The Growing Housing Affordability Problem


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. 


 

 


Hello there, I’m Windermere’s Chief Economist Matthew Gardner and welcome to this month’s episode of Monday with Matthew.

If you’ve listened to me at all over the past several years, you’ll know that I am pretty passionate about one subject: housing affordability. And, given the significant price growth that we’ve seen over the past decade, as well as the recent spike in mortgage rates, I wanted to talk a little bit about what might be done to address this very serious issue.

The Growing Housing Affordability Problem

Now, when we think about housing affordability and how it might be solved, a lot of people get tied up in the minutiae when, quite frankly, it really isn’t that hard a problem to solve. You see, there’s one very simple way to address this: to build more housing units. But, as easy as that may sound, there are a lot of obstacles that are holding new supply back. But before I get to that, I want to share some data with you that might help to demonstrate how serious an issue we all face.

Every quarter, the National Association of Homebuilders puts out its affordability numbers for metro areas across the country. An analysis of sales and incomes allows them to show the number of homes—both new and existing—sold in a quarter that were affordable to households making median income.

Housing is Increasingly Unaffordable

Here you will see numbers from just a few of the 240 metropolitan areas across the country and the share of sales in the first quarter of this year that were “technically” affordable. I think you’ll agree that it’s eye opening.

 

Although I am only showing you a few of the U.S. markets I will tell you that the ten least affordable US housing markets were all in California. The Golden State is also home to 21 of the top 25 least affordable markets in the country. But what you might also find interesting is that our primary cities aren’t the only ones that are suffering from affordability issues, with markets like Bend, Oregon; Boise, Idaho; and even Las Vegas, Nevada becoming increasingly unaffordable for a lot of households.

And it’s worth mentioning that that 48 of the 69 markets where less than half of the homes sold were affordable were in states that have at some point in the past implemented comprehensive planning and growth management legislation. And when governments mandate where homes can and cannot be built, one thing happens: it pushes land prices higher which makes new homes more expensive and limits the amount of new supply that builders are able to provide. So, what can be done?

Well, I will start out by saying that states who have implemented growth management plans, which they generally did to slow or stop suburban sprawl, remain disinclined to move these boundaries, and that means it becomes paramount to not look further out but to concentrate within the urban growth boundaries and decide whether it’s time to think about removing single-family zoning altogether.

This is a fascinating thought, but I must add that I am not suggesting that we do away with single-family homes. Absolutely not! What I am thinking about is the ability for a market to decide what makes the most sense. In order to do so, single-family zones need to allow for the development of denser housing, but also allow the market to decide what’s best. Areas that have implemented such change has given rise to a movement in order to address what is being referred to as “missing middle housing.” For those of you who are unfamiliar with this term let me try and explain.

Missing Middle Housing

A depiction of different housing types from Optico Design Inc. that illuminates the "missing middle" housing types that were common prior to World War II but are now far less common and, therefore, "missing". The housing types in the "missing middle" include duplexes, fourplexes, courtyard buildings, cottage corts, townhouses, medium-sized multiplexers, stacked triplexes, and live-work buildings. The housing types outside of the "missing middle" include detached single-family houses and mid-rise apartment buildings.

 

This is a great image courtesy of Opticos, a team of urban designers, architects, and strategists who are passionate about adding sorely needed housing options.

They came up with the term “missing middle” as it describes housing types that were actually very common prior to World War II where duplexes, row-homes, and courtyard apartments were in high demand. Unfortunately, however, they are now far less common and, therefore, “missing.”

And the key function of this type of housing is to meet the rising demand for walkable neighborhoods, respond to changing demographics, and provide housing at different price points. You see, rather than focusing on the number of units in a structure—think high rise apartments or condominiums—this type of housing emphasizes scale and heights that are appropriate for and sympathetic to single-family or transitional neighborhoods.

The Decline of Missing Middle Housing Construction

A bar chart showing the number of duplexes to 8-unit buildings built over roughly the past half-century dating back to 1974. The years 1974 through 2021 appear on the x-axis and the number of completed units built appears in thousands on the y-axis, ranging from 0 to 300. On the z-axis, the chart shows what percentage of total new homes completed the y-axis values for that year accounted for. The z-axis ranges from 0% to 18%. The highest values in the chart are 1974 and 1984, when roughly 250,000 units were completed, which was roughly 15% of the total new homes completed that year. The chart gradually declines from the mid-1980s to present day. Since 2007, there hasn't been a single year where over 50,000 units were completed.

 

And to show you how supply of these types of units has changed, this chart shows the number of duplexes to eight-unit buildings built over the past almost half-century and you can clearly see that up until the late 1980s they were being built in decent numbers, but the 1990s saw a significant shift toward traditional single-family home ownership and builders followed the demand and this type of product started to become scarcer.

Almost 16% of total new homes built in America in the early 1980s were of this style, but that number has now shrunk to just 1.4%—or a paltry 19,000 units.

But I see demand for these housing types growing as we move forward and that buyers or renters, young and old, will be attracted as it will meet their requirements not only in regards to the type of home they would want to live in but, more importantly, it can be built cheaper than traditional single-family housing and therefore it will be more affordable.

But although this sounds like it’s a remarkably simple solution that can solve all our woes, in reality it’s not that easy for two very specific reasons. The first is that many markets are already essentially built out, meaning that in order to develop this type of product, a builder would have to purchase a number of existing homes and raze them in order to rebuild. But given current home values, it’s very hard for a builder to be able to make such a proposal financially.

And the second issue is that current residents within these “transition” areas—which have been developed as traditional single-family neighborhood—simply don’t want to see change. But is this type of product bad? Here are some examples.

This shows row-homes in Brooklyn on the left and traditional “triple-deckers” in Massachusetts on the right:

A side-by-side look at two different types of East Coast building types: the horizontal Brooklyn Row-Homes and the more vertically constructed Massachusetts "Triple Deckers."

 

This is a bungalow court project in California:

 

An interconnected building of California "Bungalow Courts" with low-pitched roofs and small porches, all connected by a winding sidewalk.

 

Here are some Live/Work Units in Colorado:

 

A white live/work unit in Buena Vista, Colorado with a second-story patio built onto the right side of the building.

 

These are some amazing mews homes in Utah:

 

A community of Mews Homes in South Jordan, Utah painted white with arched windows and small eaves hanging above the doorsteps.

 

And finally, a new terrace housing project that will be built in Washington DC:

 

A drawing of Terrace Housing in Washington DC showing facades with many windows lined side-by-side on a city street.

