Matthew Gardner Reports February 2, 2022

The Gardner Report – Q4 2021

 

The Gardner Report – Q4 2021

The following analysis of the Western Washington real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere agent.

REGIONAL ECONOMIC OVERVIEW

Just when we thought COVID was starting to pull back, the Omicron variant made its presence known. It is still too early to suggest that this has affected the region’s economic recovery—we won’t likely know for certain until we get more job data. I remain hopeful that this latest spike in infections will not have too much of an impact, but only time will tell. To date, the region has recovered all but 51,000 of the 297,000 jobs that were lost due to the pandemic. Some of the region’s smaller counties, including Grays Harbor, Cowlitz, Thurston, San Juan, and Clallam, have seen a full job recovery. The most recent data (November) shows the regional unemployment rate at a very respectable 3.3%, which is below the pre-pandemic low of 3.7%. The lowest unemployment rates were in King and San Juan Counties, where 2.9% of the labor force was out of work. The highest rate was in Grays Harbor County, which registered 5.1%. I still expect to see a full job recovery by this summer. However, there is a growing labor shortage holding the area back. Hopefully, this will change, but some industry sectors—especially hospitality—continue to find it hard to attract workers.

HOME SALES

  • In the final quarter of the year, 22,161 homes sold, representing a drop of 5.2% compared to the same period in 2020 and down 18.8% from the third quarter.
  • The reason there were lower year-over-year sales is simply because the number of homes for sale was down more than 30%. The drop between third and fourth quarters is likely due to seasonality changes in the market.
  • Although home sales were lower in most markets, there was a significant uptick in Grays Harbor and Thurston counties. The number of homes sold dropped across the board compared to the third quarter.
  • The ratio of pending sales (demand) to active listings (supply) showed sales outpacing listings by a factor of 5.2. The market is supply starved and unfortunately, it’s unlikely enough homes will be listed this spring to satisfy demand.

HOME PRICES

  • Home prices rose 15.1% compared to a year ago, with an average sale price of $711,008. This was 2.1% lower than in the third quarter of 2021.
  • When compared to the same period a year ago, price growth was strongest in San Juan and Jefferson counties. All but two markets saw prices rise more than 10% from a year ago.
  • Relative to the third quarter, every county except Island (-8.6%), Mason (-5.2%), Lewis (-2.9%), King (-2.1%), Cowlitz (-1.7%), and Kitsap (-0.9%) saw sale prices rise.
  • Mortgage rates rose more than .2% between the third and fourth quarters, which may have impacted prices. Affordability constraints continue to grow, which is also likely to have played a part in slowing gains.

DAYS ON MARKET

  • It took an average of 23 days for homes to sell in the final quarter of 2021. This was 8 fewer days than in the same quarter of 2020, but 6 more days than in the third quarter of last year.
  • Snohomish, Thurston, King, and Kitsap counties were the tightest markets in Western Washington, with homes taking an average of between 13 and 16 days to sell. The greatest drop in market time compared to a year ago was in San Juan County, where it took 33 fewer days for a seller to find a buyer.
  • All counties contained in this report saw the average time on market drop from the same period a year ago. Every county except Whatcom saw market time rise compared to the third quarter.
  • Longer days on market might suggest that things are starting to slow, but I don’t actually think this is the case. I believe buyers are being a little more selective before making offers, and many may be waiting in the hope that supply levels will improve in the spring.

CONCLUSIONS

 

This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.

The housing market remains in a state of imbalance, but, as I look at the data, I believe the frenetic pace of sales and price appreciation may start to soften in 2022.

This will likely be due to financing costs and affordability acting as headwinds to price growth. Mortgage rates have started to rise again, and I have forecasted them to reach 3.7% by fourth quarter. This alone will slow price growth as affordability in many areas declines.

One thing that remains unknown that could have a significant impact on the market is long-term work-from-home policies. Many businesses have not yet determined their plans for remote working, but once they do, potential home buyers who have been waiting to see how frequently they have to commute to work could immediately start their search. In addition to boosting sales, this could add inventory to the market as well.

All things considered, I am moving the needle just a notch toward buyers. However, as you can see, we are still in a market that heavily favors home sellers.

As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.

In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.

This post originally appeared on the Windermere.com Blog.

 

Market ReportMatthew Gardner Reports March 31, 2020

Matthew Gardner Weekly COVID-19 Housing & Economic Update: 3/30/2020

Every Monday Windermere Chief Economist Matthew Gardner provides an update regarding the impact of COVID-19 on the US economy and housing market. This week he discusses what it really means for the economy and housing to be in a COVID-19 induced recession (hint: it’s not all bad news).

