Matthew Gardner’s Top 10 Predictions for 2023


This video shows Windermere Chief Economist Matthew Gardner’s Top 10 Predictions for 2023. 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.


Matthew Gardner’s Top 10 Predictions for 2023

1. There Is No Housing Bubble

Mortgage rates rose steeply in 2022 which, when coupled with the massive run-up in home prices, has some suggesting that we are recreating the housing bubble of 2007. But that could not be further from the truth.

Over the past couple of years, home prices got ahead of themselves due to a perfect storm of massive pandemic-induced demand and historically low mortgage rates. While I expect year-over-year price declines in 2023, I don’t believe there will be a systemic drop in home values. Furthermore, as financing costs start to pull back in 2023, I expect that will allow prices to resume their long-term average pace of growth.

2. Mortgage Rates Will Drop

Mortgage rates started to skyrocket at the start of 2022 as the Federal Reserve announced their intent to address inflation. While the Fed doesn’t control mortgage rates, they can influence them, which we saw with the 30-year rate rising from 3.2% in early 2022 to over 7% by October.

Their efforts so far have yet to significantly reduce inflation, but they have increased the likelihood of a recession in 2023. Therefore, early in the year I expect the Fed to start pulling back from their aggressive policy stance, and this will allow rates to begin slowly stabilizing. Rates will remain above 6% until the fall of 2023 when they should dip into the high 5% range. While this is higher than we have become used to, it’s still more than 2% lower than the historic average.

3. Don’t Expect Inventory to Grow Significantly

Although inventory levels rose in 2022, they are still well below their long-term average. In 2023 I don’t expect a significant increase in the number of homes for sale, as many homeowners do not want to lose their low mortgage rate. In fact, I estimate that 25-30 million homeowners have mortgage rates around 3% or lower. Of course, homes will be listed for sale for the usual reasons of career changes, death, and divorce, but the 2023 market will not have the normal turnover in housing that we have seen in recent years.

4. No Buyer’s Market But a More Balanced One

With supply levels expected to remain well below normal, it’s unlikely that we will see a buyer’s market in 2023. A buyer’s market is usually defined as having more than six months of available inventory, and the last time we reached that level was in 2012 when we were recovering from the housing bubble. To get to six months of inventory, we would have to reach two million listings, which hasn’t happened since 2015. In addition, monthly sales would have to drop below 325,000, a number we haven’t seen in over a decade. While a buyer’s market in 2023 is unlikely, I do expect a return to a far more balanced one.

5. Sellers Will Have to Become More Realistic

We all know that home sellers have had the upper hand for several years, but those days are behind us. That said, while the market has slowed, there are still buyers out there. The difference now is that higher mortgage rates and lower affordability are limiting how much buyers can pay for a home. Because of this, I expect listing prices to pull back further in the coming year, which will make accurate pricing more important than ever when selling a home.

6. Workers Return to Work (Sort of)

The pandemic’s impact on where many people could work was profound, as it allowed buyers to look further away from their workplaces and into more affordable markets. Many businesses are still determining their long-term work-from-home policies, but in the coming year I expect there will be more clarity for workers. This could be the catalyst for those who have been waiting to buy until they know how often they’re expected to work at the office.

7. New Construction Activity Is Unlikely to Increase

Permits for new home construction are down by over 17% year over year, as are new home starts. I predict that builders will pull back further in 2023, with new starts coming in at a level we haven’t seen since before the pandemic.

Builders will start seeing some easing in the supply chain issues that hit them hard over the past two years, but development costs will still be high. Trying to balance homebuilding costs with what a consumer can pay (given higher mortgage rates) will likely lead builders to slow activity. This will actually support the resale market, as fewer new homes will increase the demand for existing homes.

8. Not All Markets Are Created Equal

Markets where home price growth rose the fastest in recent years are expected to experience a disproportionate swing to the downside. For example, markets in areas that had an influx of remote workers, who flocked to cheaper housing during the pandemic, will likely see prices fall by a greater percentage than other parts of the country. That said, even those markets will start to see prices stabilize by the end of 2023 and resume a more reasonable pace of price growth.

9. Affordability Will Continue to Be a Major Issue

In most markets, home prices will not increase in 2023, but any price drop will not be enough to make housing more affordable. And with mortgage rates remaining higher than they’ve been in over a decade, affordability will continue to be a problem in the coming year, which is a concerning outlook for first-time buyers.

Over the past two years, many renters have had aspirations of buying but the timing wasn’t quite right for them. With both prices and mortgage rates spiraling upward in 2022, it’s likely that many renters are now in a situation where the dream of homeownership has gone. That’s not to say they will never be able to buy a home, just that they may have to wait a lot longer than they had hoped.