 

Don’t get me wrong, I’m sure that some of you who simply aren’t inspired by this type of architecture, and that is understandable. But can we simply stick with the status-quo? I don’t think so. And some state legislators have already implemented significant zoning amendments in order to try and encourage this type of development.

Back in 2018, Minneapolis was the first city to allow this type of development inside single-family zoned areas. This was followed by Oregon State in 2019. Senate Bill 9 was signed by Governor Newsom of California last year which made it legal for property owners to subdivide lots into two parcels and turn single-family homes into duplexes, effectively legalizing fourplexes on land previously reserved for single-family homes. So, we are starting to see some change.

This is a good start but as I mentioned earlier in areas that are already built out, even this type of forward-thinking legislation will not be the panacea that some want. But I’m not giving up hope.

Addressing the “missing middle housing” would allow for homes of all shapes and sizes, for people of all incomes including workers who are essential to our economy and community. Here I am talking about our teachers, firefighters, administrative assistants, childcare providers, and nurses—just to name a few!

There are currently 45 million Americans aged between 25 and 34 and most aspire to homeownership. However, the massive price growth which, by the way, many of us have benefitted from over the past several years, has simply put a “starter home” out of their reach.

I will leave you with one last statistic. Over 28% of American households today are made up of a single people living alone, and it is anticipated that up to 85% of all U.S. households will not include children by the year 2025. Finally, by 2030, one in five Americans will be over the age of 65.

Are we going to meet the needs of the country’s changing demographic going forward? I certainly hope so, but it will take a lot of work for us to get there. As always, if you have any questions or comments about this particular topic, please do reach out to me but, in the meantime, stay safe out there and I look forward to visiting with you all again next month.

Bye now.

The post The Growing Housing Affordability Problem appeared first on Windermere Real Estate.

Moving Patterns for U.S. Homeowners and Renters in 2021


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. 


 


Hello there. I’m Windermere Real Estate’s Chief Economist Matthew Gardner and welcome to the latest episode of Monday with Matthew. Over the past few months, analysts like myself have been starting to get our hands on early numbers from the Census Bureau and, although we won’t get the bulk of the data for another several months, I thought it would be interesting to take a quick look at some of the information that the government has put out specifically as it relates to patterns.

This is a relevant topic given the pandemic, with many people wondering if we saw a mass shift in where we choose to live because of COVID-19. This belief that we packed up and moved because of the pandemic is, at face value, quite credible, especially given that home sales in 2021 were at levels we haven’t seen since 2006. But the reality, at least from the data we have received so far, actually tells a different story.

Moving Patterns for U.S. Homeowners and Renters in 2021

We Move More Infrequently

 

This first chart looks at people and not households and it shows that, contrary to popular belief,  we’re actually moving less frequently now then we have done in decades, with the share of people not moving in a single year rising from just about 84% to over 91½%. Of course, we are having fewer children now than we did, but not to the degree that would change the trend.

Unsurprisingly, Renters Move More Often than Owners

Two charts showing that on average, renters move more often than owners in the span of years between 2000 and 2021. Over this stretch of time, the percentage of renters staying put rose from 67.5% to 84%, while homeowners staying put rose from 90.9% to 95.1%.

 

And when we break this down between homeowners and renters there is quite the discrepancy between the two groups. Although the number of renters not moving has risen from 67½ percent up to 84% since 2000, the number of homeowners staying put has moved from almost 91% all the way up to 95% last year.

So, the data thus far is not suggesting that we saw any form of mass exodus following the pandemic, in fact we haven’t been moving as much for the past 2-decades, but people did move since COVID-19 hit and the reasons they did were fascinating. The following charts are broken up into four categories of movers: those who moved for family reasons; those who moved for employment related reasons; those that moved for housing related reasons; and finally, those that moved for other reasons.

Reasons to Move (1)

A chart showing the reasons why owners and renters moved. Moving due to a change in marital status was virtually the same, while more renters moved for things like getting a new job and moving closer to work. More owners moved due to retirement and because they lost their job.

 

So, starting with family-related reasons, it was not surprising to see the major reason for both owners and renters to move was to establish a new household, nor was it surprising to see a greater share of renters headed out on their own than homeowners. Finally, the share of those moving because of a change in marital status was essentially the same between renters and homeowners. And when we look at employment related reasons for people moving last year, a greater share of renters moved because of a new job than homeowners, and more renters moved to be closer to their workplaces than did homeowners. Again, not really surprising, given that a large share of renters work in service-based industries and therefore proximity to their workplaces is important. You will also see that a greater share of homeowners than renters moved because they lost their jobs and, finally—and not at all surprisingly—far more homeowners moved because they chose to retire than renters.

Reasons to Move (2)

A graph showing the housing-related reasons to move for both owners and renters. Noticeable differences include that more renters moved to find cheaper housing and to attend or leave college, while more owners moved for change of climate and health reasons.

 

And when we look at housing related reasons that people moved, a large share of owners and renters moved from their current home or apartment and into a new, bigger, better house or apartment. A statistically significant share looked to move into a better neighborhood, and I do wonder whether owners were doing this because of the ability to work from home and possibly move to a better location further away from their workplaces. And even though renters tend to stay closer to their workplaces, I wonder whether these renters weren’t in white-collar industries and that the ability to work from home has led them to move into an area that they perceive to be better suited to them.

And finally, a significant share of renters moved because of the fact that rents have been skyrocketing over the past 18-months or so. This clearly impacted some homeowners, too. And finally, under the “other” category, more renters than owners moved because they were either entering or exiting a relationship with a domestic partner, and more renters left to either go to college or because they had completed their degrees.

Health-related reasons for moving had a significant impact on homeowners over renters, and I found it particularly interesting to see a lot of owners saying that “climate” was a reason for their move. Of course, I can only hypothesize as to whether people are simply looking to move to warmer climates or whether climate change is starting to have an increasingly large influence on where we choose to live. My gut tells me that climate change is becoming a far more important consideration for homeowners, although we can’t deny that a lot of people, specifically on the East Coast, moved South during the pandemic.

These next few charts break down movers not just by whether they our owners or renters but also by ethnicity.

2021 Mobility by Ethnicity & Tenure: Owners vs Renters Movers and Non-Movers

Six pie charts showing the non-moving and moving percentages for 2021 among populations of White, Black, and Asian owners (95.1%, 95.6%, and 95.7% respectively for non-movers and 4.9%, 4.4%, and 4.3% respectively for movers) and White, Black, and Asian renters (83.7%, 85.3%, and 84.9% for non-movers respectively, and 16.3%, 14.7%, and 15.1% for movers respectively.)

