Market News • Matthew Gardner • June 29, 2023

2023 Top 10 Predictions | Mid-Year Update

by Carlene Sandstrom

Windermere Chief Economist Matthew Gardner revisits his Top 10 Predictions for 2023. Reviewing his forecasts for home prices, mortgage rates, and more, he highlights recent changes in the real estate market and updates his predictions for the near future.

This video is the latest in our Monday with Matthew series with Windermere Chief Economist Matthew Gardner. Each month, he analyzes the most up-to-date U.S. housing data to keep you well-informed about what’s going on in the real estate market.

Top 10 Real Estate Market Predictions 2023 | Mid-Year Update

Hello there, I’m Windermere Real Estate’s Chief Economist Matthew Gardner and welcome to this month’s episode of Monday with Matthew. You may remember that at the end of last year, I published my Top-10 Predictions for 2023 and, as we hit the mid-year mark, some of you have been asking me how well my forecasts have been holding up. So, I thought it would be interesting to take another look at them to see how accurate they have or have not been! These were the predictions I made last November, and they covered everything from my expectations for home sales and prices to shifting government policies.

U.S. Home Sale Prices

A line graph showing the year-over-year U.S. home sale prices from May 2022 to April 2023. The YOY price change drops from 15% to below 0%, while the MOM price change oscillates between roughly 4% and -4.5%, bottoming out in July of 2022.

My first forecast suggested that sale prices would fall in 2023; however, I was not expecting any sort of systemic decline in values. Here you can see that year-over-year prices are down by a bit less than 2%, but when you look at how prices have changed month over month, they rose by 3.6% in April and are up by more than 6% since the end of last year.

I stand by my forecast that the median sale price in 2023 will be modestly lower than the 2022 number; and the monthly increase in sale prices that we have seen so far this year also supports my forecast that we are not seeing any long-term decline in home values.

2023 Mortgage Rates

A line graph showing the mortgage rates so far in 2023, peaking above 7% in late February and late May. Otherwise, they have remained between 6% and 7%.

Although mortgage rates have broken above 7% eight times so far this year—the first time because of the banking crisis, and the second because of the looming debt ceiling—I expect them to become a little less frantic as we move through the second half of the year. That said, my call for them to drop below 6% this year is now likely to be inaccurate given where they are today. I still expect them to drop into the “fives” though, but not until early next year.

Is housing inventory increasing?

A line graph showing the inventory of homes for sale in the U.S. from January 2020 to March 2023. In million, the number has gradually decreased from just above 1.5 to just above 1.0, bottoming out between January and March 2022 at below 1.0.

Listing activity saw a very modest late spring bump, but for perspective, the number of homes for sale is running at about 40% of its long-term average, and I still don’t see much growth this year. Why? Well, by my calculations, there could be over 20 million homeowners with mortgage rates around 3%. Why would they move!

Is 2023 a buyer’s or seller’s market?

A line graph showing the months of inventory for homes between 2017 and 2023, and whether that value corresponds to a seller's market, a balanced market, or a buyer's market. Most of the data points are in the seller's market range for these years, and Matthew Gardner predicts it is unlikely that we'll see a buyer's market in 2023.

And with limited inventory, the market still “technically” favors home sellers. Now, this is a little speculative because what defines a traditional “buyer’s” or “seller’s” market varies by location, but with relatively few homes on the market and the share of homes with price reductions dropping and list prices rising again, I just can’t see a buyer’s market appearing this year.

Are home prices falling?

A line graph showing U.S. median list prices for homes between January 2022 and April 2023. Prices were roughly $330,000 in January 2022, climbing to almost $400,000 during summer 2022, bottoming out at below $370,000 around January 2023, and returning to $390,000 by April 2023.

Well, this doesn’t look to be meeting my forecasts, does it! Sellers have been pretty bullish so far this year, but I would add that this is not true across the whole country. List prices are still down significantly in markets such as Hailey, Idaho; Jasper, Alabama; and Elko, Nevada, where list prices for single-family homes are down between 30 and 50% from their peak. So, I admit that the country has outperformed my forecast for list prices.

Return to Office Statistics 2023

A graph and table showing the number of U.S. employees subject to newly effective return-to-office mandates. May 2023 has the highest value at nearly 600,000 employees. Matthew Gardner predicts more employees will get clarity on these policies in 2023.

As I had expected, the pace of workers heading back to the office has not been very robust. In fact, the share of people in the office full time dropped to 42% in the second quarter of 2023, down from 49% in the first quarter, that according to The Flex Report. Meanwhile, the share of offices with hybrid work arrangements hit 30% in the quarter, up from 20% the previous quarter. But I still expect to see more workers heading back to their offices, albeit very reluctantly.

New Home Permits and Starts Have Fallen

A line graph showing the number (in thousands) of U.S. single-family new home starts from January 2021 to March 2023. The numbers have almost entirely stayed in the 800-1,200 range, peaking above 1,200 in March 2021 and certain points between November and March 2022. In March 2023, the number of starts sat at just above 800,000.

With new home permits down 21% year-over-year, and new home starts off by 28%, I think its accurate to say that activity in the new construction sector has slowed. Builders continue to be hit by high financing rates as well as high material prices.

Are U.S. home prices dropping?