10. Government Needs to Take Housing More Seriously

Over the past two years, the market has risen to such an extent that it has priced out millions of potential home buyers. With a wave of demand coming from Millennials and Gen Z, the pace of housing production must increase significantly, but many markets simply don’t have enough land to build on. This is why I expect more cities, counties, and states to start adjusting their land use policies to free up more land for housing.

But it’s not just land supply that can help. Elected officials can assist housing developers by utilizing Tax Increment Financing tools, whereby the government reimburses a private developer as incremental taxes are generated from housing development. There are many tools like this at the government’s disposal to help boost housing supply, and I sincerely hope that they start to take this critical issue more seriously.

 


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.

The post Matthew Gardner’s Top 10 Predictions for 2023 appeared first on Windermere Real Estate.

Q3 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

Over the past year, the Northern California markets covered by this report added 159,000 jobs. Given these solid job gains, it was no surprise that the unemployment rate fell from 5.6% to 2.9%. By county, the lowest jobless rate was in Santa Clara County (2.3%) and the highest rate was in Shasta County at 4.3%. The labor force continues to expand, which is a positive signal of the relative strength of the economy in Northern California. The region is only 17,000 jobs short of its pre-pandemic peak employment.

Northern California Home Sales

In the third quarter of this year, 11,454 homes sold, which is down 32.5% from a year ago and down 19.5% from the second quarter.

Year over year, sales fell across the board. Though the largest drop was in Santa Clara County, there were significant declines throughout the region.

The number of homes for sale continues to grow, with total average listings in the quarter up 29.2% from a year ago. There were 25.5% more homes for sale than in the second quarter.

Pending home sales fell 16.6% from the second quarter, suggesting that the market softened during the late summer months.

Northern California Home Prices

The significant increase in mortgage rates has started to impact home prices. The average home sale price dropped .5% from a year ago and 12.6% from the second quarter of 2022.

Median listing prices rose 1.6% from the second quarter, but the increase was not widespread. Although asking prices jumped 18.8% in San Luis Obispo County and rose modestly in Napa and Shasta counties, this was offset by lower asking prices in the balance of the markets.

Prices rose in five of the counties contained in this report, while they fell in three. Compared to the second quarter of 2022, prices fell across the board, with double-digit drops in Alameda, Contra Costa, and Napa counties.

Financing costs are negatively impacting home prices, which I anticipate will continue through the balance of the year and into 2023.

A map showing the real estate home prices percentage changes for various counties in Northern California. Different colors correspond to different tiers of percentage change. Shasta, Contra Costa, and Alameda County are in the -1.5% to -0.9% range. Napa, Solano, and Santa Clara County have a percentage change in the 1% to 3.4% range, Placer is in the 3.5% to 5.9% range, and San Luis Obispo is in the 8.5%+ range.

A bar graph showing the annual change in home sale prices for various counties in Northern California from Q3 2021 to Q3 2022. San Luis Obispo County tops the list at 9.9%, followed by Placer at 3.9%, Napa at 2.7%, Santa Clara at 1.3%, Solano at 1%, Shasta at -0.4%, Alameda at -1%, and Contra Costa at -1.3%.

Mortgage Rates

This remains an uncertain period for mortgage rates. When the Federal Reserve slowed bond purchases in 2013, investors were accused of having a “taper tantrum,” and we are seeing a similar reaction today. The Fed appears to be content to watch the housing market go through a period of pain as they throw all their tools at reducing inflation.

As a result, mortgage rates are out of sync with treasury yields, which not only continues to push rates much higher, but also creates violent swings in both directions. My current forecast calls for rates to peak in the fourth quarter of this year before starting to slowly pull back. That said, they will remain in the 6% range until the end of 2023.

A bar graph showing the mortgage rates from 2020 to the present, as well as Matthew Gardner's forecasted mortgage rates through Q4 2023. After the 5.62% figure in Q3 2022, he forecasts mortgage rates continuing to climb to 6.7% in Q4 2022, 6.55% in Q1 2023, 6.35% in Q2 2023, 6.15% in Q3 2023, and 5.60% in Q4 2023.

Northern California Days on Market

The average time it took to sell a home in the Northern California counties in this report was seven days higher than it was in the third quarter of 2021.

The length of time it took to sell a home fell in Napa County but rose across the rest of the region. Compared to the second quarter of 2022, market time rose across all counties except Placer, where it fell four days.

During the third quarter, it took an average of 35 days to sell a home, which was 9 more days than in the second quarter of this year.

The combination of more choice and very cautious buyers has led market time to increase.

A bar graph showing the average days on market for homes in various counties in Northern California for Q3 2022. Alameda County has the lowest DOM at 23, followed by Santa Clara and Contra Costa at 24, San Luis Obispo at 26, Placer at 28, Solano at 36, Napa at 46, and Shasta at 79.