 

Market Update March 19, 2020

LOCAL MARKET UPDATE – MARCH 2020

The data and analysis below looks back at February’s market performance.

Buyers that may have been in wait-and-see mode at the end of 2019 jumped off the fence in February. Pending sales (offers accepted but not yet closed) jumped 27%, snapping up already-tight inventory. 55% of homes on the market sold in 15 days or less. The median home price jumped 9% over a year ago to $985,000, an increase of $58,000 from the prior month. Development on the Eastside continues to surge and includes the recent groundbreaking for a 600-foot tower in Bellevue and a proposed 11 acre mixed-use project.

VIEW FULL EASTSIDE REPORT

HomeownersLiving March 17, 2020

Protecting Your Home’s Air Quality

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Most of us tend to think of air pollution as something that occurs outdoors where car exhaust and factory fumes proliferate, but there’s such a thing as indoor air pollution, too. Since the 1950s, the number of synthetic chemicals used in home products have increased drastically, while homes have become much tighter and better insulated. As a result, the EPA estimates that Americans, on average, spend approximately 90 percent of their time indoors, where the concentrations of some pollutants are often two to five times higher than typical outdoor concentrations. 

Luckily, there are many ways to reduce indoor air pollution. We all know that buying organic and natural home materials and cleaning supplies can improve the air quality in our homes, but there are several other measures you can take as well. 

How pollutants get into our homes 

Potentially toxic ingredients are found in many materials throughout the home, and they leach out into the air as Volatile Organic Compounds, or VOCs. If you open a can of paint, you can probably smell those VOCs. Mold is a VOC that can build up in the dampest parts of your home like the laundry room or crawl spaces. Another example is the “new car smell” that seems to dissipate after a while, but VOCs can “off-gas” for a long time, even after a noticeable smell is gone. 

Many materials used to build a home contain chemicals like formaldehydetoluene, xylene, ethanol, and acetone, and even lead. VOCs can also be in the form of pet dander or dust. Fortunately, VOCs from building materials dissipate over time. For that reason, the highest levels of VOCs are usually found in new homes or remodels. If you are concerned about VOCs, there are several products you can buy that are either low- or no-VOC. You can also have your home professionally tested. 

How to reduce VOCs in your home 

Choose your building materials wisely  

  • – Use tile or solid wood for flooring—hardwood, bamboo, or cork
  • – Choose solid wood or outdoor-quality plywood that uses a less toxic form of formaldehyde. 
  • – Choose low-VOC or VOC-free paints and finishes 

Purify the air  

  • – Make sure your rooms have adequate ventilation, air out newly renovated areas for at least a week 
  • – Clean ductwork and furnace filters regularly 
  • – Install air cleaners if needed 
  • – Use only environmentally responsible cleaning chemicals 
  • – Plants are a natural solution to help clean the air 
  • – Air out freshly dry-cleaned clothes or choose a “green” cleaner 

Pick the right carpet 

  • – Choose “Green Label” carpeting or a natural fiber such as wool or sisal
  • – Use nails instead of glue to secure carpet 
  • – Install carpet LAST after completing painting projects or wall coverings
  • – Air out newly carpeted areas before using  
  • – Use a HEPA vacuum or a central vac system that vents outdoors

Prevent mold  

  • – Clean up water leaks fast 
  • – Keep humidity below 60 percent, using dehumidifiers if necessary 
  • – Refrain from carpeting rooms that stay damp 
  • – Insulate pipes, crawl spaces, and windows to eliminate condensation 
  • – Use one-half cup of bleach per gallon of water to kill mold in its early stages 
HomeownersLiving March 10, 2020

What Makes A Home “Modern”?

Image Source: Shutterstock

Sleek, sustainable design, open concept floor plans, minimalism, and eco-conscious thinking are defining characteristics of modern architecture. Recently, modern design concepts in home building have become more popular, and the resurgence of interest in modern real estate has followed suit.  

These characteristics are what define Contemporary Architecture: 

Clean geometric linesAt the heart of modernist values lies the simplification of form. Modernist homes have a very ‘linear’ feel with straight lines and exposed building materials. Furnishings and adornment reflect this value, incorporating vibrant, geometric and abstract designs. 