A map graphic showing 2023 U.S. home sale prices relative to their 2022 highs for select cities. Johnstown, PA has the greatest difference at -39.1% and Duluth has the least at -19.6%. Overall, Matthew predicts that the markets where home prices rose the fastest in recent years will experience a downturn.

As we all know, not all markets are created equal, and this chart shows how far below their 2022 highs some of the country’s metro areas are. On the opposite end of the spectrum, there are some markets where prices have already exceeded the highs seen last year (see map below).

A map graphic showing 2023 U.S. home sale prices relative to their 2022 highs, specifically some markets where prices have already exceeded the highs seen last year: Pueblo, El Paso, Hilo, and others.

Housing Affordability 2023

A line graph showing a homeownership affordability index from January 2020 to March 2023. The affordability line sits at 100. From January 2020 to May 2021, the trend line was above 100. It consistently dipped after that until January 2023, sitting just below 80.

Affordability has not improved, mainly due to home prices that remain out of sync with incomes as well as financing costs that remain well above the level that buyers had become used to. I still believe that this will not improve in 2023.

A power point slide showing recent changes in support of zoning changes including House Bill 1110, The New York Housing Compact, Florida SB-88, and the Make Virginia Home Plan.

And finally, I told you that governments would start to move to address the significant housing shortage that the country is experiencing, and they have. As you can see, in Washington State, Governor Inslee recently signed House Bill 1110 into law which allows the development of duplex up to six-unit buildings within any area zoned for single-family-only development. Additionally, jurisdictions in a significant number of states are either pursuing legislation to tackle this problem or have at least created task forces to look at the issue. It’s a good start, but more needs to be done.

Although it’s really cheating to grade one’s own work, I think that I have been pretty accurate with my forecasts. Yes, I was too pessimistic when it came to list prices and a little optimistic regarding the direction of mortgage rates. But other than those two items, the data seems to suggest that the housing market is headed in the direction that I had suggested.

What do you think? I’d love to hear your thoughts on this subject so leave your comments below. As always, stay safe out there and I’ll see you all next month. Bye now.

To see the latest real estate market data for your area, visit our quarterly Market Updates page.

About Matthew Gardner

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.

Design • June 12, 2023

What is Victorian Architecture?

by Carlene Sandstrom

A street-level view of the Painted Ladies Victorian architecture homes at Alamo Square in San Francisco, California.

Like its namesake Queen Victoria, Victorian architecture is home design royalty. With its uniquely detailed decorations, it helped to define the style of homes in its era. These special homes still exist in large numbers today around the world, perhaps none more famous than San Francisco’s “Painted Ladies” near Alamo Square pictured above. Let’s dive into the history of Victorian architecture and some of its defining features.

What is Victorian Architecture?

Bursting onto the scene in the mid-1800s, Victorian architecture spawned several styles, creating multiple branches of the Victorian home design tree. Borrowing elements of other architectural styles of that era such as Gothic, Greek Revival, and Italianate, the highly ornate style reflected the expensive taste among the British people of the time, who were experiencing increased wealth due to the industrial Revolution. Much of the work required for building Victorian homes could be done by machine, and due to the industrial innovations of the time, the parts could be easily shipped across the country by train. Pretty soon, Victorian homes were popping up everywhere.

A street-level view of a pink Victorian architecture home with rounded windows, decorative trim, and ornate crown molding.

Image Source: Getty Images – Image Credit: LordRunar

Features of Victorian Architecture

Two to three stories
Steep, pitched roofs
High ceilings
Wood construction with detailed woodwork
Decorative trim and crown molding
Towers and turrets
Spacious porches
Recessed balconies
Iron railings
Bay windows
Stained glass

The interior of a Victorian architecture home with brown and tan antique furniture and accessories, traditional furnishings, and stained-glass windows.

Image Source: Getty Images – Image Credit: YinYang

Styles of Victorian Homes

Though there are several styles of Victorian homes, they are all multiple-story structures with steeply pitched roofs. Part dollhouse, part palace, their vintage character remains popular today. The Stick Victorian style resembles a gingerbread house with its decorative cladding and trim. The Queen Anne style is known for its asymmetry and cross-gable rooflines, while the Folk style is more symmetrical, cutting down on excessive ornamentation. As if the architecture itself wasn’t loud and eclectic enough, many Victorian homes were painted in bright colors to further differentiate their style from other homes—especially Queen Anne Victorian homes.

The Carson Mansion, a large Victorian house of American Queen Anne style Victorian architecture in Eureka, California.

The Carson Mansion in California, a classic example of Queen Anne Victorian architecture. Image Source: Getty Images – Image Credit: LordRunar

Market News • Matthew Gardner • May 30, 2023

Would the FHFA Mortgage Fee Changes Have Favored Buyers with Low Credit Scores?

by Carlene Sandstrom

The Federal Housing Finance Authority recently put a hold on raising upfront mortgage fees given pushback that suggested home buyers with good credit were being penalized. Windermere Chief Economist Matthew Gardner looks at Loan Level Price Adjustments (LLPAs) to explain why some headlines were misleading.

This video on the proposed FHFA mortgage fee changes is the latest in our Monday with Matthew series with Windermere Chief Economist Matthew Gardner. Each month, he analyzes the most up-to-date U.S. housing data to keep you well-informed about what’s going on in the real estate market.