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.

Far higher financing costs in concert with very low affordability levels are now impacting the region’s housing market. Although there may be some pain as the market continues to revert to a normal pace of price growth and sales activity, I am not overly concerned about the long-term outlook. Home values are correcting, but the adjustment will not be severe, and certainly nothing like the plummet we saw following the bursting of the housing bubble.

A speedometer graph indicating a balanced market, slightly headed toward a seller's market in Northern California in Q3 2022.

I think there are more buyers than most people might expect who are waiting for prices to correct and, more importantly, for mortgage rates to stabilize. While the market is firmly in a period of transition, it still is not a traditional buyer’s market. That said, it’s also not one that gives sellers all the control. As such, I am moving the needle more in favor of buyers, but not so far as to suggest that the tide has completely turned.

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 Q3 2022 Northern California Real Estate Market Update appeared first on Windermere Real Estate.

Q3 2022 Nevada Real Estate Market Update

The following analysis 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

After two long years, I can now announce that all the jobs in the Las Vegas metro area that were lost because of the pandemic have returned. Employment levels are now 7,800 jobs above the pre-pandemic peak. With the job market continuing to strengthen, the number of people who have started to look for work has increased. This has led the unemployment rate to rise to 5.7%.

Nevada Home Sales

A total of 6,533 homes sold in the third quarter, which was a drop of 39.8% compared to the same period a year ago, and 30.2% lower than in the second quarter of this year.

Sales fell in every neighborhood covered by this report compared to a year ago, and all areas reported fewer sales than in the second quarter of 2022.

Listing activity continues to grow significantly, with the number of homes for sale up 130% year over year and up 97.2% from the second quarter.

Pending sales, which are an indicator of future closings, fell 27.6% compared to the second quarter, suggesting that the market may see sales fall further in the final quarter of this year.

Nevada Home Prices

Even with slower sales, home prices still rose 9.4% from a year ago to an average of $479,046. They were 9% lower than in the second quarter of 2022.

The impact of higher mortgage rates has now started to affect both sales and prices. Median listing prices are down from the second quarter in all markets except Spring Valley (+0.3%) and Anthem (+1.4%).

Year over year, prices rose in every neighborhood other than Queens Ridge. They fell in every area compared to the second quarter of 2022.

The market has entered a period of reversion. The impact of mortgage rates rising 2.7% between the third quarter of 2021 and the current quarter has clearly started to have a dampening effect on the market.

A chart showing the sub-market areas and their corresponding zip codes in the Greater Las Vegas, Nevada area.

A bar graph showing the annual change in home sale prices for various sub-market areas in Greater Las Vegas from Q3 2021 to Q3 2022. Spring Valley tops the list with a 19.4% change, followed by Southwest at 19%, The Lakes / Section 10 at 16.5%, Northeast at 15.5%, North Las Vegas at 15.3%, Downtown at 14.3%, Anthem at 13.9%, Whitney at 13.4%, Aliante at 12.1%, Centennial at 11.6%, Southeast at 10.6%, Green Valley at 8.9%, Henderson at 4.2%, Summerlin at 3.3%, and finally Queensridge at -12.4%.

Mortgage Rates

This remains an uncertain period for mortgage rates. When the Federal Reserve slowed bond purchases in 2013, investors were accused of having a “taper tantrum,” and we are seeing a similar reaction today. The Fed appears to be content to watch the housing market go through a period of pain as they throw all their tools at reducing inflation.

As a result, mortgage rates are out of sync with treasury yields, which not only continues to push rates much higher, but also creates violent swings in both directions. My current forecast calls for rates to peak in the fourth quarter of this year before starting to slowly pull back. That said, they will remain in the 6% range until the end of 2023.

A bar graph showing the mortgage rates from 2020 to the present, as well as Matthew Gardner's forecasted mortgage rates through Q4 2023. After the 5.62% figure in Q3 2022, he forecasts mortgage rates continuing to climb to 6.7% in Q4 2022, 6.55% in Q1 2023, 6.35% in Q2 2023, 6.15% in Q3 2023, and 5.60% in Q4 2023.

Nevada Days on Market

The average time it took to sell a home in the region rose seven days compared to the third quarter of 2021.

It took an average of 25 days to sell a home in the quarter, which is nine days longer than it took in the second quarter of this year.

Days on market rose in all neighborhoods compared to the same period a year ago. Market time also rose in all neighborhoods compared to the second quarter of 2022.

Although these numbers may appear to be very bleak, it is worth remembering that the average days on market in the current quarter was 19 fewer than in the same quarter in 2019.

