The following analysis of the Eastern 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.
The Washington State economy continues to add jobs at an above-average rate, though the pace of growth is starting to slow as the business cycle matures. Over the past 12 months, the state added 96,600 new jobs, representing an annual growth rate of 2.9%—well above the national rate of 1.7%. Private sector employment gains continue to be quite strong, increasing at an annual rate of 3.6%. Public sector employment was down 0.3%. The strongest growth sectors were Real Estate Brokerage and Leasing (+11.4%), Employment Services (+10.3%), and Residential Construction (+10.2%). During fourth quarter, the state’s unemployment rate was 4.3%, down from 4.7% a year ago.
Eastern Washington added 4,984 jobs over the past 12 months, representing an annual growth rate of 1.1%. Although the region added jobs at a fairly healthy clip, the unemployment rate matched that seen a year ago at 5%.
HOME SALES ACTIVITY
Home sales throughout Eastern Washington slowed in the final quarter of the year, with total sales down 8.7% over the same quarter in 2017 to 3,211 units.
Sales rose fastest in the small Lincoln County area, which increased by a significant 42.1%. For perspective, that translates to only eight additional sales. Walla Walla County was again a laggard, with a drop of 21.8%. But it, too, is a small market that can be prone to significant swings.
Year-over-year, home sales rose in just two counties, with the balance of the market seeing some fairly significant drops.
Interestingly, the number of homes for sale dropped by 15.2% from the fourth quarter of 2017. Many Pacific Northwest markets saw significant increases in inventory levels last fall, but that was not the case in Eastern Washington. That said, I anticipate we will see more homes for sale as we move into the spring selling season.
Year-over-year, the average home price in Eastern Washington rose 9.5% to $264,231. However, price growth slowed somewhat between third and fourth quarter, reporting a 2.6% drop in the average sales price.
Low inventory in the region continues to be a significant hurdle to many home buyers. I had hoped more homes would come onto the market in the fall, but that was not the case. The spring market should provide more choice for buyers.
All the counties in this report saw prices rise compared to the fourth quarter of 2017. Whitman County took over the number one spot, with an annual price increase of 28.9%.
The takeaway here is that home-price growth has cooled a little but remains well above the long-term average.
DAYS ON MARKET
The average time it took to sell a home in Eastern Washington in the fourth quarter of 2018 was 63 days.
The average amount of time it took to sell a home in Eastern Washington dropped nine days compared to the fourth quarter of 2017.
Every county other that Lincoln (+2days) saw the time it took to sell a home drop compared to the same quarter in 2017.
Notably, it took 17 more days to sell a home in the fourth quarter than it did in the third quarter of last year, but I attribute that to seasonality.
The 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 number of homes for sale dropped off in recent months and housing markets throughout Eastern Washington remain very tight. The overall trend continues to favor home sellers, so I am moving the needle slightly more in their favor.
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 Governor’s 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.
RPG's Real Estate Market Trends Summary – Q1-2016 Newsletter
After a sky-rocketing surge in sales activity stats nationwide to end Q4-2015 last December, existing-home sales activity tumbled in Q1-2016, particularly in many of the hottest markets. Hit by continuing low supply levels and unrelenting price growth the National Association of Realtors (NAR) reported that all four major regions experienced sales declines in February. Then in March home sales nationwide only rose by an annual rate of 1.0%, the smallest increase in sixteen months, even while new listings grew 6.8% compared to last year. The strongest regions remain the South and the West, the Northeast is the weakest.