FHFA Mortgage Fee Changes

Hello there, I’m Windermere Real Estate’s Chief Economist Matthew Gardner, and welcome to this month’s episode of Monday with Matthew. As most of you are aware, the Federal Housing Finance Authority announced that they were going to raise the upfront fees for mortgages backed by Fannie Mae and Freddie Mac, and that led to significant backlash from some suggesting that borrowers with good credit would now be paying more than borrowers with bad credit.

And as these voices grew louder, Congress stepped in with House Financial Services Committee Chair Patrick McHenry and Housing and Insurance subcommittee Chair Warren Davidson announcing a plan to repeal these fee increases if they were introduced. Well, this did not go unnoticed, and the FHFA announced on May 10^th that they were putting a hold on a new fee structure in order to engage industry stakeholders and better understand their concerns.

So, for now nothing has changed, but I still think it’s a subject worth discussing because we will see another proposal from the FHFA at some point in the future. So, what’s going on?

Well, periodically the FHFA raises the upfront fees that the Agencies charge borrowers for the purchase and refinance of mortgages that they guarantee, and these fees are called Loan Level Price Adjustments, or LLPAs.

In April of 2022, these fees went up for several types of loans including ones in expensive markets that have a higher conforming loan limit than seen nationally, and they also raised fees on second home mortgages. But to support affordable housing, the lower rates for certain programs including HomeReady, Home Possible, and HFA Advantage weren’t increased. And they didn’t raise fees for loans to first-time home buyers in high-cost areas if they earned at or below the area median income.

And the new round of fee increases that was scheduled to start in May of this year has many believing that it was just another subsidy given to households with lower credit that’s being paid for by households with better credit. But is that really an accurate statement? I don’t necessarily think so.

First off, the FHFA had to increase fees this year simply because they needed the money to cover higher capital requirements that went into effect last year, but that’s a topic for another day. For now, let’s take a look at the changes that would have been made.

Changes to LLPAs

A matrix chart showing the differences between the mortgage fee loan level price adjustments that were in place and the FHFA's proposed mortgage fee increases for credit scores ranging from 639 and 780. The matrix chart shows that seemingly, the changes do benefit those with lower credit scores. However, that is misleading.

The matrix you see here shows you the difference between the fee that was in place and the one that was proposed. Remember, this is not the actual fee itself, but the spread between the old and new pricing. And, as you can see, on face value it really does look to benefit borrowers with lower credit scores and penalize households with better credit. For example…

Changes to LLPAs: Credit Score 640 – 659

A matrix chart showing the differences between the mortgage fee loan level price adjustments that were in place and the FHFA's proposed mortgage fee increases for credit scores ranging from 639 and 780. The matrix chart shows that a household with a credit score of between 640 and 659 would see savings across all loan-to-value ranges.

A household with a credit score of between 640 and 659 would see savings across all loan-to-value ranges versus the following:

Changes to LLPAs: Credit Score 740 – 759

A matrix chart showing the differences between the mortgage fee loan level price adjustments that were in place and the FHFA's proposed mortgage fee increases for credit scores ranging from 639 and 780. The matrix chart shows that a household with a credit rating of 740 to 759 would be paying the same or more in most scenarios with fees increasing between 0.125% and three quarters of a percent.

A household with a credit rating of 740 to 759 who would be paying the same or more in all bar two scenarios with fees increasing between 0.125% and three quarters of a percent.

But is this really something to be worried about?

There are two things that stand out to me. The first is that a household putting down less than 20% has to buy private mortgage insurance. So, in reality, these households are actually less of a risk to the agencies than those who don’t, so isn’t it right that they should pay less in fees? Secondly, although I can’t disagree with anyone who states that families with lower credit will see fees go down and, generally speaking, they will go up for those with better credit, but people are confusing the CHANGE in the fee with the ACTUAL fee itself.

What I am saying is that low credit borrowers aren’t paying less than high credit borrowers. It’s just the spread in the rates between households with lower credit and those with higher credit has simply gotten smaller.

There is absolutely no scenario where someone with lower credit gets a lower fee. Let me show you.

Loan Level Pricing as of March 1, 2023

This was the new pricing schedule had it actually come into effect. Now let’s say there are two households wanting to buy houses for $500,000 and both looking to borrow 80% of the purchase price.

One buyer has a credit score of 640, so their LLPA would be 2.25% of the loan amount, or $9,000. The other buyer had a credit score of 740 so their fee would be 0.875%. That means the household with higher credit would be paying $5,500 less than the household with lower credit on a $400k loan.

No one is arguing that households with lower credit scores would have paid less in upfront fees, but I actually don’t see a problem with that. Remember, Fannie and Freddie’s mission is, in part, to facilitate access to affordable housing. Moreover, these fees don’t even apply to non-conforming or jumbo loans and they don’t impact FHA or VA loans either.

Although I certainly don’t know where the FHFA will end up regarding fee changes, they will have to do something at some point. I just hope that any modified plan is presented in a way that fully describes the situation and isn’t one that’s able to be interpreted in a manner which allows for headlines that don’t describe the full picture.

As always, I’d love to hear your thoughts on this subject but, in the meantime, stay safe out there and I’ll see you all next month. Bye now.

To see the latest housing data for your area, visit our quarterly Market Updates page.

