports programs within Bellevue public schools. Our Windermere team helped with a variety of maintenance tasks including painting doors and benches, landscaping, replacing lights, washing windows, repainting the basketball court, pressure washing walkways and play sets, and more. We are proud of our offices’ hard work at this site, and we are grateful to Jubilee REACH for their important contributions to our community and for letting us be a part of their mission!

See more photos of the day here.

Kids Without Borders

Windermere Redmond CSD 2018

Our Redmond office assisted Bellevue-based Kids Without Borders, an organization founded by Son Michael Pham, who used his experience as a refugee from Vietnam as a catalyst to serve children in our local and international communities with the vision of “all kids, one world.” Agents and staff spent the day with Son Michael Pham at the KWB storage units where they sorted and packed clothing for distribution to families in need. This was a great opportunity for us to return some of the generosity this organization has put into our global community!

See more photos of the day here.

Heritage Park

Windermere Yarrow Bay CSD 2018

Yarrow Bay agents and staff rolled up their sleeves, slipped on their gardening gloves, and grabbed shears and rakes to landscape and remove invasive plants at Heritage Park near downtown Kirkland. The park offered an incredible view of the Seattle skyline across Lake Washington as they worked – a reminder of how lucky we are to be able to enjoy the serenity of nature while still being close to the bustling city. We were happy to do our part to beautify and help preserve part of what makes our community so special!

See more photos of the day here.

Odessa Brown Children’s Clinic

Windermere Bellevue South CSD 2018

Our Bellevue South office gave back by partnering with Seattle Children’s Odessa Brown Children’s Clinic, which strives to promote quality pediatric care, family advocacy, health collaboration, mentoring, and education in a culturally relevant context. Our agents and staff helped with landscaping and mulching the clinic grounds, facilitating the book drive, and working on art projects with kids at the clinic. As an added bonus, they had the chance to listen to talks by a pediatrician and Lenny Wilkens, former NBA player and coach and current children’s healthcare advocate. We are thankful to OBCC for welcoming and inspiring us on Community Service Day and every day!

See more photos of the day here.

Cougar Mountain Zoo

Windermere Issaquah CSD 2018

Our Issaquah office headed to the Cougar Mountain Zoo in Issaquah to help with their mission to increase the understanding and appreciation of the Earth’s wildlife and the role of humanity in nature through education, conservation, propagation, and exhibition – and enjoy the company of some of its animal inhabitants. A few of their projects included clearing brush, painting benches, and habitat maintenance/wall building. This was one of the Issaquah office’s favorite Community Service Day projects, and we loved seeing them experience the zoo in a whole new way that reminded us of all of the work that goes into maintaining these neighborhood treasures!

See more photos of the day here.

Community Service Day has always been a treasured tradition and an important part of our culture here at Windermere. We greatly appreciate everything our agents invest in our communities to make them even better. Thank you all for continuing to make this a place we are proud to call HOME.

What Can We Expect From The 2018 Housing Market?

This article was originally written by Windermere Real Estate’s Chief Economist Matthew Gardner on the Windermere.com blog.

It’s the time of the year when I look deep into my crystal ball to see what’s on the horizon for the upcoming year. As we are all aware, 2017 has been a stellar year for housing across the country, but can we expect that to continue in 2018?

Here are my thoughts:

Millennial Home Buyers

Last year, I predicted that the big story for 2017 would be millennial home buyers and it appears I was a little too bullish. To date, first-time buyers have made up 34% of all home purchases this year – still below the 40% that is expected in a normalized market.  Although they are buying, it is not across all regions of the country, but rather in less expensive markets such as North Dakota, Ohio, and Maryland.

For the coming year, I believe the number of millennial buyers will expand further and be one of the biggest influencers in the U.S. housing market. I also believe that they will begin buying in more expensive markets. That’s because millennials are getting older and further into their careers, enabling them to save more money and raise their credit profiles.

Existing Home Sales

As far as existing home sales are concerned, in 2018 we should expect a reasonable increase of 3.7% – or 5.62 million housing units. In many areas, demand will continue to exceed supply, but a slight increase in inventory will help take some heat off the market. Because of this, home prices are likely to rise but by a more modest 4.4%.

New Home Sales

New home sales in 2018 should rise by around 8% to 655,000 units, with prices increasing by 4.1%. While housing starts – and therefore sales – will rise next year, they will still remain well below the long-term average due to escalating land, labor, materials, and regulatory costs. I do hold out hope that home builders will be able to help meet the high demand we’re expecting from first-time buyers, but in many markets it’s very difficult for them to do so due to rising construction costs.

Interest Rates

Interest rates continue to baffle forecasters. The anticipated rise that many of us have been predicting for several years has yet to materialize. As it stands right now, my forecast for 2018 is for interest rates to rise modestly to an average of 4.4% for a conventional 30-year fixed-rate mortgage – still remarkably low when compared to historic averages.

Tax Reform

Something that has the potential to have a major impact on housing are the current proposals relative to tax reform. As I write this, we know that both the House and Senate propose doubling the standard deduction, and the House plans to lower the mortgage interest deduction from $1,000,000 to $500,000. If passed, the mortgage deduction would no longer have value for home owners who would likely opt to take the standard deduction.

If either of the current proposals is adopted into law, the potential reduction in mortgage-related tax savings means the after-tax cost of home ownership will increase for most home owners. Additionally, both the House and Senate bills also end tax benefits for interest on second homes, and this could have a devastating effect in areas with higher concentrations of second homes.

The capping of the deduction for state and local property taxes (SALT) at $10,000 will also negatively impact states with high property taxes, such as California, Connecticut, and New York. Furthermore, proposed changes to the capital gains exemption on profits from the sale of a home (requiring five years of continuous residence as compared to the current two) could impact approximately 750,000 home sellers a year and slow the growth of home ownership.

Something else to consider is that all of the aforementioned changes will only affect new home purchases, which I fear might become a deterrent for current home owners to sell. Given the severe shortage of homes for sale in a number of markets across the country, this could serve to exacerbate an already-persistent problem.

Housing Bubble

I continue to be concerned about housing affordability. Home prices have been rising across much of the country at unsustainable rates, and although I still contend that we are not in “bubble” territory, it does represent a substantial impediment to the long-term health of the housing market. But if home price growth begins to taper, as I predict it will in 2018, that should provide some relief in many markets where there are concerns about a housing bubble.

In summary, along with slowing home price growth, there should be a modest improvement in the number of homes for sale in 2018, and the total home sales will be higher than 2017. First-time buyers will continue to play a substantial role in the nation’s housing market, but their influence may be limited depending on where the government lands on tax reform.