The Gardner Report – Fourth Quarter 2017

Economic Overview

The Washington State economy added 104,600 new jobs over the past 12 months. This impressive growth rate of 3.1% is well above the national rate of 1.4%. Interestingly, the slowdown we saw through most of the second half of the year reversed in the fall, and we actually saw more robust employment growth.

Growth continues to be broad-based, with expansion in all major job sectors other than aerospace due to a slowdown at Boeing.

With job creation, the state unemployment rate stands at 4.5%, essentially indicating that the state is close to full employment. Additionally, all counties contained within this report show unemployment rates below where they were a year ago.

I expect continued economic expansion in Washington State in 2018; however, we are likely to see a modest slowdown, which is to be expected at this stage in the business cycle.

Home Sales Activity

  • There were 22,325 home sales during the final quarter of 2017. This is an increase of 3.7% over the same period in 2016.
  • Jefferson County saw sales rise the fastest relative to fourth quarter of 2016, with an impressive increase of 22.8%. Six other counties saw double-digit gains in sales. A lack of listings impacted King and Skagit Counties, where sales fell.
  • Housing inventory was down by 16.2% when compared to the fourth quarter of 2016, and down by 17.3% from last quarter. This isn’t terribly surprising since we typically see a slowdown as we enter the winter months. Pending home sales rose by 4.1% over the third quarter of 2017, suggesting that closings in the first quarter of 2018 should be robust.
  • The takeaway from this data is that listings remain at very low levels and, unfortunately, I don’t expect to see substantial increases in 2018. The region is likely to remain somewhat starved for inventory for the foreseeable future.

Annual change in home sales

Home Prices

  • Because of low inventory in the fall of 2017, price growth was well above long-term averages across Western Washington. Year-over-year, average prices rose 12% to $466,726.
  • Economic vitality in the region is leading to a demand for housing that far exceeds supply. Given the relative lack of newly constructed homes—something that is unlikely to change any time soon—there will continue to be pressure on the resale market. This means home prices will rise at above-average rates in 2018.
  • Compared to the same period a year ago, price growth was most pronounced in Lewis County, where home prices were 18.8% higher than a year ago. Eleven additional counties experienced double-digit price growth as well.
  • Mortgage rates in the fourth quarter rose very modestly, but remained below the four percent barrier. Although I anticipate rates will rise in 2018, the pace will be modest. My current forecast predicts an average 30-year rate of 4.4% in 2018—still remarkably low when compared to historic averages.

Days on Market

  • The average number of days it took to sell a home in the fourth quarter dropped by eight days, compared to the same quarter of 2016.
  • King County continues to be the tightest market in Western Washington, with homes taking an average of 21 days to sell. Every county in the region saw the length of time it took to sell a home either drop or remain static relative to the same period a year ago.
  • Last quarter, it took an average of 50 days to sell a home. This is down from 58 days in the fourth quarter of 2016, but up by 7 days from the third quarter of 2017.
  • As mentioned earlier in this report, I expect inventory levels to rise modestly, which should lead to an increase in the average time it takes to sell a house. That said, with homes selling in less than two months on average, the market is nowhere near balanced.

Average Days On Market

Conclusions

Market SpeedometerThis speedometer reflects the state of the region’s housing market using housing inventory, price gains, home sales, interest rates, and larger economic factors. For the fourth quarter of 2017, I have left the needle at the same point as third quarter. Price growth remains robust even as sales activity slowed. 2018 is setting itself up to be another very good year for housing.

 

Matthew Gardner is the Chief Economist for Windermere Real Estate, specializing in residential market analysis, commercial/industrial market analysis, financial analysis, and land use and regional economics. He is the former Principal of Gardner Economics, and has more than 30 years of professional experience both in the U.S. and U.K.

 

This article originally appeared on the Windermere.com blog.

The Gardner Report – Third Quarter 2017

Economic Overview

The Washington State economy added 79,600 new jobs over the past 12 months—an impressive growth rate of 2.4%, and well above the national growth rate of 1.2%. However, as we anticipated in last quarter’s report, we continue to see a modest slowdown in the growth rate as the state grows closer to full employment. Growth has been broad-based, with expansion in all major job sectors other than Aerospace (a function of a slowdown at Boeing). Given the current rate of expansion, I am raising my employment forecast and now predict that Washington will add 81,000 new jobs in 2017.

Given the robust job market, it is unsurprising that the state unemployment rate continues to fall. The current unemployment rate in Washington State is 4.6% and we are essentially at full employment. Additionally, all counties contained within this report reported either a drop or stability in their unemployment rate from a year ago. I maintain my belief that the Washington State economy will continue to outperform the U.S. as a whole. Given such a strong expansion, we should also expect solid income growth across Western Washington.

Home Sales Activity

  • There were 25,312 home sales during the third quarter of 2017. This is an increase of 3.6% over the same period in 2016.
  • Clallam County maintains its number one position for sales growth over the past 12 months. Only four other counties saw double-digit gains in sales. This demonstrates continuing issues with the low supply of listings. There were modest declines in sales activity in six counties.
  • The market remains remarkably tight with listing inventory down by 14.2% when compared to the third quarter of 2016. But inventory is up a significant 32% compared to the second quarter of this year. Pending sales rose by 5.2% over the same quarter a year ago, which suggests that closings in Q4 will still be robust.
  • The key takeaway from this data is that inventory is still very low, and the situation is unlikely to improve through the balance of the year.