About Matthew Gardner

Buyers • May 15, 2023

How to Pay for a House

by Carlene Sandstrom

Buying a home is, for many people, the largest financial undertaking of their lives. So, how do the numbers work? How is the price of a property converted into a transaction? Let’s take a look at how to pay for a house by focusing on some of the major components in a real estate purchase, namely the down payment, earnest money, and the mortgage payments required to successfully buy a home.

How to Pay for a House

If you have enough money available, it is possible to make an all-cash offer on a house. Most home buyers, however, save enough money to make a down payment that works for them and finance the remainder of a home purchase with a mortgage. Saving money to buy a house requires significant planning, but by being proactive, you’ll eventually put yourself in a position of higher buying power. Reducing debt, increasing savings contributions, and finding additional streams of income are all helpful ways of generating some extra cash to pay for a house.

Making a Down Payment on a Home

The down payment is a lump sum paid upfront by the buyer. The actual down payment amount varies by transaction, but it’s usually somewhere between 3% and 20% of the home’s purchase price. It’s one of the most important home buying costs, given how much planning goes into it. There’s a snowball effect with the down payment; once you figure out how much of a down payment you can afford, that will determine your home loan’s principal amount. The higher the down payment, the less risk for the mortgage lender. When buyers aren’t able to make a down payment of 20% of the purchase price, lenders will require they purchase additional mortgage insurance to protect the investment.

A closeup of two men’s hands doing paperwork at an office desk as they figure out how to pay for a house. One man points to a calculator while the other takes notes.

Image Source: Getty Images – Image Credit: Perawit Boonchu

Earnest Money and Escrow

A real estate transaction is not your typical purchase. With so much money being moved around, it requires a little extra protection. This is where escrow comes in. Escrow ensures that your earnest money or “good faith deposit” gets properly disbursed according to plan during the home buying process, and holds property tax and homeowners insurance funds during the life of your home loan.

Making Mortgage Payments

Searching for a home loan is similar to searching for a home: there are many options, but based on what’s affordable and what works for your situation, you’ll eventually find the right one. When looking at the different types of home loans, you’ll compare the loans’ terms, interest rates, and conditions for repayment. For example, 15-year and 30-year mortgages are two of the most common home loan products. You’ll have lower monthly payments with a 30-year loan, but you’ll pay more interest over the life of the loan. With a 15-year mortgage, you’ll have higher monthly payments but pay less in total interest. Work with your mortgage broker to find the best home loan for you.

Living • May 1, 2023

Your Guide to Going Solar

by Carlene Sandstrom

Two male technicians install solar panels on a roof at sunset.

To reduce your carbon footprint, increase your household’s sustainability, and add value to your property, solar power may be right for you. Understanding how solar works and how to maximize its benefits are key first steps in your journey to becoming a solar energy-producing household.

How does solar power work?

The technology that turns your house into a solar energy-harnessing hub is called photovoltaics, more commonly known as PV. PV works by fielding direct sunlight and absorbing its photons into the solar panels’ cells, which then creates electricity that provides energy for your home. This energy reduces your home’s output of carbon and other pollutants, which translates to cleaner air and water.

With the sun as your power source, the majority of the power generation occurs during the middle of the day, making summer the highest producing season. Rooftop panels work best when they are exposed to sunlight, free of shade or shadow from nearby trees or structures. Given the sun’s east-to-west path, south-facing roofs are best-suited for maximizing your solar power. To see if your roof is set up for success, consult a mapping service or solar calculator to establish your roof’s suitability. If your roof isn’t up to standard, you can explore alternatives such as ground mount solar installations and community solar gardens.

Components of Solar Power

Solar Panels: Capture the sun’s energy
Inverter: Converts the sun’s energy to a form that powers devices
Racking: The foundation that holds your solar system in place
Batteries: Store the energy generated
Charge Controller: Controls how quickly the batteries charge

A brick home with solar panels covering its steep roof.

Image Source: Getty Images – Image Credit: hansenn

What are the benefits of solar power?

Sustainability: Having a renewable source of energy coursing through your home reduces your household’s carbon footprint by converting a significant portion of your home’s energy to solar power.

Save Money: How much money you save by going solar depends largely on how much energy your household consumes and the energy output of your solar panels. The cost of solar power has steadily decreased over time, so you are more likely to save as time goes on. For information on state incentives and tax breaks, explore what options apply to your home by visiting DSIRE (Database of State Incentives for Renewables & Efficiency®).

Utilities: Whether your utility company charges a flat rate for electricity or charges variable rates throughout the day based on electricity production—i.e., higher rates in the afternoon, lower rates at night—solar power offsets the price you are charged for electricity. It becomes even more valuable during those higher-rate periods or during seasonal fluctuations in utilities costs.

Sell Solar Power Back: Homeowners can sell their solar energy back to utilities through “Net-metering” plans. When your power generation rate is greater than your household’s consumption rate, the end result on your electric bill is a net energy consumption. Refer to DSIRE for region-specific regulations and policies.

Home Value: Studies have shown that buyers are willing to pay more for homes with solar panels. The Appraisal Journal, published by the industry-leading appraisers association The Appraisal Institute, found that homes with solar PV systems increased their home value by $20 for every $1 saved on utility bills annually.

Although the right solar solution looks different for each household, what remains true across the board is that solar power creates more sustainable homes while increasing home value. Taking all this information into your solar power plans will help to improve your home’s renewable energy output and reduce your carbon footprint.