NAR chief economist, Lawrence Yun, stated that overall sales took a considerable step back in most of the country in February and March, particularly in the Northeast and Midwest. There were extraneous factors weighing on the decline, such as an extremely early Easter holiday. "The lull in contract signings in January from the large East Coast blizzard, along with the slump in the stock market, may have played a role in February's lack of closings. However, the main issue continues to be a supply and affordability problem. Finding the right property at an affordable price is burdening many potential buyers," Yun said. There are other economists who would agree with Yun’s observation that there is an increasing difficulty for buyers faced with declining suitable inventory. Redfin chief economist, Nela Richardson sums it up colorfully; “No matter how high homebuyer demand is, it takes two to tango, and many sellers are sitting (2016) out.” Take San Francisco, Seattle, Portland, OR and Minneapolis as examples – all are seeing sales activity rates falling for the first time in almost 2 years as a direct result of significant inventory declines. San Francisco’s situation may be a bellwether for the rest of the nation, too, as its home prices are falling for the first time in four years. The median sale price had averaged 15% appreciation in 2015, fell 1.8% year over year, while the number of sales plummeted over 22%. Nationally, the median sale price rose 4.7 percent year over year by the close of Q1-2016, about the same rate as in the February data, but below the 12-month average of 6.1 percent appreciation. The average sale-to-list price ratio climbed to 92.9 percent, the highest level since 2009. Overall inventory nationwide fell year over year by 3.2 percent, the 14th consecutive month of declines despite the 6.8 percent increase in new listings.
Interest rates fell for much of Q1-2016: The 30-year, conventional, fixed-rate mortgage rate declined from 3.87 percent in January to 3.66 percent in February and below 3.6 at the beginning of Q2-2016. Rates are very likely to stay at or near these historically low figures for all of 2016, putting added pressure on home price increases in the most affordable markets even as sales activity declines.
The Spokane regional data story is consistent with the rest of the country. The average regional MLS sales price in March was $204,562 compared to $182,265 for March last year and compared to $265,200 for the national average. This local increase in average sales price was 12.2%, notably stronger than the national average, due in large part to Spokane’s relative affordability for investors and upwardly mobile buyers moving in with home sale proceeds from high-equity markets on the coast. The median sales price for March was $187,500, an increase of 10.4% over March 2015 when the median sales price was $169,900. March 2016 closed sales of single family homes on less than one acre including condominiums totaled 495. Last year’s March closed sales data for the same type of properties totaled nearly the exact number at 497 Q1-2016 sales totaled 1,186 compared to 1,166, for last year through Q1-2015, an increase of only 1.7%. The average sales price for Q1-2016 is $199,378 compared to $182,181 last year, an increase of 9.4%. The median price through Q1-2016 is $182,500 compared to $167,950 last year Q1-2015, up 8.7%.
The national story of limited inventory is playing out regionally as well. Spokane and North Idaho inventory continues to be tight. Inventory in the Spokane MLS as of this report totaled 1,752 properties compared to 2,162 last year at the same time. Inventory is down 19%. New construction sales reported to the Spokane MLS are up 18.7% through Q1-2016, with 165 sales compared to 139 for Q1-2015.
National Association of Realtors, Spokane Association of Realtors, Coeur d'Alene Association of Realtors and Redfin all contributed source material for this report.
RPG's January 2016 Newsletter
Solid, modest gains during 2015 – That’s the kind of year we’ve experienced in the Spokane and North Idaho markets for 2015. Overall, the data was not as flashy, nor as headlines-grabbing as the bigger, hotter markets across the nation, or Washington state for that matter. Still, our market definitely saw positive appreciation – and we’ll take it, thank you very much! Those of you who have lived in the area for a long time may know the following from experience: when it comes to trends in real estate and the economy, compared to the top metropolitan markets and even national averages, the Inland Northwest has historically been a lagging market with statistically flatter highs and shallower lows. That said, the bleeding of local home values from the 2008 to 2013 crash was still very painful. Although overall, the average mean home value in the region fell only about 20% from the peak, some sectors of the local market fell much farther. Many high-end residential properties lost close to half their peak value.