 

Here you can see that homeowners across these three ethnicities were pretty much uniform in their desire to stay in their existing home with only 4 to 5% moving. And renters who, as we have already seen, did move more frequently last year than homeowners, were also in a very tight range at between 83 and 85%.

2021 Mobility by Ethnicity & Tenure: Owners vs Renters Movers and Non-Movers (2)

Six pie charts showing the non-moving and moving percentages for 2021 among populations of Hispanic, Mixed (White & Other), and Mixed (Black & Other) owners (94.8%, 95%, and 94.9% respectively for non-movers and 5.2%, 5%, and 5.1% respectively for movers) and Hispanic, Mixed (White & Other), and Mixed (Black & Other) renters (87.7%, 83.6%, and 85.2% for non-movers respectively, and 12.3%, 16.4%, and 14.8% for movers respectively.)

 

And the same can be said about Hispanic owners and mixed race families, with about 95% not moving last year. Now this is modestly lower than White, Black, or Asian households, but the difference is very marginal. As for renters, between 83 and almost 88% of them within these three ethnicities moved last year, but you will see a bigger share of Hispanic renters stayed put as opposed to all the other ethnicities shown here.

2021 Mobility by Ethnicity & Tenure: Moves In & Out of State

Six pie charts showing the percentages of staying in state vs moving out of state for 2021 among populations of White, Black, and Asian owners (82.1%, 81.8%, and 75.2% respectively for those who stayed in state and 17.9%, 18.2%, and 24.8% respectively for out-of-state movers) and White, Black, and Asian renters (82.6%, 81.4%, and 74.1% for those who stayed in state respectively, and 17.4%, 18.6%, and 25.9% for out-of-state movers respectively.)

 

Looking closer now at those who did move, even though fewer Asian households moved when compared to all other ethnicities, far more left the state than stayed, and the same was true for Asian renters with over a quarter moving out of state.

2021 Mobility by Ethnicity & Tenure: Moves In & Out of State (2)

Six pie charts showing the percentages of staying in state vs moving out of state for 2021 among populations of Hispanic, Mixed (White & Other), and Mixed (Black & Other) owners (86.6%, 81.9%, and 80.9% respectively for those who stayed in state and 13.4%, 18.1%, and 19.1% respectively for out-of-state movers) and Hispanic, Mixed (White & Other), and Mixed (Black & Other) renters (83.6%, 82.4%, and 81.1% for those who stayed in state respectively, and 16.4%, 17.6%, and 18.9% for out-of-state movers respectively.)

 

Again, a greater share of the Hispanic homeowners who did move last year stayed in the state where their old house was, and the share of mixed households was roughly at the average for all ethnicities. And the share of Hispanic and mixed-race renters who stayed in State was also about average.

What I see from the data is that the huge shift that many expected during COVID has not been affirmed—at least not by the numbers we have looked at. That said, we are sure to see numerous revisions because of the issues that COVID 19 has posed on Census takers, so we may get a different story as more data is released and revisions posted. What I found to be most interesting in the numbers we have looked at was the massive increase in renters moving in with their “significant others.” But I am not surprised, given that there are around 48½ million people aged between 20 and 30, and this is their time!

And I was also interested in the share of the population who moved due to climate. I will be doing some more digging around in the darkest recesses of the Census Bureau website to see if I can find out more about this. Although I can’t confirm it, my gut tells me that climate—and specifically climate change—will be a factor of growing importance when people are thinking about where they want to live.

And there you have it. As always, if you have any questions or comments about this particular topic, please do reach out to me but, in the meantime, stay safe out there and I look forward to visiting with you all again next month.

Bye now.

The post Moving Patterns for U.S. Homeowners and Renters in 2021 appeared first on Windermere Real Estate.

Q1 2022 Northern California Real Estate Market Update

The following analysis of select counties of the Northern California 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

Northern California added 60,900 jobs in the first quarter of 2022, and 213,300 jobs have returned over the past year. With total employment now at 3.02 million, the markets covered by this report have recovered all but 24,800 of the 473,900 jobs lost during the pandemic. With solid growth in the region, the unemployment rate fell from 3.6% at the end of 2021 to 3.1% in March of this year. By county, the lowest jobless rate was in Santa Clara County (2.5%), and the highest rates were in Solano and Shasta counties, where 4.6% of the workforce remains unemployed. The region’s labor force grew in the quarter but remains below pre-pandemic levels. This is likely to mean that businesses will continue to find it hard to attract new employees, which could slow the pace of growth going forward. That said, I feel confident that all the jobs lost to COVID-19 will have been recovered by the spring.

Northern California Home Sales

In the first quarter of the year, 10,347 homes sold, which is a drop of 12.4% compared to a year ago. Sales were 27.2% lower than in the fourth quarter of 2021.

Year over year, sales fell in all counties contained in this report. Solano County saw a modest drop, but there were fairly significant decreases across the rest of the region.

With listing activity rising 17% compared to the fourth quarter of 2021, the drop in sales was a little surprising.

Pending home sales ticked up from the final quarter of 2021, suggesting that we may see some growth in sales in the second quarter of this year.

Northern California Home Prices

Even with sales pulling back, the average home price in the region rose an impressive 17.2% year over year to $1.215 million. Compared to the final quarter of 2021, home prices rose 4%.

The most affordable county relative to average prices continued to be Shasta. Santa Clara was again the most expensive market.

Prices rose by double digits in all counties other than Napa compared to a year ago. Prices were also higher everywhere but Napa County compared to the fourth quarter of 2021.

Rising prices continue to impact affordability in the region and the significant jump in mortgage rates in the first quarter will not help matters. Any effects of rising rates on prices were not evident in the first quarter, but the second quarter should be more telling.

A map showing the year-over-year real estate market percentage changes in various counties in Northern California for Q1 2022.

A bar graph showing the annual change in home sale prices for various counties in Northern California from Q1 2021 to Q1 2022.

Mortgage Rates

Average rates for a 30-year conforming mortgage were 3.11% at the end of 2021, but since then have jumped over 1.5%—the largest increase since 1987. The surge in rates is because the market is anticipating a seven- to eight-point increase from the Federal Reserve later this year.

Because the mortgage market has priced this into the rates they are offering today, my forecast suggests that we are getting close to a ceiling in rates, and it is my belief that they will rise modestly in the second quarter before stabilizing for the balance of the year.