A bar graph showing the average days on market for homes in various sub-market areas of Greater Las Vegas from Q3 2021 to Q3 2022. Northeast the lowest DOM at 20, followed by Downtown at 21, North Las Vegas at 22, Whitney, Henderson, and Green Valley at 23, Southeast, and Spring Valley at 24, Queensridge, Centennial, and The Lakes / Section 10 at 25, Summerlin and Southwest at 27, Anthem at 29, and Aliante at 31.

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 third quarter was one of transition as the market started to feel the impact of higher financing costs and more homes for sale. I expect the market to continue underperforming through the end of this year. However, as we enter 2023 mortgage rates should start stabilizing and moving modestly lower, leading to a more sustainable pace of sales and price growth. Although sellers may feel that the value of their homes is collapsing, that is not the case. Over 56% of Clark County homeowners with a mortgage have over 50% equity in their homes. Though any price correction might be painful to watch, it will not cause a major jump in foreclosure activity. Owners will see values return, but only after this period of reversion is complete, which will occur in 2023.

A speedometer graph indicating a balanced market, leaning toward a seller's market in Nevada in Q3 2022.

Given all the data discussed here, I have moved the needle more in favor of home buyers. However, they still do not 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 Q3 2022 Nevada Real Estate Market Update appeared first on Windermere Real Estate.

Q3 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

Utah’s economy continues to add jobs. The 53,600 jobs created statewide over the past year represent a growth rate of 3.3%. The counties covered by this report added more than 40,000 new jobs over the past year, which is a growth rate of 3%. The state’s unemployment rate in August was 2%, which is marginally above the all-time low of 1.9% reported in April of this year. The labor force continues to expand, suggesting that the region expects economic growth to remain strong. Even though the state has seen a modest decline in the pace of job growth, the numbers are still very impressive.

Utah Home Sales

In the third quarter, 7,134 homes sold. This was 31.6% fewer sales than a year ago and down 16.1% compared to the second quarter of this year.

Year over year, sales fell across the board. Sales in all markets covered by this report were lower than in the second quarter of 2022 as well.

Inventory levels continue to grow, with the average number of homes for sale in the quarter 149% higher than a year ago and up 79% from the second quarter of this year.

Buyers, who seemed to ignore rising mortgage rates in the second quarter, are now feeling the impact of higher financing costs and have taken a pause.

Utah Home Prices

The average home sale price in the third quarter was up 5.9% from a year ago to $627,503. However, prices fell 5.7% compared to the second quarter of this year.

Median listing prices in the third quarter were down across the board. Sellers appear to be coming to terms with the fact that the remarkably buoyant market we’ve experienced since the start of the pandemic has now ended.

All areas contained in this report except Morgan County had higher sale prices than a year ago. Compared to the second quarter of this year, only Wasatch County had higher sale prices.

Although the data suggests that a market correction has started, I don’t find this terribly troubling. Homeowners have seen a remarkable run-up in home values over the past couple of years. It was only a matter of time before the market reverted back to a more sustainable pace of price growth.

A map showing the real estate home prices percentage changes for various counties in Utah. Different colors correspond to different tiers of percentage change. Morgan County is in the -10.6% to -6.1% range. Weber, Davis, Salt Lake, and Wasatch County have a percentage change in the 3.2% to 7.7% range, and Utah and Summit are in the 7.8%+ range.

A bar graph showing the annual change in home sale prices for various counties in Utah from Q3 2021 to Q3 2022. Utah County tops the list at 12.3%, followed by Summit at 9.1%, Salt Lake at 7.5%, Weber at 6.7%, Davis at 5.8%, Wasatch at 4%, and Morgan at -10.3%.

Mortgage Rates

This remains an uncertain period for mortgage rates. When the Federal Reserve slowed bond purchases in 2013, investors were accused of having a “taper tantrum,” and we are seeing a similar reaction today. The Fed appears to be content to watch the housing market go through a period of pain as they throw all their tools at reducing inflation.

As a result, mortgage rates are out of sync with treasury yields, which not only continues to push rates much higher, but also creates violent swings in both directions. My current forecast calls for rates to peak in the fourth quarter of this year before starting to slowly pull back. That said, they will remain in the 6% range until the end of 2023.

A bar graph showing the mortgage rates from 2020 to the present, as well as Matthew Gardner's forecasted mortgage rates through Q4 2023. After the 5.62% figure in Q3 2022, he forecasts mortgage rates continuing to climb to 6.7% in Q4 2022, 6.55% in Q1 2023, 6.35% in Q2 2023, 6.15% in Q3 2023, and 5.60% in Q4 2023.

Utah Days on Market

The average number of days it took to sell a home in the counties covered by this report rose ten days compared to the same period a year ago.

Though homes sold fastest in Salt Lake County, average market time rose in all counties covered by this report year over year. Days on market was also higher in every county compared to the second quarter of this year.