Market News • Matthew Gardner • April 27, 2023

Q1 2023 Western Washington Real Estate Market Update

by Carlene Sandstrom

The following analysis of select counties 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 Real Estate agent.

Regional Economic Overview

The pace of employment growth in Western Washington continues to slow. The region added only 90,340 new jobs over the past 12 months. That said, the annual pace of employment growth was a respectable 3.6%. Three counties have not recovered completely from their pandemic job losses: Whatcom, Skagit, and Snohomish. However they are short by just under 10,000 jobs, which should be recovered by this fall. Regionally, the unemployment rate in February was 4.1%, which was marginally above the 3.8% level of a year ago. The employment outlook has improved modestly, with the likelihood of a recession in 2023 down to about 50%. That said, I expect the pace of job growth to continue to slow as businesses remain concerned about a contraction in consumer spending, as well as facing tighter credit conditions following recent bank failures.

Western Washington Home Sales

❱ In the first quarter of the year, 10,335 homes sold. This was down 30.9% from the same period in 2022 and 18.9% lower than in the fourth quarter of 2022.

❱ Lower sales activity was more a function of the limited number of homes for sale than anything else. Listing activity in the first quarter of 2023 was down 43% from the final quarter of 2022.

❱ Home sales fell across the board compared to the same quarter of last year and were lower in every county compared to the final quarter of 2022.

❱ Pending sales rose in all but three counties compared to the fourth quarter of 2022. This suggests that sales in the second quarter of the year may tick higher. That said, the region is in dire need of more inventory.

Western Washington Home Prices

❱ Home prices fell an average of 6.9% compared to the first quarter of 2022 and were 1.3% lower than in the fourth quarter of 2022. The average home sale price in the first quarter of 2023 was $692,866.

❱ Compared to the fourth quarter of 2022, prices were higher in Kitsap, Skagit, Lewis, San Juan, and Whatcom counties.

❱ Even though prices fell in the region, five counties saw sale prices rise very modestly from the first quarter of 2023.

❱ It’s worth noting that median listing prices rose in all but two markets compared to the previous quarter. This suggests that sellers are getting a little more comfortable with the market. If listing prices continue to rise, one can surmise that home prices will follow suit.

A map showing the real estate home prices percentage changes for various counties in Western Washington. Different colors correspond to different tiers of percentage change. Grays Harbor and Snohomish Counties have a percentage change in the -12.7% to -9.5% range, Clallam, Jefferson, Island, and King counties are in the -9.4% to -6.2% change range, Whatcom, Mason, Thurston, and Pierce are in the -2.8% to 0.4% change range, and Lewis, San Juan, and Skagit counties are in the 0.5%+ change range.

Mortgage Rates

Rates in the first quarter of 2023 were far less volatile than last year, even with the brief but significant impact of early March’s banking crisis. It appears that buyers are jumping in when rates dip, which was the case in mid-January and again in early February.

Even with the March Consumer Price Index report showing inflation slowing, I still expect the Federal Reserve to raise short-term rates one more time following their May meeting before pausing rate increases. This should be the catalyst that allows mortgage rates to start trending lower at a more consistent pace than we have seen so far this year. My current forecast is that rates will continue to move lower with occasional spikes, and that they will hold below 6% in the second half of this year.

A bar graph showing the mortgage rates from Q1 2021 to the present, as well as Matthew Gardner's forecasted mortgage rates through Q1 2024. After the 6.79% figure in Q4 2022 and 6.37% in Q1 2023, he forecasts mortgage rates dipping to 6.26% in Q2 2023, 5.78% in Q3 2023, 5.43% in Q4 2023, and 5.28% in Q1 2024.

Western Washington Days on Market

❱ It took an average of 56 days for a home to sell in the first quarter of this year. This was 32 more days than in the same quarter of 2022 and 16 days more than in the fourth quarter of last year.

❱ King County remains the tightest market in Western Washington, with homes taking an average of 41 days to sell. Homes in San Juan County took the longest time to sell.

❱ Market time rose in all counties contained in this report compared to the same period in 2022 and compared to the fourth quarter.

❱ The greatest increase in market time compared to a year ago was in Grays Harbor County, where it took an average of 41 more days for homes to sell. Grays Harbor County also saw the greatest increase in market time compared to the final quarter of 2022 (from 46 to 76 days).

A bar graph showing the average days on market for homes in various counties in Western Washington for Q1 2023. King County has the lowest DOM at 41, followed by Snohomish at 42, Kitsap at 46, Pierce and Island at 49, Thurston at 50, Jefferson and Skagit at 51, Whatcom at 54, Mason at 57, Clallam at 66, Lewis at 68, Grays Harbor at 76, and San Juan at 89.

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.

Although the regional economy is still expanding, it continues to show signs of slowing. With the probability of a national recession this year now fifty-fifty, I do not see any reason for buyers to lose confidence in their housing decisions based purely on economic factors. Sellers appear to be a little more confident in the market as demonstrated by rising listing prices. Periods of lower mortgage rates and the lack of homes for sale are both likely contributors to this. Whatever the case may be, I am not seeing any signs of panic in the market.

A speedometer graph indicating a balanced market, leaning toward a seller's market in Western Washington in Q1 2023.