Smaller, multifunctional spaces: With the Tiny House subculture consistently on the rise, and the new generation of homeowners expressing a desire to move away from the sprawling dwellings of the past, multifunctional living spaces are a must for modern homes. Built-in storage is commonly used to reflect this multi-purpose; space-saving feel. 

Eco-conscious: Modern homes are wellsuited for technological and green upgrades, as well as eco-friendly building materials and energy efficient practices, and flat roofs to accommodate solar power. A new trend is to bring nature into each room for a calming, soothing effect. Large windows are abundant in modern architecture, allowing light to fill and expand the interior space, bringing the natural world indoors. 

Post-and-beam structure: Exposed wood posts and ceiling beams are classic elements in modern architecture. This style of building has been around for thousands of years; however, modern homes significantly emphasize the structure, rather than hiding the bones behind drywall. In new modern homes the post-and-beam structure can be made of concrete, iron or other materials. The visible horizontal and vertical beams reinforce the clean geometric lines of the space. 

Open concept:  Modern design strives to “open” the space by eliminating enclosed rooms. A common tactic is to open the kitchen and dining room into an open living space, allowing the spaces to flow into one another. 

Minimalism: With open and connected modernist spaces, careful curation of furniture, adornments, and household objects is paramount to incorporating the modernist aesthetic. Generally, modernist homes have art and furniture that reflects the clean geometric lines and the natural materials of the architecture, leaving less space for clutter. Minimalist philosophies encourage few household items that serve both form and function, which work well within this design and architectural style. 

Buyers March 3, 2020

Finding Your New Home in Four Steps

Image Source: G-Stock Studio

Whether you’re a first-time homebuyer or you currently own and are looking for a new home, the ideas below will help you better navigate that all-important first step: Finding a property that is both appealing and affordable.

The search for a new home always starts out with a lot of excitement. But if you haven’t prepared, frustration can soon set in, especially in a competitive real estate market. The biggest mistake is jumping into a search unfocused, just hoping to “see what’s available.” Instead, we recommend you first take some time to work through the four steps below.

Step 1: Talk to your agent

Even if you’re just thinking about buying or selling a house, start by consulting your real estate agent. An agent can give you an up-to-the-minute summary of the current real estate market, as well as mortgage industry trends. They can also put you in touch with all the best resources and educate you about the next steps, plus much more.

Step 2: Decide how much home you can afford

It may sound like a drag to start your home search with a boring financial review, but when all is said and done, you’ll be glad you did. With so many people competing to buy what is available, it’s far more efficient to focus your search on the properties you can afford. A meeting or two with a reputable mortgage agent should tell you everything you need to know.

Step 3: Envision your future

Typically, it takes at least five years for a home purchase to start paying off financially—which means—the better your new home suits you, the longer you’ll most likely remain living there.

Thinking of your near future, what life events do you anticipate in the next five or six years? If you’re planning to add to the family or change careers, or even rent out a portion of your home to others, share this information with your real estate agent. They will be able to help you evaluate your current and future needs to help find the best home that you can grow into.

Step 4: Visualize your ideal home

When it comes to this step, be realistic. It’s easy to get carried away dreaming about all the home features you want. Try listing everything on a piece of paper, then choose the five “must-haves,” and the five “really-wants.”

Home ImprovementsLiving February 25, 2020

Designing Your Home Office

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Working from home is an aspiration for many of us, but to do so effectively takes effort. A disorganized space at home can be just as troublesome as a hectic office. The most disciplined telecommuters will tell you that you need a structured routine and organization in order to be successful.

Having a designated workspace is one of the most important elements to your success when you make the switch to telecommuting. Even if you live in a small space, you need to find a balance between home and office. People who work from home often have a difficult time separating their work hours from their non-work hours because it’s so easy to keep at it late into the night. But maintaining a balance and shutting down the computer is important for overall wellbeing. What are some other must-haves for a successful home office? Here are the top five:

 