A bar graph showing the average rates for a 30-year conforming mortgage, plus Matthew Gardner's mortgage rate forecasts for Q2 2022 through Q1 2023.

Northern California Days on Market

The average time it took to sell a home in the Northern California counties in this report dropped seven days compared to the first quarter of 2021.

The amount of time it took to sell a home dropped in every county other than Solano (+1 day) compared to a year ago. Days on market fell everywhere except Shasta, Placer, and San Luis Obispo compared to the fourth quarter of 2021.

In the first quarter, it took an average of 33 days to sell a home, which matched the fourth quarter of 2021.

The greatest drop in market time from a year ago was in Napa County, where it took 14 fewer days to sell a home.

A bar graph showing the average days on market for homes in various counties in Northern California during Q1 2022.

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 jump in home prices compared to the prior quarter may be a surprise to some given the rapid increase in mortgage rates. However, when rates rise, there is typically a lag in time before we know the impact on the market. The increase in the number of homes for sale means there is more choice for buyers which, combined with higher financing costs, should start to taper the pace of price appreciation as we move into the spring buying season. Affordability continues to be a concern, but the market does not appear to be overly affected thus far. Average listing prices in most counties are increasing, which suggests that sellers remain confident for the time being.

A speedometer graph indicating a seller's market in Northern California during Q1 2022.

Although prices continue to increase at a significant pace, the growth in listing activity combined with lower sales may suggest that the market may be starting to slow from the frenetic pace of the past few years. With all the data here, I have moved the needle a little towards home buyers, although it clearly remains a seller’s market.

About Matthew Gardner

Matthew Gardner - Chief Economist for Windermere Real Estate

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.

The post Q1 2022 Northern California Real Estate Market Update appeared first on Windermere Real Estate.

Q1 2022 Nevada Real Estate Market Update

The following analysis of select counties of the greater Las Vegas 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

Jobs continue to return to the Las Vegas market and the area has now recovered all but 13,100 of the 287,000 jobs that were lost during the pandemic. With almost 10,000 jobs added per month over the past year, I am hopeful that the area will return to preCOVID employment levels by spring. With rising employment, the jobless rate continues to drop. The latest data shows an unemployment rate of 5.3%, which is well below the pandemic-induced rate of 31.1%. If there is cause for concern, it is that the labor force remains at pre-pandemic levels. If employers are unable to find qualified workers, the pace of the job recovery may start to slow. As the country moves toward “post-COVID” life, I expect that leisure travel will continue to increase, which would be very good for a hospitality-driven market such as Las Vegas. This will certainly aid in the overall economic recovery in the region.

Nevada Home Sales

A total of 9,122 homes sold in the first quarter of the year—a drop of 7.3% compared to the same period a year ago. Sales were 10.8% lower than in the fourth quarter of 2021.

Sales rose in three of the neighborhoods contained in this report but dropped in all other areas compared to the first quarter of 2021. Compared to the previous quarter, all neighborhoods saw fewer sales.

Supply constraints persist, which is limiting sales. The average number of homes for sale was down 20% year over year and down an even more substantial 31% compared to the final quarter of 2021.

Pending sales, which are an indicator of future closings, increased 1.6% compared to the prior quarter, suggesting that closings in the second quarter of 2022 may show very slight improvement from the current numbers.

Nevada Home Prices

Home prices rose 23% from a year ago to an average of $485,820 and were 5.8% higher than in the fourth quarter of 2021.

I consider listing prices to be a leading indicator for shifts in the market. That they continue to trend higher suggests that sellers remain very confident that the market will be able to accommodate the higher financing costs buyers are facing.

Prices rose by double digits in all but two neighborhoods compared to the same quarter last year and rose in all markets other than Aliante compared to the fourth quarter of 2021.

The data suggests that rising mortgage rates have not impacted the market yet, but there is normally a lag between rising rates and any effect on prices or demand. The market clearly has more buyers than sellers, but it will be interesting to see if prices continue to rise at their current pace in the face of higher financing costs.

A map showing the year-over-year real estate market percentage changes in various areas of Greater Las Vegas, Nevada for Q1 2022.

A bar graph showing the annual change in home sale prices for various areas of Greater Las Vegas, Nevada from Q1 2021 to Q1 2022.

Mortgage Rates

Average rates for a 30-year conforming mortgage were 3.11% at the end of 2021, but since then have jumped over 1.5%—the largest increase since 1987. The surge in rates is because the market is anticipating a seven- to eight-point increase from the Federal Reserve later this year.

Because the mortgage market has priced this into the rates they are offering today, my forecast suggests that we are getting close to a ceiling in rates, and it is my belief that they will rise modestly in the second quarter before stabilizing for the balance of the year.

A bar graph showing the average rates for a 30-year conforming mortgage, plus Matthew Gardner's mortgage rate forecasts for Q2 2022 through Q1 2023.

Nevada Days on Market

The average time it took to sell a home in the region dropped 16 days compared to the first quarter of 2021.

It took an average of 23 days to sell a home in the quarter, which matched the average market time in the fourth quarter of 2021.

Days-on-market dropped across the board compared to a year ago, but rose in Aliante, The Lakes/Section 10, Southeast and Southwest Las Vegas, Spring Valley, and Northeast Las Vegas compared to the prior quarter.

The greatest drop in market time was in The Lakes/ Section 10 neighborhood, where the length of time it took to sell a home fell 33 days compared to a year ago.

A bar graph showing the average days on market for homes in various areas of Greater Las Vegas, Nevada during Q1 2022.

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 local economy appears to be picking up momentum, which typically translates into demand for housing. As mentioned earlier, if there are impacts to sales or prices from rising mortgage rates, we will likely see signs of this in the next two quarters. With supply levels as low as they are, rising financing costs may not slow the market significantly. Housing affordability continues to fall as price growth rises. This, combined with higher mortgage rates, should temper the market, though it hasn’t yet. It might seem intuitive to move the needle a little toward home buyers, but the numbers don’t justify it.

A speedometer graph indicating a seller's market in Greater Las Vegas, Nevada during Q1 2022.

All things considered, I have left the needle in the same position as the last quarter. There are too many uncertainties that preclude me from moving it one way or another. Hopefully the spring will provide more clarity.

About Matthew Gardner

Matthew Gardner - Chief Economist for Windermere Real Estate

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.

The post Q1 2022 Nevada Real Estate Market Update appeared first on Windermere Real Estate.