Even in the face of higher financing costs, low inventory levels support home values, and the data suggests that the worst of the price declines are now behind us. The region had fewer sales, modestly lower prices, and higher average days on market, all of which favor home buyers. However, lower inventory levels, higher pending sales, higher listing prices, and a higher absorption rate of homes that are for sale favor sellers. As such, I am moving the needle towards a balanced market, but one that ever so slightly favors sellers.

About Matthew Gardner

Matthew Gardner - Chief Economist for Windermere Real Estate

Market News • Matthew Gardner • April 25, 2023

Mortgage Rate Predictions and Misconceptions

by Carlene Sandstrom

The Federal Reserve Bank of New York just released their 2023 Housing Survey, which shows how the U.S. population feels about the housing market. Windermere Chief Economist Matthew Gardner digs into the mortgage rate predictions, showing how demographics played a role in the results.

This video on mortgage rate predictions is the latest in our Monday with Matthew series with Windermere Chief Economist Matthew Gardner. Each month, he analyzes the most up-to-date U.S. housing data to keep you well-informed about what’s going on in the real estate market.

Mortgage Rate Predictions

Hello there! I’m Windermere Real Estate’s Chief Economist Matthew Gardner. This month we’re going to take a look at the latest SCE Housing Survey, which gives us a really detailed look at consumers’ psyche in regard to the housing market.

I’ve always been fascinated by surveys, as they frequently give me insights that I simply don’t get from just looking at raw data and, as luck would have it, the New York Fed just released its 2023 Consumer Expectations Housing Survey. Now, this particular survey has always given me some great and often surprising insights as to how the U.S. population views the overall housing market. We certainly don’t have time to cover all of the questions that the survey poses, but there was one section I wanted to share with you today as it really resonated with me, and it relates to mortgage rates.

Will mortgage rates continue to rise?

A double line graph showing mortgage rate predictions. Specifically, it shows the average interest rates for 30-year fixed-rate mortgages from 2014 to 2023 and ends with the predicted values by U.S. households as captured in the Federal Reserve Bank of New York in their 2023 Housing Survey. People think the rate will be 8.8% three years from now and 8.4% one year from now.

The first question asked was where they expected mortgage rates to be one year from now. And as you see here that, on average, households expected rates to rise all the way up to 8.4%. Although some may see this as extreme, you can see that in the 2022 survey respondents predicted rates would hit 6.7%, almost exactly where they were at the beginning of this March.

And when asked where they thought rates would be three years from now, on average, households expected to see them climb to 8.8%. Now, that’s a rate we haven’t seen since early 1995!

Well, I’m not sure about you, but I was very surprised by these results as they counter just about every analyst’s expectation regarding where rates will be over the next few years. In fact, myself and every economist I know believes that rates will slowly pull back as we move through this year. I haven’t seen a single forecast suggesting that mortgage rates will rise to a level this country hasn’t seen in decades.

But as they say, the devil’s in the details. When I dug deeper into the numbers, it became very clear to me that demographics played a pretty big part in guiding people’s answers. Let me explain.

1-Year Mortgage Rate Expectations by Education

Here the data is broken down by educational achievement. You can see that survey respondents who didn’t have a college degree thought that mortgage rates would rise to 9.4% within a year. But college graduates were far more optimistic, and they expected rates to be in the high 6’s.

3-Year Mortgage Rate Expectations by Education

And when asked to look three years out, respondents without degrees expected rates to break above 10%. While college graduates saw them pulling back a little from their one-year expectations of 6.7%, down to 6.4%.

Now we are going to look at the survey results broken down by housing tenure.

1-Year Mortgage Rate Expectations by Tenure

And here you see that renters expect mortgage rates to be at almost 11% within a year. And homeowners also saw them rising, but only up to 7.3%.

3-Year Mortgage Rate Expectations by Tenure

And over the next three years, renters expected rates to break above 12%. That’s a level not seen since the fall of 1985. But homeowners expected to see rates at a somewhat more modest 7.4%.

So, what does this tell us? I see two things.

Firstly, the rapid increase in mortgage rates that we all saw starting in early 2022 has a lot of people believing that we will see rates continuing to rise, sometimes at a very fast pace, over the next few years. I mean, if it happened before, why can’t it happen again? And this mindset leads me to my second point, which is that it’s very clear that a lot of would-be home buyers just don’t understand how mortgage rates are calculated.

The bottom line here is that I see a potential buyer pool out there that needs educating and that can give an opportunity to brokers to discuss how rates are set and where the market is expecting to see them going forward.

This may alleviate the concerns that many households have who may be thinking that they will never be able to afford to buy a home because of where they expect borrowing costs to be in the future. Education is everything, don’t you agree?

As always, I’d love to get your thoughts on this topic so please comment below! Until next month, take care and I will see you all soon. Bye now.

To see the latest housing data for your area, visit our quarterly Market Updates page.

About Matthew Gardner

Living • April 17, 2023

How to Declutter Before Selling Your Home

by Carlene Sandstrom

A woman starts to declutter before selling her home. She is organizing items in the living room. She holds a small pile of winter clothing and prepares to place it in a box labeled “donation” on the floor.

To sell your home for the best price, it needs to be in pristine condition. You’ll work with your agent to identify high-ROI remodeling projects and various ways to improve the property, but all that is a moot point if you don’t declutter before selling your home. Here are some helpful tips to get started.