Autopsy on “The Crash” – How bad was it here in the Inland Northwest compared to other markets? The general rule locally was the lower the peak value, the lower the percent of loss that those property owners saw. How does our -17% to -22% average decline in value for our regional MLS markets, peak to trough, compare to the best and worst performers nationwide? The NAR data was bleak for many markets; here’s a sampling: Las Vegas, NV: -58.2%; Riverside, CA (where the collapse is reported to have first appeared) -50.5%; Sacramento, CA -48.3%; Orlando, FL -47.6%; Phoenix, AZ -47.1%; West Palm Beach, FL -45.7%; Detroit, MI -44.6%; Chicago, IL -42%; the nationwide average came in at -33.8%; Seattle, WA -34%; Providence, RI -32%; San Francisco, CA -27%. Best performers in the subprime-driven downturn were Raleigh, NC -10.3%; Columbus, OH -10.8%; and Nashville, TN -11.8% where valuations started out relatively low to begin with. I am happy to confirm that the market decline story on display in the above data is at long last officially over and done with here and across the nation. Seattle in fact has just recently exceeded its peak 2007 valuation in aggregate, with increasing numbers of industry professionals expressing concern about another bubble forming across the Seattle metro markets.
A little recent history – Technically, our region’s housing market bottomed much later than the earliest markets to turn around, hitting its lowest point in March 2013. The local market then started to claw its way into recovery, had a slight flattening again in mid 2014, but since, we are at 15 months and counting of steady gradually rising prices and climbing sales activity rates. This pattern promises to continue into 2016, but only if several external forces do not weigh it down too much. I’ll go into further detail on this shortly.
The local data – As for the regional data highlights, the 2015 sales numbers are the best we’ve seen since 2007, with total sales up 17% over last year, and average sales price is up to $197,593 in the SAR-MLS, which is an increase of 6.1% and up 7.8% in the CAR-MLS to $201,663 in our north Idaho neighborhoods. The median price is up 7.1% to $179,900 from $168,000 at the end of December last year. Zillow estimates are slightly lower as they tend to lag in appreciating market periods. Inventory continues to be low, down about 20% from end of last year. New construction sales are consistent with the rest of our local market, although at an average higher valuation, with 9.7% more units sold this year. New construction options in our region are very popular since much of our existing housing stock is generally older, marginally updated and characterized by an excess of disfavored or obsolete floor plans, like – split levels, by far the least popular floor plan out there; 50s ranchers and brick bungalows with very small bedrooms, no master baths and single car garages; chopped up multi-levels; and older houses with none of the open and vaulted interior space now popular with the majority of buyers. Unfortunately, many older neighborhoods in our market suffer from an oversupply of undersized homes that are unlikely candidates for realistic remodeling objectives or budgets when return on investment (ROI) analyses are considered – as they always should be. So, locally, new construction has done quite well since the market began to recover and has experienced a very good 2015, with increasing numbers of customs and presales, and many builders selling their specs well before completion.
The national data – Nationally, existing-home sales rose about 15 percent in December alone, according to the National Association of Realtors (NAR) and was the largest monthly increase the NAR has ever seen, placing 2015 in total number of homes sold at the highest level since 2006. There was a slight increase in the percentage of first-time homebuyers from 29% to 30%. Also notable was the average age of a first-time homebuyer rising to 33, the highest average age since data began being collected. Mainly for economic reasons, millennials are waiting longer to buy their first home. The national median existing-home price increased 7.6 percent to $224,100 in 2015. The hottest real estate markets nationwide include the largest tech-center metros – SF-Bay-San Jose area, Denver, Dallas, Austin, Seattle and nearly all of the other urban California SMSAs – all regions with very strong recovery in their labor markets. Foreclosures, short sales and REOs nationally and locally are now at their lowest levels since the market bottom.