During the quarter, it took an average of 33 days to sell a home in the region. Market time rose 15 days compared to the second quarter of 2022.

Rapidly rising inventory levels and mortgage rates have put the brakes on the Utah housing market.

A bar graph showing the average days on market for homes in various counties in Utah for Q3 2022. Salt Lake County has the lowest DOM at 27, followed by Davis at 28, Utah at 30, Weber at 31, Morgan at 34, Wasatch at 37, and Summit at 41.

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 Utah’s economy remains strong, the housing market is now feeling the effects of mortgage rates that were 2.7% higher than in the third quarter of 2021. With rates expected to rise even more in the fourth quarter before hopefully levelling off in early 2023, I anticipate that prices will decline further from their current levels. While this may seem like a dire situation to some, homeowners have seen their equity leap since the pandemic started. Though the expected drop in home values may be disconcerting for owners, it’s necessary for the market to return to more realistic conditions. I expect that some would-be sellers will decide to wait until the market stabilizes before listing their homes, while others will decide not to sell at all. This will limit how far inventory levels will rise. As such, I don’t see the market reaching saturation.

A speedometer graph indicating a balanced market, leaning toward a seller's market in Utah in Q3 2022.

The Utah housing market is in a period of reversion that will bring it back to balance, which is actually positive for the long-term health of the market. Buyers have more choice, but many will wait until financing costs and the market start to stabilize before they resume their search for a home. We still aren’t in a buyer’s market, but we are certainly getting closer to balance. As such, I have moved the needle far closer to the middle.

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 Q3 2022 Utah Real Estate Market Update appeared first on Windermere Real Estate.

Q3 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

Though employment growth in Montana continues to taper, the addition of 11,500 new jobs over the past year is solid. All metro areas in the region continue to add jobs. Missoula was the standout, having added 1,900 new jobs during the past quarter. The state unemployment rate in August was 2.8%; this is up from 2.6% at the end of the second quarter and is mainly due to the growing labor force. In the metro areas covered in this report, the lowest jobless rate was in Billings at 2.6%, followed by Missoula at 2.7%, and Great Falls at 2.9%. The labor force participation rate (which is the civilian population divided by the labor force) has risen marginally to 62.7%, which is still very close to the all-time low. This means businesses will still have a difficult time finding workers.

Montana Home Sales

In the third quarter of this year, 2,023 homes sold in the markets contained in this report, which is a 7.9% decline from a year ago. Sales activity fell 14.3% compared to the second quarter of this year.

The number of homes for sale was 17.5% higher than a year ago and a remarkable 75.7% higher than in the second quarter. Sellers appear to still be confident in the market.

Year over year, sales grew in Ravalli County but fell in the balance of the markets included in this report. Sales grew in Missoula, Ravalli, and Lake counties from the second quarter but fell in all other markets.

Seller confidence was supported by the fact that pending sales rose 34.4% from the second quarter, which is a very significant improvement and is likely a result of there being considerably more choice in the market.

Montana Home Prices

Home prices were flat year over year, with the average sale price coming in at $709,013. Prices were .2% lower than in the second quarter of 2021.

Price growth will likely remain flat for the balance of 2022 and into 2023 as buyers and sellers react to mortgage rates that are higher than they’ve seen in a long time. That said, even with more expensive financing costs and higher inventory levels, I do not expect home prices in Montana to turn negative in 2023.

With pending sales up significantly but home prices essentially flat, the numbers are somewhat unusual until you note that the median listing price fell .8% from the second quarter. Home sellers are reacting to a market with more competition and are now having to price their homes more competitively.

Sellers who price their homes realistically are still finding buyers—even with more competition than they’ve seen in several years.

A map showing the real estate home prices percentage changes for various counties in Montana. Different colors correspond to different tiers of percentage change. Flathead, Broadwater, and Gallatin County have a percentage change in the -14% to 5.4% range. Lewis & Clark, Missoula, Ravalli, Madison, and Park are in the 5.5% to 24.9% change range, Lake is in the 35% to 44.4% range, and Jefferson is in the 64%+ range.

A bar graph showing the annual change in home sale prices for various counties in Montana from Q3 2021 to Q3 2022. Jefferson County tops the list at 91.9%, followed by Lake at 37.9%, Missoula at 16.4%, Lewis & Clark at 12.1%, Madison 11%, Ravalli 9.7%, Park 9.4%, Gallatin -5.3%, Flathead -13.3%, and Broadwater at -13.8%.

Mortgage Rates

This remains an uncertain period for mortgage rates. When the Federal Reserve slowed bond purchases in 2013, investors were accused of having a “taper tantrum,” and we are seeing a similar reaction today. The Fed appears to be content to watch the housing market go through a period of pain as they throw all their tools at reducing inflation.