  1. Natural Light – Study upon study tells us that natural light is needed to boost productivity and mood. Make sure to set your desk up as close to a window as you can. If being near a window isn’t an option, a natural light lamp is the next best thing. It helps balance your body clock and leaves you feeling rested and refreshed.
  2. To-Do List or Planner – Start each day off by making a to-do list outlining what you need to get done before the end of the workday. Make sure to set a realistic time frame in which all of that should be completed, so you can check each one off the list and feel immense accomplishment once you’ve completed them all.
  3. Storage – If you have a big enough space, put in a large bookshelf where you can organize everything (think storage boxes). It reduces clutter and looks stylish. Using your walls and cabinetry is the most efficient use of space.
  4. Calendar – Many people tend to rely on digital calendars these days because of their convenience. When all of your devices sync together and pop up with reminders, you never have to worry about missing an appointment. However, many people find that it helps to keep a paper calendar handy too so you can easily view your whole month at a glance. Choose which options works best for you by playing with both options, or something in between and see which one lets you be more productive with the least amount of stress.
  5. Space for Inspiration – It doesn’t matter what field you work in, having a source of inspiration in your workspace is essential. Whether it’s a photo of your family, your dream car, or that vacation you’ve been dying to take, having that inspiration right in front of you provides a constant reminder of why you do what you do.
Market Update February 20, 2020

LOCAL MARKET UPDATE – FEBRUARY 2020

New jobs and low interest rates continue to fuel the housing market boom. While January is traditionally a slower month for activity, the new year saw steady buyer demand. With the number of sales exceeding new listings, all indicators point to a strong spring market.

The tech industry on the Eastside continues to grow rapidly. Microsoft and Alibaba both have significant expansions underway. Amazon expects to increase its workforce in Bellevue to 15,000 in the next few years, a sevenfold increase from today. As the economy continues to grow, inventory keeps being squeezed. There were 47% fewer single-family homes on the market in January than the year prior. Home prices have been stabilizing for some time, fluctuating slightly from month to month. In January the median home price slipped 2% over a year ago to $892,000.

VIEW FULL EASTSIDE REPORT

Home ImprovementsHomeowners February 18, 2020

What to Consider When Adding to Your Home

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When dissatisfaction with your current home strikes, it can be exciting to launch into a plan for a new addition. A new living room, bedroom, or more can add value to your home while improving your quality of life.

On the other hand, even a modest addition can turn into a major construction project, with architects and contractors to manage, construction workers traipsing through your home, hammers pounding, and sawdust everywhere. And although new additions can be a very good investment, the cost-per-square-foot is typically more than building a new home, and much more than buying a larger existing home.

Define your needs

To determine if an addition makes sense for your situation, start by defining exactly what it is you want and need. By focusing on core needs, you won’t get carried away with a wish list that can push the project out of reach financially.

If it’s a matter of needing more space, be specific. For example, instead of just jotting down “more kitchen space,” figure out just how much more space is going to make the difference, e.g., “150 square feet of floor space and six additional feet of counter space.”

If the addition will be for aging parents, consult with their doctors or an age-in-place expert to define exactly what they’ll require for living conditions, both now and over the next five to ten years.

Types of additions

Bump-out addition

“Bumping out” one or more walls to make a first-floor room slightly larger is something most homeowners think about at one time or another. However, when you consider the work required, and the limited amount of space created, it often figures to be one of your most expensive approaches.

First-floor addition

Adding a whole new room (or rooms) to the first floor of your home is one of the most common ways to add a family room, apartment or sunroom. But this approach can also take away yard space.

Dormer addition

For homes with steep rooflines, adding an upper floor dormer may be all that’s needed to transform an awkward space with limited headroom. The cost is affordable and, when done well, a dormer can also improve the curb appeal of your house.

Second-story addition

For homes without an upper floor, adding a second story can double the size of the house without reducing surrounding yard space.

Garage addition

Building above the garage is ideal for a space that requires more privacy, such as a rentable apartment, a teen’s bedroom, guest bedroom, guest quarters, or a family bonus room.

Permits required

You’ll need a building permit to construct an addition, which will require professional blueprints. Your local building department will not only want to make sure that the addition adheres to the latest building codes, but also ensure it isn’t too tall for the neighborhood or positioned too close to the property line. Some building departments will also want to ask your neighbors for their input before giving you the go-ahead.

Requirements for a legal apartment

While the idea of having a renter that provides an additional stream of revenue may be enticing, the realities of building and renting a legal add-on apartment can be sobering. Among the things you’ll need to consider:

Special permitting

Some communities have regulations against “mother-in-law” units so they have zone-approval requirements.

Separate utilities

In many cities, you can’t charge a tenant for heat, electricity, and water unless utilities are separated from the rest of the house (and separately controlled by the tenant).

ADU Requirements

When building an “accessory dwelling unit” (the formal name for a second dwelling located on a property where a primary residence already exists), building codes often contain special requirements regarding emergency exits, windows, ceiling height, off-street parking spaces, the location of main entrances, the number of bedrooms, and more.