Q1 2022 Utah Real Estate Market Update

The following analysis of select counties of the Utah 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 Utah economy continues to impress, with total employment up 3.8% year over year. Of greater significance: current employment levels are now 78,600 higher than the pre-pandemic peak. The counties covered by this report added almost over 48,400 new jobs over the past year, representing a growth rate of 3.7%. Thanks to the state’s robust economy, the unemployment rate dropped to 2%, which is the lowest level recorded since the Labor Department started keeping records in 1976. Moreover, this remarkably low level of unemployment comes while the labor force rose above the 1.7 million mark—a level never before seen.

Utah Home Sales

In the first quarter of 2022, 6,493 homes were sold, which is a drop of 7.5% year over year. There were 29.1% fewer sales than in the fourth quarter of 2021.

Year over year, sales rose in four of the seven counties contained in this report, but fell in the balance of the region.

Inventory levels remain well below the average, which is clearly limiting sales. The number of homes for sale was down 30.9% from the previous quarter, and down 5.6% from the same period a year ago.

Pending sales, which are an indicator of future closings, fell 9.2% from the final quarter of 2021, suggesting that second quarter closings may remain below average.

Utah Home Prices

With more demand than supply, it wasn’t surprising that home prices picked up. Year over year, prices rose 19.5% to an average of $639,131. Prices were 6.1% higher than in the fourth quarter of 2021.

Compared to the final quarter of last year, prices rose in all counties other than Morgan, with Summit County jumping more than 20%.

All areas contained in the report except for Morgan County saw prices increase by double digits. The pullback in Morgan County is not a concern given that it is a very small market.

Mortgage rates increased in the first quarter but, as there is normally a lag between rising financing costs and their impact on sales or prices, it’s too early to tell if the market will experience any slowing. We will have a better idea in the second quarter report.

A map showing the year-over-year real estate market percentage changes in various counties in Utah for Q1 2022.

A bar graph showing the annual change in home sale prices for various counties in Utah from Q1 2021 to Q1 2022.

Mortgage Rates

Average rates for a 30-year conforming mortgage were 3.11% at the end of 2021, but since then have jumped over 1.5%—the largest increase since 1987. The surge in rates is because the market is anticipating a seven- to eight-point increase from the Federal Reserve later this year.

Because the mortgage market has priced this into the rates they are offering today, my forecast suggests that we are getting close to a ceiling in rates, and it is my belief that they will rise modestly in the second quarter before stabilizing for the balance of the year.

A bar graph showing the average rates for a 30-year conforming mortgage, plus Matthew Gardner's mortgage rate forecasts for Q2 2022 through Q1 2023.

Utah Days on Market

The average time it took to sell a home in the counties covered by this report dropped eight days compared to the first quarter of 2021.

Homes again sold fastest in Davis County, and market time dropped in all but three counties compared to a year ago. The greatest decline in market time was in Summit County, where it took 31 fewer days to sell a home.

During first quarter, it took an average of 24 days to sell a home in the region. Market time fell year over year. It also took 4 fewer days for a home to sell than in the final quarter of last year.

With days on market dropping across the board compared to the prior quarter, it’s clear that there is significant demand for the few homes that are available.

A bar graph showing the average days on market for homes in various counties in Utah during Q1 2022.

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.

In last quarter’s Gardner Report, I suggested that home prices would continue to rise in 2022 but at a modestly slower pace than in 2021. Although it would be easy to assume that the jump in mortgage rates will cause price growth to slow more significantly, I am not sure whether that will be the case. As tight as the labor market is, rising incomes will likely offset most of the potential pain from higher mortgage payments. The region clearly heavily favors sellers, and I don’t expect this to change this year. While the full impact of rising mortgage rates has yet to be felt, I don’t believe it will be overly burdensome for buyers.

A speedometer graph indicating a seller's market in Utah during Q1 2022.

Given all of this, I have left the needle in the same position as last quarter. Though the data points to another very solid year for housing, I am waiting for the spring figures to determine if rising mortgage rates will cause any slowing to this supply-starved market.

About Matthew Gardner

Matthew Gardner - Chief Economist for Windermere Real Estate

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.

The post Q1 2022 Utah Real Estate Market Update appeared first on Windermere Real Estate.

Q1 2022 Idaho Real Estate Market Update

The following analysis of select counties of the Idaho 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

Employment in Idaho rose 3.2% over the past 12 months and the latest data shows the number of jobs is 38,300 higher than the pre-pandemic peak. This is particularly notable as there are only nine other states that have exceeded their pre-Covid employment levels. The state unemployment rate was only 2.7%, down from 3.1% at the end of 2021, and lower than the March 2021 rate of 3.9%. There was a very modest decline in total employment between February and March of this year, but I do not see this as being an issue. The labor force continues to grow, and my current forecast calls for employment to rise 3% in 2022.

Idaho Home Sales

In the first quarter of 2022, 5,183 homes sold, representing an increase of 4.2% compared to a year ago but 24.7% lower than in the fourth quarter of 2021.

Quarter over quarter, sales fell in every county covered by this report.

Sales fell in all the northern counties contained in this report compared to a year ago, but this was offset by rising sales in more than half of the counties in Southern Idaho.

Pending sales were 2.7% lower than in the fourth quarter of 2021, but this is more than likely a function of inventory levels, which were down 28.4% from the last quarter. Supply is still very tight.

Idaho Home Prices

The average home price in the region rose 18.6% year over year to $612,558 and was 3.1% higher than in the fourth quarter of 2021.

Compared to the final quarter of 2021, prices were higher in Kootenai and Shoshone counties in the north. All counties in the southern part of the state saw sale prices increase from the prior quarter.

Prices rose by double digits in all the northern counties contained in this report, and all but Boise County saw similar robust price appreciation in the southern part of the state. In total, prices rose 17.2% in the Northern Idaho counties and 19.5% in the southern counties.

The market appears to have either shrugged off the significant increase in mortgage rates in the first quarter, or the impact has yet to be felt.

A map showing the year-over-year real estate market percentage changes in various counties in Idaho for Q1 2022.

A bar graph showing the annual change in home sale prices for various counties in Idaho from Q1 2021 to Q1 2022.

Mortgage Rates

Average rates for a 30-year conforming mortgage were 3.11% at the end of 2021, but since then have jumped over 1.5%—the largest increase since 1987. The surge in rates is because the market is anticipating a seven- to eight-point increase from the Federal Reserve later this year.

Because the mortgage market has priced this into the rates they are offering today, my forecast suggests that we are getting close to a ceiling in rates, and it is my belief that they will rise modestly in the second quarter before stabilizing for the balance of the year.