As a result, mortgage rates are out of sync with treasury yields, which not only continues to push rates much higher, but also creates violent swings in both directions. My current forecast calls for rates to peak in the fourth quarter of this year before starting to slowly pull back. That said, they will remain in the 6% range until the end of 2023.

A bar graph showing the mortgage rates from 2020 to the present, as well as Matthew Gardner's forecasted mortgage rates through Q4 2023. After the 5.62% figure in Q3 2022, he forecasts mortgage rates continuing to climb to 6.7% in Q4 2022, 6.55% in Q1 2023, 6.35% in Q2 2023, 6.15% in Q3 2023, and 5.60% in Q4 2023.

Montana Days on Market

The average time it took to sell a home fell eight days compared to the same period a year ago.

Homes sold fastest in Broadwater County, while homes in Flathead County took the longest to sell. Jefferson, Gallatin, Park, and Madison counties saw market time rise compared to a year ago. Average market time in the rest of the region dropped.

During the third quarter, it took an average of 49 days to sell a home in the markets covered by this report.

In comparison to the second quarter of 2022, average market time fell in all counties other than Park (+17 days), Lake (+12 days), Gallatin (+11 days), and Madison (+6 days).

A bar graph showing the average days on market for homes in various counties in Montana for Q3 2022. Broadwater County has the lowest DOM at 25, followed by Gallatin at 26, Jefferson at 28, Park at 38, Madison 48, Lewis & Clark 50, Missoula 58, Lake and Ravalli 64, and Flathead at 86.

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 Montana housing market has started to react to mortgage rates that have essentially doubled since the start of 2022. Sellers are having to adjust to higher inventory levels, more expensive financing costs, and increased competition by making sure their asking price is realistic. These adjustments should favor buyers—and they do. I see a trend back toward a more balanced market, but one that is still far from being a traditional buyer’s market.

A speedometer graph indicating a balanced market, leaning toward a seller's market in Montana in Q3 2022.

Therefore, I am moving the needle more toward the middle, but not so much as to suggest that buyers are now in the driver’s seat.

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 Q3 2022 Montana Real Estate Market Update appeared first on Windermere Real Estate.

Q3 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 continues to grow, but the pace has started to taper. The addition of 22,400 jobs over the past 12 months represents a growth rate of 2.8%. Idaho’s third-quarter unemployment rate was 2.7%, down from 3.5% a year ago. This is higher than the all-time low in May and June of this year, but very impressive all the same. Although jobs are being added at a slower pace, I am not concerned given the current unemployment rate and the growing labor force.

Idaho Home Sales

In the third quarter of 2022, 5,243 homes sold, which was 28.7% lower than a year ago and 18.1% lower than in the second quarter of the year.

Listing activity was up 53% compared to a year ago. The average number of homes on the market was 9.1% higher than in the second quarter of 2022.

Compared to the same period a year ago, sales fell in the northern part of the state and were lower in all areas of Southern Idaho except Valley County. Compared to the second quarter, sales also fell across Northern Idaho, but rose in Valley, Payette, and Boise counties in the southern part of the state.

Pending sales were 19% lower than in the second quarter of this year. With more listings and fewer sales, the market is certainly slowing, much of which can be attributed to rising mortgage rates, which hit a level we have not seen since 2008.

Idaho Home Prices

The average home price in the region rose 4.3% year over year to $625,275 but was down 2.9% compared to the second quarter of the year.

Compared to the second quarter of 2022, prices rose in all Northern Idaho counties except Kootenai, where they were down 1.7%. In the southern part of the state, prices fell across the board.

Prices rose by double digits in Bonner and Boundary counties, while the balance of Northern Idaho counties saw single-digit growth. In the southern part of the state, prices rose in four of the counties, but fell in Boise, Valley, and Blaine counties.

Median listing prices in the second quarter were lower in all southern markets, but higher in all but Bonner County in the northern part of the state.

A map showing the real estate home prices percentage changes for various counties in Idaho. Different colors correspond to different tiers of percentage change. In the southern area of the state, Blaine, Boise, and Valley County have a percentage change in the -16% to -0.1% range. Ada is in the 0% to 5.9% change range, and Payette, Gem, and Canyon are in the 6% to 11.9% range. In the north, Kootenai is in the 0% to 5.9% range, while Shoshone is in the 6% to 11.9% rage and Bonner and Boundary are in the 18%+ range.

A bar graph showing the annual change in home sale prices for various counties in North and South Idaho from Q3 2021 to Q3 2022. In the north, Bonner County tops the list at 29.1%, followed by Boundary at 20.7%, Shoshone at 6.1%, and Kootenai at 1.1%. In the South, Payette leads off at 8.6%, followed by Gem at 7.8%, Canyon at 7.5%, Ada 5.5%, Boise -3.2%, Valley -12.4%, and Blaine at -15.3%.