Home Prices

  • Given tight supply levels, it is unsurprising to see very solid price growth across the Western Washington counties. Year-over-year, average prices rose 12.3% to $474,184. This is 0.9% higher than seen in the second quarter of this year.
  • With demand far exceeding supply, price growth in Western Washington continues to trend well above the longterm average. As I do not expect to see the new home market expand at any significant pace, there will be continued pressure on the resale market, which will cause home prices to continue to rise at above-average rates.
  • When compared to the same period a year ago, price growth was most pronounced in Grays Harbor County where sale prices were 20.1% higher than the third quarter of 2016. Nine additional counties experienced double-digit price growth.
  • Mortgage rates in the quarter continue to test the lows of 2017, and this is unlikely to change in the near-term. This will allow home prices to escalate further but I expect we will see rates start to rise fairly modestly in 2018, which could slow price growth.

Days on Market

  • The average number of days it took to sell a home in the quarter dropped by eight days when compared to the same quarter of 2016.
  • King County continues to be the tightest market, with homes taking an average of 17 days to sell. Every county except San Juan saw the days on market drop from the same period a year ago.
  • This quarter, it took an average of 43 days to sell a home. This is down from the 51 days it took in the second quarter of 2016 and down by 8 days from the second quarter of this year.
  • At some point, inventory will start to grow and this will lead to an increase in the average time it takes to sell a house. However, I do not expect that to happen at any time soon. So we remain in a seller’s market.

Conclusions

This speedometer reflects the state of the region’s housing market using housing inventory, price gains, home sales, interest rates, and larger economic factors. For the third quarter of 2017, I have left the needle at the same point as the second quarter. Though price growth remains robust, sales activity has slowed very slightly and listings jumped relative to the second quarter. That said, the market is very strong and buyers will continue to find significant competition for accurately priced and well-located homes.

 

Matthew Gardner is the Chief Economist for Windermere Real Estate, specializing in residential market analysis, commercial/industrial market analysis, financial analysis, and land use and regional economics. He is the former Principal of Gardner Economics, and has more than 30 years of professional experience both in the U.S. and U.K.

 

This article originally appeared on the Windermere.com blog.

Local Market Update – October 2017

The typical seasonal slowdown of new listings in September added to frustration for buyers who are competing for a very limited number of homes. Strong job growth continues to fuel demand. The state added 83,000 new jobs in the month of August, and September looked to be just as robust. The result? King, Pierce and Snohomish counties all reported double-digit price increases from a year earlier.

Eastside

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The median price of a single-family home on the Eastside jumped 14 percent from the same time last year to a $855,000. As the median on the Eastside approaches the $1 million mark, the price tag for a luxury home is increasing. Of all the single-family homes that sold on the Eastside in September nearly 40 percent sold for more than $1 million. In the city of Bellevue, two-thirds of the homes sold for more than $1 million.

King County

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The median price of a single-family home sold in King County in September increased 16 percent from a year ago to $625,000. While down from the record high of $658,000 in July, it represents the highest value for any September since records began in 2000. Among the largest metro areas in the U.S., our region has now led the nation in price increases for the last 11 months.

Seattle

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Seattle’s inventory remains as tight as ever, with homes being snapped up in days. A big hiring push by local employers just keeps adding to the pressure. With supply dwindling and demand soaring, prices had only one place to go – up. In September, the median single-family home price in Seattle soared 15 percent over a year ago to $725,000.

Snohomish County

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The median price of a single-family home in Snohomish County sold in September was $450,000, a 14 percent increase over the same time last year. With just slightly over one month’s inventory of homes available, it’s unlikely price growth here will slow any time soon.

Local Market Update – September 2017

High demand and low supply made it the market’s hottest August since records began in 2000. Sparse inventory was again the norm, as were multiple offers. However, brokers are cautioning sellers to price their homes correctly. Most buyers have been in the market a long time and are well educated. Overpriced listings are not getting showings or offers. In some rare good news for buyers in this heated market, mortgage lenders are relaxing some standards to make it easier to buy a home.

Eastside

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The median price of a single-family home on the Eastside increased 11 percent from a year ago to a $853,000. That number is down slightly for the second month in a row, but affordability is still a big issue. The share of million-dollar homes here is rising faster than just about anywhere in the country. In Medina, 99.7 percent of homes are worth at least $1 million. On Mercer Island, it’s 88 percent, and 64 percent of West Bellevue homes are worth $1 million or more.

King County

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The local area led the nation in home-price growth for the 10th straight month. In August, the median home price in King County jumped 18 percent over the same time last year to $650,000, off slightly from the record high of $658,000 in July. While inventory is low, the fourth quarter of the year has always seen the lowest demand for home sales. If you’re thinking about buying a home, it is to your advantage to work with your broker and make an offer now.

Seattle

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Inventory-starved Seattle just can’t keep up with the demand of its growing population. Lack of supply helped push the median price for a single-family home to $730,000, an increase of 17 percent over a year ago. That’s down slightly from the peak of $750,000 in June. If sellers need an incentive to put their home on the market, a recent analysis showed Seattle among the top U.S. cities for sellers to get the greatest return on investment.

Snohomish County

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While prices in King County may be showing the first signs of moderating, Snohomish County continues to hit new records for home prices. The median price of a single-family home here jumped 14 percent over the same time last year to $455,000, yet another record high.