A bar graph showing the average rates for a 30-year conforming mortgage, plus Matthew Gardner's mortgage rate forecasts for Q2 2022 through Q1 2023.

Idaho Days on Market

It took an average of 80 days to sell a home in Northern Idaho, and 53 days in the southern part of the state covered by this report.

The average number of days it took to sell a home in the region dropped ten days compared to a year ago but rose eight days compared to the fourth quarter of 2021.

In Northern Idaho, days-on-market dropped in all counties from a year ago, and market time dropped or remained static in every county other than Bonner compared to the previous quarter. In Southern Idaho, average market time fell in all counties other than Canyon, Gem, and Ada compared to a year ago but rose across the board compared to the prior quarter.

Homes sold the fastest in Ada County in the southern part of the state, and in Shoshone County in Northern Idaho.

A bar graph showing the average days on market for homes in various counties in Idaho during Q1 2022.

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 strong Idaho economy has helped the housing market continue its upward trajectory. We should see more homes come on the market as we move into the spring selling season, but this is unlikely to be sufficient to meet demand. The question remains whether rising mortgage rates will impact the pace of appreciation that home prices have experienced in recent years. The data suggests that it has yet to be a factor, but we will have to wait and see what the spring market shows us.

A speedometer graph indicating a seller's market in Idaho during Q1 2022.

Given all these factors, I have decided to leave the needle in the same position as the previous quarter. It remains a strong seller’s market, but listing prices are softening somewhat in certain areas, which may be a pre-cursor to a slowdown in price appreciation.

About Matthew Gardner

Matthew Gardner - Chief Economist for Windermere Real Estate

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.

The post Q1 2022 Idaho Real Estate Market Update appeared first on Windermere Real Estate.

Q1 2022 Montana Real Estate Market Update

The following analysis of select counties of the Montana 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

At the end of the first quarter, 505,200 people were employed in the state, which is up 17,400 from a year ago and 16,100 more than the pre-pandemic peak. Regionally, job levels in Billings and Missoula were also above pre-COVID-19 rates. Great Falls is only 200 jobs shy of matching its February 2020 level. Given the solid pace of job growth in the state, it’s not surprising that the unemployment rate is at a very low 2.3%. This is the lowest rate Montana has seen since the Labor Department started keeping records in 1976. In the metro areas contained in this report, the lowest jobless rate was in Billings at 2.4%, followed by Great Falls at 2.5%, and Missoula at 2.7%. Revisions by the labor department showed an economy that is doing better than originally thought. The only cause for concern is that the labor force has not been increasing at a pace that can keep up with the needs of employers, as demonstrated by the very low jobless rate. This will likely lead wages to rise significantly to attract more workers.

Montana Home Sales

In the first quarter of the year, 1,137 homes sold, which is a 35% drop from a year ago and 23.2% lower than in the final quarter of 2021.

The lower number of sales can be blamed on the lack of homes for sale: inventory was down 37.7% from a year ago and was 31.7% lower than the previous quarter.

The small county of Jefferson saw sales increase from a year ago, but all other markets pulled back. Compared to the final quarter of 2021, sales were lower across the board.

Pending sales increased by a solid 18.8% quarter over quarter, suggesting that second quarter numbers should show growth.

Montana Home Prices

Home prices rose a modest 3.1% year over year to an average of $815,938 and were 13.1% higher than in the final quarter of 2021.

Compared to the fourth quarter of 2021, prices were split: there were increases in Ravalli, Lewis and Clark, Lake, Jefferson, and Gallatin counties, but prices fell in the remaining market areas.

Although the tepid increase in prices may surprise some readers, it uses weighted averages which account for market size. If we use simple averages, prices in the region rose by a more significant 14.5% year over year.

There is a lag between mortgage rates rising and any impact on home prices. Thus far, higher financing costs have not had much of an effect on the market, but data from the second quarter of this year should give us a better idea as to whether the increase in rates is enough to dampen the market significantly.

A map showing the year-over-year real estate market percentage changes in various counties in Montana for Q1 2022.

A bar graph showing the annual change in home sale prices for various counties in Montana from Q1 2021 to Q1 2022.

Mortgage Rates

Average rates for a 30-year conforming mortgage were 3.11% at the end of 2021, but since then have jumped over 1.5%—the largest increase since 1987. The surge in rates is because the market is anticipating a seven- to eight-point increase from the Federal Reserve later this year.

Because the mortgage market has priced this into the rates they are offering today, my forecast suggests that we are getting close to a ceiling in rates, and it is my belief that they will rise modestly in the second quarter before stabilizing for the balance of the year.

A bar graph showing the average rates for a 30-year conforming mortgage, plus Matthew Gardner's mortgage rate forecasts for Q2 2022 through Q1 2023.

Montana Days on Market

The average time it took to sell a home dropped 15 days compared to the first quarter of 2021.

Homes sold fastest in Gallatin County and slowest in Madison County. Missoula, Ravalli, Lake, Lewis and Clark, Broadwater, and Gallatin counties saw market time drop. The length of time it took for homes to sell rose in the rest of the counties contained in this report.

During the first quarter, it took an average of 68 days to sell a home in the region.

Average market time across the region rose one day compared to the fourth quarter of 2021, but was lower in Missoula, Lake, Broadwater, and Jefferson counties.

A bar graph showing the average days on market for homes in various counties in Montana during Q1 2022.

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.

Full employment and a growing economy tend to encourage home buyers, but rising financing costs are a cause for concern. Furthermore, we have yet to see whether the increase in mortgage rates will have a dampening effect on price growth, especially if more homes come on the market.

A speedometer graph indicating a seller's market in Montana during Q1 2022.

With this level of uncertainty, I have left the needle in the same position as the previous quarter. The data shows that an inflection point may have been reached, as indicated by slowing home-price growth and lower sales, but the impact of mortgage rates is not clear at this time. We should have a better picture of the market as we move through the spring. That said, it firmly remains a seller’s market.

About Matthew Gardner

Matthew Gardner - Chief Economist for Windermere Real Estate

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.

The post Q1 2022 Montana Real Estate Market Update appeared first on Windermere Real Estate.