Mortgage Rates

This remains an uncertain period for mortgage rates. When the Federal Reserve slowed bond purchases in 2013, investors were accused of having a “taper tantrum,” and we are seeing a similar reaction today. The Fed appears to be content to watch the housing market go through a period of pain as they throw all their tools at reducing inflation.

As a result, mortgage rates are out of sync with treasury yields, which not only continues to push rates much higher, but also creates violent swings in both directions. My current forecast calls for rates to peak in the fourth quarter of this year before starting to slowly pull back. That said, they will remain in the 6% range until the end of 2023.

A bar graph showing the mortgage rates from 2020 to the present, as well as Matthew Gardner's forecasted mortgage rates through Q4 2023. After the 5.62% figure in Q3 2022, he forecasts mortgage rates continuing to climb to 6.7% in Q4 2022, 6.55% in Q1 2023, 6.35% in Q2 2023, 6.15% in Q3 2023, and 5.60% in Q4 2023.

Idaho Days on Market

The average number of days it took to sell a home in the region rose five days compared to the same quarter of 2021 but fell six days compared to the second quarter of 2022.

In Northern Idaho, days on market rose in all counties other than Kootenai compared to a year ago. Market time rose in every county other than Blaine in Southern Idaho.

It took an average of 74 days to sell a home in Northern Idaho, and 37 days in the southern part of the state.

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 North and South Idaho for Q3 2022. In North Idaho, Shoshone County has the lowest DOM at 63, followed by Kootenai at 73, Bonner at 77, and Boundary at 81. In the South, Ada County has the lowest DOM at 30, then Gem at 31, Payette 33, Boise and Canyon 34, Valley 39, and Blaine at 59.

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 third quarter appears to have been an inflection point: the impact of higher mortgage rates and lower affordability have now started to negatively affect home sales and prices. With mortgage rates likely to remain very high compared to recent years, the massive run-up in home values is at an end. Although the market will continue to be negatively impacted as we move through the winter and into the spring, I don’t see it falling in a manner similar to the Great Recession. Owners are sitting on significant equity. Even if prices fall in 2023, which I expect, the decline will be relatively modest.

A speedometer graph indicating a slight seller's market in Idaho in Q3 2022.

With a contracting market, I expect that many homeowners who were thinking about selling will decide to stay put and ride out the slowdown. This will mean the number of homes for sale is unlikely to grow significantly from current levels. Given all the data discussed here, I am moving the needle more toward balance, but we are still not in a typical buyer’s market at the present time.

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 Q3 2022 Idaho Real Estate Market Update appeared first on Windermere Real Estate.

Q3 2022 Colorado Real Estate Market Update

The following analysis of select counties of the Colorado 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

Though statewide job growth continues to taper in Colorado, more than 108,000 jobs have been added over the past 12 months, representing an annual growth rate of 3.9%. The unemployment rate in August stood at a healthy 3.4%. Regionally, unemployment rates ranged from a low of 2.6% in Boulder to a high of 3.7% in the Grand Junction and Greeley metropolitan areas.

Colorado Home Sales

In the third quarter, 10,749 homes were sold, which is a drop of 27.8% from a year ago. Sales were 16.3% lower than in the second quarter of 2022.

Year over year, sales rose in Gilpin County but fell in the balance of the region. Sales increased in Gilpin, Clear Creek, and El Paso counties over the second quarter.

Inventory levels jumped 73.1% in the third quarter, which is significant even though it is a slower pace of growth than occurred between the first and second quarters.

Pending sales, which are an indicator of future closings, dropped 22.3% from the second quarter. Placed alongside rising inventory levels and lower sales activity, this clearly suggests that the market is pulling back rather quickly following the remarkably buoyant period between 2020 and 2021.

Colorado Home Prices

The average home sale price rose 8.3% from the same period in 2021 to $654,425. However, prices were 6.6% lower than in the second quarter.

Compared to the second quarter, listing prices dropped in all counties except Clear Creek and Gilpin, suggesting that sellers are starting to realize that the market has shifted.

Year over year, prices rose by double digits in Clear Creek and Douglas counties and rose by single digits in the rest of the market areas.

Rising mortgage rates and inventory levels are now impacting the region’s housing market. As stated in the second quarter Gardner Report, any palpable drop in listing prices is an indication that the market is softening, which has proven to be the case.

A map showing the real estate home prices percentage changes for various counties in Colorado. Different colors correspond to different tiers of percentage change. El Paso and Gilpin County have a percentage change in the 0% to 5.4% range. Larimer, Weld, Boulder, Adams, Arapahoe, Jefferson, Denver, and Park are all in the 5.5% to 10.9% change range, Douglas is in the 11% to 16.4% range, and Clear Creek is in the 22%+ range.