General forecast for this year – So what’s in store for 2016? The NAR's chief economist, Lawrence Yun, has a cautious national outlook for the upcoming year. He and others have indicated that none of the nation’s markets will hit a sudden wall or fall off precipitously, but many will struggle in 2016 to keep pace with last year's rate of sales. Zillow economists’ forecasts are similar. The external forces these experts cite as positive influences are – low interest rates; improving household income growth for millennials, who now represent the largest demographic in the workforce. Negatives are – low existing-home supplies (depresses sales activity, discourages buyers entering the market); diminishing affordability in the hottest markets; slowing economic growth and rapidly falling demand for homes in oil-&-gas-producing regions. These are the main factors they see affecting national home sales data for 2016.
Inland Northwest forecast – Locally, we should continue our characteristic delayed and moderated version of the national trends. This means we are set to stay on a likely course for another year of slow, steady appreciation; lower than average inventory; shorter than average days on market and gradually improving demand as interest rates remain at near -record lows and new residential and commercial construction continues to complement the fundamental economic drivers in our regional economy – low utility costs, agricultural exports, natural resource industries, tourism, government spending (Fairchild, WSU, Eastern, regulatory offices, law enforcement, etc.), professional services and health care.
What are the long-term prospects? – If you are enthusiastic about local economic growth and development, then an argument can be made (no bets on timing) that the long-view, big-picture news for the Inland Northwest is very promising. We are a geographically attractive region centered upon a small city and outlying towns with high marks for affordability, desirability and quality of life, but low marks for job opportunities. Small livable urban hubs not integrated into any already over-priced, large, sprawling, commuter-based metropolitan area are increasingly cited as places people report they would prefer to live and work. If the trend proves true, we fit into an emerging development paradigm that will have a long-term net positive growth story for the Spokane-Coeur d’Alene economy and real estate markets. What we are lacking so far is the prerequisite expansion of our labor markets with an emphasis on higher paying tech-related jobs in industries organic to our region – aeronautical design and manufacturing, software, alternative energy, mining, agriculture & timber products, higher education and health care. Educational training for such positions is critical and the hard work of community leaders in creating and expanding such local opportunities in the University District is a testament to the dedication our region has to innovating our way into the new economics of the 21st Century.
Anecdotal considerations – Finally, when we consider the experts’ factors weighing on the real estate economy in general, three important considerations stand out that could prove beneficial to Eastern Washington-Northern Idaho – First, continued low interest rates with gradually loosening credit criteria encourages buyers, especially first-timers. Second, rapidly declining affordability in California, Colorado’s Front Range cities, and the northwest metros of Seattle and Portland eventually creates a spillover of out-migration into our area, as seen in past real estate booms. Third, the collapsing oil-patch job market in eastern Montana and North Dakota is a new source of physical labor for our region. Although at the risk of sounding counterintuitive, both of these last two factors have silver-linings already contributing to growth in our region. Anecdotal evidence that merits mention – some of the laid-off Bakken fields construction labor force is now helping fill the demand for positions in our region’s improving construction industry. Also worth noting is the impressive growth in better-quality restaurants in our area over the last decade which has been fueled by food industry entrepreneurs leaving high-rent, soaring-overhead, big cities like Seattle, San Francisco and New York, looking for affordability and quality of life in a place receptive to their top-shelf culinary skills. I believe this migration of talented chefs and restaurateurs into our community is just a bellwether precursor and will have its analog in other sectors of the local economy as the region grows. While mentioning such long-term trends, it should also be noted that the unfolding chronic, compounding water crises in California and Nevada will eventually drive increasing migration into our region as well.
In closing – These are just a few thoughts on the current conditions and future prospects influencing the eastern Washington and northern Idaho real estate markets. In future newsletters I will be delving into further details about the developments and trends emerging in our economy and what it means to those of us living in this uniquely positioned and beautiful place I’m happy to call home. Whether you are a homeowner, renter or investor, a first-time homebuyer or an empty-nester couple looking to downsize, real estate is such an important part of all of our lives, that we all need to be as well-informed as possible on the matter. That's why I aim to always keep you abreast of the most important news and insider info about this fascinating industry as best I can. Please do not hesitate to call me with questions about any of your real estate needs, or just to chat. I’m only an email, text or phone call away.