Q1 2022 Central Washington Real Estate Market Update

The following analysis of select counties of the Central 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

Central Washington employment rose 6% year over year. However, with the significant revisions to 2021 employment levels the state made, total employment is down 3,778 jobs from the pre-pandemic peak. The jobs shortfalls are primarily in Kittitas and Yakima counties, with far smaller shortfalls in Okanogan and Chelan counties. Douglas County is the only market where employment levels are higher than the pre-pandemic peak. Unadjusted unemployment levels in Central Washington were 7.6%. When adjusted for seasonality, they were 5.9%. The county with the lowest unemployment rate was Chelan at 4.8%; the highest was Yakima, where 6.5% of the labor force was still without work. I expect that the region will be back to pre-pandemic employment levels by this summer.

Central Washington Home Sales

Sales in Central Washington rose 6.8% compared to a year ago, with a total of 1,022 homes sold. Sales fell 36.1% compared to the final quarter of 2021, but it is likely that seasonal factors impacted the number.

The drop in sales compared to fourth quarter of 2021 suggests that closings in second quarter of this year will remain tepid.

Compared to a year ago, sales rose in Okanogan, Yakima, and Kittitas counties, but fell in Chelan and Douglas counties. Sales fell across the board compared to the final quarter of last year.

Even though inventory levels rose 4% year over year, there were 33.5% fewer listings in the first quarter than in the prior quarter. This is creating frustrating conditions for buyers who have seen financing costs increase significantly in recent months. I hope more homes will come to market as spring gets underway, but the market is far from balanced.

Central Washington Home Prices

The average home price in Central Washington rose 17% year over year to $485,435 but was 0.8% lower than in the final quarter of 2021.

Lower quarter-over-quarter sale prices may be a function of rising mortgage rates, but it’s too soon to tell given that there’s usually a lag between rising financing costs and their impact on prices. Data from the second quarter of this year will give us a better indication.

Every county except Yakima saw double-digit increases in sale prices compared to the first quarter of 2021. Prices were lower in Chelan and Yakima counties than in the previous quarter, but the other three counties saw higher sale prices.

Median list prices have slowed their ascent in many of the markets contained in this report, which could also indicate some softening in the region. That said, the extent to which this is impacting secondhome markets—which are more susceptible to rising mortgage rates—remains uncertain.

A map showing the year-over-year real estate market percentage changes in various counties in Central Washington for Q1 2022.

A bar graph showing the annual change in home sale prices for various counties in Central Washington from Q1 2021 to Q1 2022.

Mortgage Rates

Average rates for a 30-year conforming mortgage were 3.11% at the end of 2021, but since then have jumped over 1.5%—the largest increase since 1987. The surge in rates is because the market is anticipating a seven- to eight-point increase from the Federal Reserve later this year.

Because the mortgage market has priced this into the rates they are offering today, my forecast suggests that we are getting close to a ceiling in rates, and it is my belief that they will rise modestly in the second quarter before stabilizing for the balance of the year.

A bar graph showing the average rates for a 30-year conforming mortgage, plus Matthew Gardner's mortgage rate forecasts for Q2 2022 through Q1 2023.

Central Washington Days on Market

The average time it took to sell a home in Central Washington in the first quarter of 2022 was 55 days.

During the first quarter, it took three fewer days to sell a home in Central Washington than it did a year ago.

All counties other than Chelan and Kittitas saw the length of time it took to sell a home drop compared to a year ago, with noticeable improvement in Okanogan County. Compared to the final quarter of 2021, days on market rose in all counties.

It took 17 more days to sell a home in the first quarter than it did in the fourth quarter of last year.

A bar graph showing the average days on market for homes in various counties in Central Washington during Q1 2022.

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 market remains in a state of imbalance. On one hand, the number of homes for sale increased as we moved into the year, but there were fewer pending sales. This is a little counterintuitive given that rising mortgage rates should have been a stimulant for home buyers. Even so, I believe home sellers remain in the driver’s seat, but the year has not started in the way some may have hoped for. Second quarter data should give us some more clarity as to the direction the market will take in 2022, but it is likely that higher mortgage costs combined with lower affordability may act as a headwind.

A speedometer graph indicating a seller's market in Central Washington during Q1 2022.

As such, I am moving the needle a little more towards buyers but, for the time being, sellers still have the upper hand.

About Matthew Gardner

Matthew Gardner - Chief Economist for Windermere Real Estate

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.

The post Q1 2022 Central Washington Real Estate Market Update appeared first on Windermere Real Estate.

Q1 2022 Eastern Washington Real Estate Market Update

The following analysis of select counties 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 Real Estate agent.

 

Regional Economic Overview

Even though Washington State revised the 2021 total employment level downward, the Eastern Washington job market is still in positive territory after its recovery from the pandemic. The region has recovered all of the jobs that were lost and added 13,000 new jobs. The job count in Whitman and Grant counties remains marginally below their pre-COVID peaks, but I expect that to be resolved by this summer. Unadjusted for seasonality, the regional unemployment rate was 5.9%. However, when adjusted for seasonal shifts, the rate was 4.9%. The highest jobless rate was in Grant County at 6.8%; the lowest rate was in Walla Walla County at 3.9%.

Eastern Washington Home Sales

In the first quarter, 2,353 homes sold, which was down 5.7% from the same period in 2021 and 36.6% lower than in the final quarter of last year.

While these numbers don’t appear positive at face value, the drop was due to the lack of homes for sale. Although listing activity was 2.2% higher than the same period in 2021, it was 40% lower than in the final quarter of last year. Limited choice is certainly impacting the market.

Year over year, sales increased in Benton and Lincoln counties, but fell in the rest of the market areas. Sales fell across the board compared to the fourth quarter.

Pending sales were down 12.6% from the final quarter of last year, suggesting that unless we see a surge in the number of homes coming to market, second quarter numbers may disappoint as well.

Eastern Washington Home Prices

Year over year the average home price in Eastern Washington rose a very significant 21.4% to $434,921 and was 2.6% higher than the previous quarter.

When compared to the final quarter of last year, prices rose in all counties other than Lincoln and Walla Walla.

All counties contained in this report saw average sale prices rise; every county except Lincoln County had double-digit growth.

The market has yet to feel the impact of rising mortgage rates. Inventory issues persist, so it’s likely prices will continue to rise as buyers compete for what homes are available and seek to lock in a loan rate before they rise any further.

A map showing the year-over-year real estate market percentage changes in various counties in Eastern Washington for Q1 2022.

A bar graph showing the annual change in home sale prices for various counties in Eastern Washington from Q1 2021 to Q1 2022.

Mortgage Rates

Average rates for a 30-year conforming mortgage were 3.11% at the end of 2021, but since then have jumped over 1.5%—the largest increase since 1987. The surge in rates is because the market is anticipating a seven- to eight-point increase from the Federal Reserve later this year.