Declutter Before Selling Your Home

Getting your home cleaned up and organized is a precursor to capturing appealing listing photos and having successful open houses. You’ll be opening your doors to crowds of interested buyers, and it’s essential that your home feels like a place they want to live. Decluttering will also get you prepared for home staging, whether you’re hiring a professional or staging your home DIY. All these preparatory measures work together to make your home as appealing as possible to a wide pool of buyers.

Decluttering also helps to kickstart the transition of moving out. Homeowners are attached to their homes, and the selling process can bring a lot of those emotions to the surface. By going through your home room by room, sorting through your possessions and paring them down, you’re simultaneously beginning to process the life changes in your near future. Plus, by getting an early jump on organizing your home, it will make moving day a whole lot easier.

For buyers, space equals opportunity, so a tidy, uncluttered home allows them to fill it with their imagination. As such, it’s crucial that buyers see decluttered, spacious areas when they walk into your home or browse through listing photos online.

A young Caucasian woman starts to declutter before selling her home. She places books into a box labeled “donation books” in her home office.

Image Source: Getty Images – Image Credit: miodrag ignjatovic

How to Declutter Your Home

Take a deep breath; your decluttering doesn’t have to get done all in one sitting. Tackle your home room by room, taking stock of items as you go. The tried-and-true home organization method of keeping boxes labeled “donate,” “keep,” and “throw away” applies here. Separating items by their destinations will help you reduce piles of clutter in no time.

To properly declutter before selling, consider your moving timeline. Between your discussions with your agent and your preparations for your next home, moving day can go from a seemingly distant point in the future to tomorrow in a hurry. Planning a yard sale can help to give yourself a specific deadline by which you need to have finished giving the house a clean sweep.

Emphasize tidiness in small and narrow areas such as hallways, closets, and storage rooms and consider hanging mirrors to make these areas feel less cramped. These little tricks of the trade can help to give the impression that even the spatially limited areas of your home feel bigger. Scrub, wash, and dust the house top to bottom, even the commonly missed cleaning spots. A home that’s sparkling clean is more welcoming to buyers.

Let’s talk about additional preparations that will put your home in the best position to sell. I know what buyers in the area are looking for, so lean on me for advice as you get ready to hit the market.

Design • April 3, 2023

What Is a Tudor Style House?

by Carlene Sandstrom

The front façade of a brown and white English Tudor house with interlocking gabled roofs with brick accents and an attached brick ADU with a separate entrance. The home is surrounded by healthy green shrubbery and has a small water fountain in the middle of the stone-paved driveway.

One look at a Tudor style house and you’re instantly transported to the English countryside. This distinct architecture dates back hundreds of years, borrowing elements of Renaissance and Gothic design, and later experienced a revival in the United States that continued to grow in popularity through the mid-twentieth century. Similar to cottage homes, their medieval imagery evokes a storybook charm, and their unique combination of materials makes for a truly signature look.

A profile shot of a brown and white English Tudor style house with a thatched roof and a tall chimney. The siding is made up of half-timbering wood patterns and brick accents. The garden surrounding the home is in full bloom, producing lettuce and spices.

Image Source: Getty Images – Image Credit: oversnap

Features of Tudor Style Houses

Known for their brown-and-white color scheme, Tudor style houses are typically built from stone or bricks, with a façade of stucco and exposed timbering framing. The framing creates straight lines that connect each level of the home, giving it a sense of geometry. Their steep-pitched, intersecting gabled roofs are tailor-made for climates that experience high levels of precipitation; snow slides off before accumulating, and rainwater has a natural path to the gutter system.

The interior of a brown and white English Tudor style house with exposed wood ceiling beams. The furniture is soft Victorian-style, and the accent pieces are dark mahogany wood.

Image Source: Getty Images – Image Credit: IPGGutenbergUKLtd

From the outside of a Tudor home, you can imagine sitting around the hearth under exposed wood ceiling beams, taking in the cozy atmosphere as the fireplace crackles. And your imagination would be spot on! A large fireplace is a central feature of these homes, given that they were the primary heating source for households early on in their history. Arched entryways with stonework accents, decorative chimneys, and narrow, closely grouped windows are also defining features of Tudor architecture.

The front façade of a brown and white Tudor style house with interlocking gabled roofs, brick accents, a tall chimney, several windows, and a decorative front entrance with stone masonry framing the doorway. There are several shrubs and a hedge in the front yard garden beds.

Image Source: Getty Images – Image Credit: peterspiro

Once World War II-era housing development began to shift toward addressing suburban sprawl affordably, the masonry-heavy Tudor style house became less popular. However, they are still found throughout the U.S. today.

Market News • Matthew Gardner • March 28, 2023

Will Rising Foreclosures Impact the Housing Market?

by Carlene Sandstrom

How will rising foreclosures impact the U.S. housing market? To give his answer, Windermere Chief Economist Matthew Gardner sheds light on the latest foreclosure data and shows how prepared home buyers are to manage their mortgage debt today compared to the 2000s.

This video on foreclosures is the latest in our Monday with Matthew series with Windermere Chief Economist Matthew Gardner. Each month, he analyzes the most up-to-date U.S. housing data to keep you well-informed about what’s going on in the real estate market.