In addition, renters have special rights while landlords have added responsibilities. You’ll need to learn those rights and responsibilities and be prepared to adhere to them.

Average costs

The cost to construct an addition depends on a wide variety of factors, such as the quality of materials used, the laborers doing the work, the type of addition and its size, the age of your house and its current condition. For ballpark purposes, however, you can figure on spending about $200 per square foot if your home is in a more expensive real estate area or about $100 per foot in a lower-priced market.

You might be wondering how much of that money your efforts might return if you were to sell the home a couple of years later? The answer to that question depends on a number of variables, but the average “recoup” rate for a family room addition is typically more than 80 percent.

The bottom line

While you should certainly research the existing-home marketplace before hiring an architect to map out the plans, building an addition onto your current home can be a great way to expand your living quarters, customize your home, and remain in the same neighborhood.

Living February 11, 2020

Kick-Starting a Kitchen Remodel

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Ask a homeowner which room they would most like to improve, and most will point to the kitchen – the starting point for every meal and the heart of the home.

Ask those same people why they don’t move forward with a kitchen remodel, and many will say the project seems so overwhelming they don’t know where to start. If your kitchen needs an upgrade, here are some step-by-step suggestions to get you started.

Gather your thoughts

The steps that follow will all progress much easier if you take time beforehand to form a strong opinion about the desired look and layout of your new kitchen.

Start by reviewing kitchen magazines and photo-heavy kitchen remodeling guides and/or websites. Compiling clippings and printouts in a notebook helps you refine your vision. Clip or print the photos that capture your imagination, add notes, and draw circles and arrows around the things you like most.

Once you have a clearer vision of what you want, search online for better examples and new solutions, if necessary. If you live with a significant other, share your ideas with them and don’t allow yourself to become too committed before getting buy-in from them. Contractors and sales associates will expect a unified front.

Focus on the flow

Another major factor you’ll want to consider is how your new kitchen will be used, and by whom:

  • Do you want to cook with others?
  • Do you want family and guests to gather in the space while you cook?
  • Do you want to serve meals in the kitchen?
  • Do you want to display your dishware?
  • Where would you like things stored for maximum efficiency?

Imagine yourself happily cooking and entertaining in your new kitchen, then note the key elements necessary to make those dreams a reality. Having a list of your desired kitchen features and storage needs will help ensure your plan meets your vision.

Determine your budget

According to the annual Remodeling Magazine survey of costs, a “midrange,” “minor” kitchen remodel will cost homeowners living on the West Coast about $23,000. Those same folks can expect to pay about $70,000 for a midrange “major” kitchen remodel. Determine what you can afford before you start work to ensure that your vision is within reach, or to help prioritize what’s most critical.

What to do with the cabinets

Replacing the cabinets is one of the most expensive improvements you can make in a kitchen remodel (typically consuming 20 to 40 percent of the overall budget, according to Architectural Digest).

Consider refacing instead. This can include one of the following: 1) Installing completely new cabinet doors and drawer fronts or 2) installing new wood or laminate veneer over the existing cabinet and drawer fronts or 3) simply refinishing the existing cabinet and drawer fronts.
Shopping for contractors

The contractor you choose will determine much of the cost, the pace of your project, the amount of disruption, the final results, and your level of satisfaction. So be thorough in your search:

  • Ask friends and family for referrals and advice.
  • Interview at least three of the leading prospects in-person.
  • Ask to see samples of past work.
  • Look for someone who complements your operating style (similar personality and communication style).
  • Once you’ve narrowed your choice to one or two, ask to speak with a few past clients.

You’ll be tempted to latch onto the first contractor who gets rave reviews from a friend or family member. But remember: You and your project are unique, and it’s worth the time and effort to be rigorous in your search.

Selecting appliances

If you’re planning to replace appliances, here are three factors you’ll want to consider:

Finish – Stainless steel is still the most popular option, but beware: smudges, fingerprints, water spots, and streaks will be obvious. Black stainless steel has a warmer feel and is better at hiding spots.

Extended warranty – According to Consumer Reports, extended warranties are hardly ever worth it because today’s appliances are so reliable. And if something does fail, it’s often less expensive to just pay for the repair.

Unbiased testing and reviews – Before making an appliance purchase, use the information resources available through Consumer Reports.

A final note

Moving walls and extending your home’s foundation are both very expensive options. If your kitchen plans call for these architectural renovations, perhaps you’ve outgrown your home and need something larger (with an already-improved kitchen).