Because the mortgage market has priced this into the rates they are offering today, my forecast suggests that we are getting close to a ceiling in rates, and it is my belief that they will rise modestly in the second quarter before stabilizing for the balance of the year.

A bar graph showing the average rates for a 30-year conforming mortgage, plus Matthew Gardner's mortgage rate forecasts for Q2 2022 through Q1 2023.

Eastern Washington Days on Market

The average time it took to sell a home in Eastern Washington in the first quarter of 2022 was 25 days. This is 8 fewer days than in the first quarter of 2021.

Compared to the previous quarter, average days on market rose in every county other than Lincoln.

All counties other than Spokane and Franklin saw the average number of days-on-market drop compared to the same period in 2021. That said, the increased market time in Spokane and Franklin counties was modest.

During the first quarter it took an average of only one more day to sell a home than it did during the final quarter of last year.

A bar graph showing the average days on market for homes in various counties in Eastern Washington during Q1 2022.

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.

Employment levels continue to grow in Eastern Washington, but the housing market is still struggling to find its direction. A lack of homes for sale remains a major issue and the region appears to be headed toward a slower pace of sales. For now, though, price growth remains strong. The impact of rising mortgage rates on the housing market lags by about three months. It will be interesting to see how this affects the pace of price growth once the spring market is fully underway.

A speedometer graph indicating a seller's market in Eastern Washington during Q1 2022.

Given all the factors discussed here, I have chosen to leave the needle in the same position as the previous quarter. Sellers are still in the driver’s seat—as list prices continue to increase—but higher mortgage rates will further exacerbate affordability concerns in several markets, which may move the region toward a period of greater stability. We will have to wait and see.

About Matthew Gardner

Matthew Gardner - Chief Economist for Windermere Real Estate

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.

The post Q1 2022 Eastern Washington Real Estate Market Update appeared first on Windermere Real Estate.

Q1 2022 Southern California Real Estate Market Update

The following analysis of select counties of the Southern California 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 counties covered by this report have now recovered 1.89 million of the 2.17 million jobs that were lost due to the pandemic. With only 279,000 jobs needed for a full recovery, it is likely that the region will break above the pre-pandemic employment level by sometime this summer. Of note is that both Riverside and San Bernardino counties have already seen a full job recovery, and current employment levels are now more than 33,000 above the pre-pandemic peak. The region’s unemployment rate in February was 4.8%, down from 9.8% a year ago. The lowest rates were in Orange (3.7%) and San Diego (4%) counties. The highest rate was again in Los Angeles County, where it was 5.4%. In all, the Southern California economy continues to recover, with the Inland Empire performing very well. Of course, the region’s performance is influenced by Los Angeles County given its size, which is still acting as a bit of a drag to the overall job recovery. Although I hope the pace of job growth here will pick up, it will be held back by a labor force that has fewer persons in it today than it did at the start of 2020.

Southern California Home Sales

In the first quarter of the year, 42,069 homes sold, which is down 9.7% from a year ago. There were 9.6% fewer sales than in the fourth quarter of 2021.

Pending home sales—an indicator of future closings—rose more than 10% from the prior quarter, suggesting that sales activity in the spring may pick back up.

The most significant decreases in sales were in Orange and San Diego counties, but all markets fell. Significant supply-side issues persist as listing activity was down more than 25% compared to the same period in 2021. There were 8.9% fewer homes for sale than in the fourth quarter of 2021.

Buyers are looking, but choices are limited. Although listing activity has picked up in San Diego County, the other markets have not seen any growth. This will hopefully change as we move through the spring, but it’s not guaranteed, and buyers will likely remain frustrated.

Southern California Home Prices

Home prices in the first quarter rose 19.1% compared to a year ago and were 4.2% higher than in the fourth quarter of 2021.

It appears as if the spike in mortgage rates during the first quarter has not dampened the market and, with more buyers than sellers, the market is still extremely hot.

The region saw double-digit price growth across the board, with Orange County again leading the way. Of note is that home prices in Riverside County rose 10.7% compared to the prior quarter.

Rising mortgage rates and prices are certain to push affordability down even further, which is concerning. The question remains whether rising financing costs will start to slow the market. For the time being, this does not appear to be the case.

A map showing the year-over-year real estate market percentage changes in various counties in Southern California for Q1 2022.

A bar graph showing the annual change in home sale prices for various counties in Southern California from Q1 2021 to Q1 2022.

Mortgage Rates

Average rates for a 30-year conforming mortgage were 3.11% at the end of 2021, but since then have jumped over 1.5%—the largest increase since 1987. The surge in rates is because the market is anticipating a seven- to eight-point increase from the Federal Reserve later this year.

Because the mortgage market has priced this into the rates they are offering today, my forecast suggests that we are getting close to a ceiling in rates, and it is my belief that they will rise modestly in the second quarter before stabilizing for the balance of the year.

A bar graph showing the average rates for a 30-year conforming mortgage, plus Matthew Gardner's mortgage rate forecasts for Q2 2022 through Q1 2023.

Southern California Days on Market

In the first quarter of the year, the average time it took to sell a home in the region was 22 days, which was 6 fewer days than a year ago but 1 day longer than in the final quarter of 2021.

Homes in San Diego County continue to sell at a faster rate than other markets in the region. In the fourth quarter, it took an average of 16 days to sell a home there—two fewer days than it took a year ago.

The other four counties also saw the time it took to sell drop compared to a year ago, but market time rose very modestly in Riverside, Los Angeles, and San Bernardino counties compared to the fourth quarter of 2021.

Limited inventory combined with growing buyer demand is creating a very tight market. Any increases we see in the number of homes for sale in the coming months is not likely to be enough to satisfy buyers.

A bar graph showing the average days on market for homes in various counties in Southern California during Q1 2022.

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.

Despite low inventory levels and rising mortgage rates, the housing market continues to perform very well in Southern California. The spike in mortgage rates has yet to have a significant impact on price growth or demand; however, it will be interesting to check back in the second quarter because if there is an impact, that’s when we would likely see it.

A speedometer graph indicating a seller's market in Southern California during Q1 2022.

Sellers remain in the driver’s seat, but if higher financing costs start to affect the market, there may be a shift back towards more normal conditions. My instincts suggest that this will not be the case, but only time will tell. With all of this in mind, I have left the needle in the same position as last quarter.

About Matthew Gardner

Matthew Gardner - Chief Economist for Windermere Real Estate

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.

The post Q1 2022 Southern California Real Estate Market Update appeared first on Windermere Real Estate.