Rising U.S. Foreclosures

The market has certainly shifted since mortgage rates started skyrocketing last year and, with prices pulling back across much of the country, some have started to become concerned about the likelihood of foreclosures rising—clearly a timely topic given current circumstances.

Hello there! I’m Windermere Real Estate’s Chief Economist Matthew Gardner and for this month’s episode of Monday with Matthew, I pulled the latest data on foreclosure starts and looked and the quality of mortgages that have been given to buyers in order to give you a clear idea of how foreclosures will impact the overall housing market.

For the purposes of this exercise, I’m going to concentrate on foreclosure starts rather than foreclosure filings because data shows us that a majority of homeowners where a foreclosure filing has been submitted to a court by their lender are able to avoid it by refinancing or selling the home, which makes total sense as over 93% of owners in the U.S. have positive equity.

U.S. Foreclosures: Starts 2007-2022

A bar graph showing U.S. foreclosures starts from 2007 to 2022. The numbers spiked in 2009 at over 2 million foreclosure starts and gradually decreased every year until 2022, where the numbers increased from 2021. Though they were 181% higher in 2022 than in 2021, it’s important to note that foreclosure starts in 2022 were 31% lower than 2019 and 88% lower than the 2009 peak.

As you can see here, foreclosure starts rose significantly last year. In fact, they were 181% higher than in 2021. But if we zoom out, it’s important to note that foreclosure starts were 31% lower than 2019 and 88% lower than the 2009 peak.

Am I surprised at the increase in foreclosure starts? Not really. The forbearance program was put in place at the start of the pandemic, and it allowed homeowners to temporarily stop making mortgage payments and not be foreclosed on, but that program ended 18 months ago.

And, although a vast majority of the 4.7 million households who entered the program have left it and sold or refinanced their homes, there were always going to be some who were not able to, and this has led to the overall foreclosure activity rising. Let’s take a closer look.

U.S. Foreclosures in 2022

A map showing foreclosures starts for each state in the U.S. California, Texas, and Florida have the highest number of foreclosure starts inn 2022. California had 27,541, Florida had 24,190, and Texas had 23,151.

This is a heat map of foreclosure starts by state. And you can see that California, Florida, and Texas saw the highest numbers in 2022. But remember that these are the states that have the greatest number of homes with mortgages so, statistically, we would expect the total number of homes in foreclosure in those states would be higher than the rest of the country. That said, foreclosure starts were significantly higher in Florida, California, Texas, and New York than they were in 2019, the last “pre-COVID” year and before the forbearance program started.

And when we look more myopically, metro areas including New York/New Jersey, Washington DC, the Delaware Valley, Atlanta, Miami, Baltimore, and Dallas all saw total foreclosure starts rise well above what they were in 2019. This may suggest that there are some markets that could see foreclosure activity rise to a level that could materially impact housing in those locations.

But looking at the country as a whole, there are other factors leading me to believe that we will not see the number of homes entering foreclosure rising above the long-term average, and certainly not sufficient to have a material impact on U.S. housing prices.

Let me show you what’s happening on the mortgage side of things. First: credit quality.

Median FICO Scores for New Mortgages 2003-2022

A line graph showing the median FICO scores for new mortgages from Q1 2003 through Q3 2022. The median FICO score generally decreased from 2003 to the low of 707 during 2007, then gradually increased throughout the years 2008-2022. The median FICO score inn Q3 2022 was 766.

The median FICO score for new mortgages was 766 in the 4^th quarter of 2022. Yes, this is down from the peak seen in early 2021 when it was a whopping 788 but as shown here, it’s far higher than we saw before the housing crisis. Buyers over the past several years had very good credit and, given the tight labor market, we are certainly in a very different place than back before the housing bubble burst.

Mortgage Debt Payments Percentages 2007-2022

A line graph showing mortgage debt payments as a percentage of disposable personal income for home buyers from Q1 2007 through Q3 2022. In 2007, mortgage debt payments were around 7% of disposable personal income, in Q3 2022 it was 3.99%. Between those two points in time, the percentage gradually and consistently decreased.

Secondly, buyers are using larger down payments than in the mid-2000’s, and with the historically low mortgage rates that we saw during the first two years of the pandemic benefitting new buyers as well as allowing existing homeowners to refinance, the share of disposable income that is used to cover mortgage payments remains very low. This basically means that owners aren’t as burdened by their house payments as they were in 2007-2009. And finally…

Equity Rich Households Q4 2022

A map showing the percentage of equity rich households for each state in Q4 2022. The highest values are Vermont at 76.6%, Florida at roughly 62%, and California at 61.5%.

With the significant run-up in housing values that we have seen over the past few years, 48% of all homeowners with a mortgage have more than 50% equity. Although this share has pulled back a little as mortgage rates rose and values pulled back, it’s still a massive amount of money and, as I mentioned earlier, many homeowners who are faced with foreclosure will end up selling their homes as they still have positive equity rather than go through the foreclosure process.

So, my answer to those of you wondering if we will see foreclosures rise to a level that could impact the overall housing market is “no.”

I don’t see any reason to believe that distressed sales will hurt the market in general, but I will say that there are some local markets where distressed sales could rise to levels that could act as a headwind to price growth in these areas. As always, I’d love to get your thoughts on this topic so please comment below! Until next month, take care and I will see you all soon. Bye now.

To see the latest housing data for your area, visit our quarterly Market Updates page.