A bar graph showing the annual change in home sale prices for various counties in Colorado from Q3 2021 to Q3 2022. Clear Creek County tops the list at 28.7%, followed by Douglas at 12.4%, Jefferson and Larimer at 8.5%, Arapahoe at 8.4%, Denver and Adams at 8.3%, Weld at 7.9%, Park at 7.3%, Boulder 6.5%, El Paso 4%, and Gilpin 1.3%.

Mortgage Rates

This remains an uncertain period for mortgage rates. When the Federal Reserve slowed bond purchases in 2013, investors were accused of having a “taper tantrum,” and we are seeing a similar reaction today. The Fed appears to be content to watch the housing market go through a period of pain as they throw all their tools at reducing inflation.

As a result, mortgage rates are out of sync with treasury yields, which not only continues to push rates much higher, but also creates violent swings in both directions. My current forecast calls for rates to peak in the fourth quarter of this year before starting to slowly pull back. That said, they will remain in the 6% range until the end of 2023.

A bar graph showing the mortgage rates from 2020 to the present, as well as Matthew Gardner's forecasted mortgage rates through Q4 2023. After the 5.62% figure in Q3 2022, he forecasts mortgage rates continuing to climb to 6.7% in Q4 2022, 6.55% in Q1 2023, 6.35% in Q2 2023, 6.15% in Q3 2023, and 5.60% in Q4 2023.

Colorado Days on Market

The average number of days it took to sell a home in the markets contained in this report rose eight days compared to the same period in 2021.

The length of time it took to sell a home rose across the board compared to the same quarter a year ago.

It took an average of 20 days to sell a home in the region, which is up 11 days compared to the second quarter of the year.

Although market time has risen significantly, it is worth noting that the average time it took for a home to sell in the quarter was still ten fewer days than in the third quarter of 2019.

A bar graph showing the average days on market for homes in various counties in Colorado for Q3 2022. Gilpin County has the lowest DOM at 16, followed by Weld at 17, Arapahoe, Larimer, Adams, Jefferson, and Denver at 18, El Paso at 20, Douglas at 22, Boulder at 23, Clear Creek at 28, and Park at 30.

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 all jobs that were lost during the pandemic have now returned and 54,700 new jobs have been added, this has not saved the housing market from cooling. Some are suggesting that we are heading into a period similar to the bursting of the housing bubble in the mid-2000s, but I don’t agree. Through the pandemic, the housing market was artificially inflated by historically low mortgage rates, not by underqualified buyers, but such favorable financing could not carry on forever.

A speedometer graph indicating a balanced market, leaning toward a seller's market in Colorado in Q3 2022.

I expect the market will continue to slow until it gets to a sustainable level of growth. Some markets will see annual price growth turn negative. Given that 57% of Colorado homeowners with a mortgage have more than 50% equity, a modest drop in values is nothing to be concerned about. With more supply and list prices pulling back, I am moving the needle more toward balance. This will favor buyers, but the market is still far from being totally in their favor.

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 Q3 2022 Colorado Real Estate Market Update appeared first on Windermere Real Estate.

Q3 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 employment market grew by 465,000 jobs over the past 12 months. However, the pace of job creation has been slowing and more recently the region has seen total employment levels drop. I am not overly concerned by this, as state data at the county level is not adjusted for seasonality, and I anticipate more jobs will be added as we move through the fall. Total employment in the counties covered by this report is now only 340,000 short of the pre-pandemic peak, having recovered 96.7% of the jobs that were lost. Los Angeles County still has the largest shortfall (-335,700), followed by Orange County (-41,500) and San Diego County (-15,400). Riverside and San Bernardino counties remain well above pre-pandemic employment levels. The region’s unemployment rate in August was 4.2%, down from 7.8% a year ago. The lowest rates were in Orange County (3%) and San Diego County (3.4%).

Southern California Home Sales

In the third quarter, 38,356 homes sold, which is down 31.8% from a year ago and 19.4% less than the second quarter of the year.

Pending home sales, which are an indicator of future closings, were down 16.2% from the second quarter, suggesting that closed sales in the final quarter of this year may disappoint.

Sales fell the most in San Diego County, but all markets saw significant declines. Relative to the second quarter, transactions were lower across the board, with Riverside County experiencing the greatest decline (-24.1%).

Listing activity rose an average of 41.6% compared to the second quarter. With more choice in the market and median list prices down 6.8% from the second quarter, it seems that many would-be buyers are sitting on the fence to see if prices will fall further.

Southern California Home Prices

Home sale prices in the quarter rose 4.6% from a year ago but were 7.1% lower than in the second quarter of this year.

Rising mortgage rates are clearly starting to impact the market. This, combined with higher inventory levels, will lead sale prices to continue pulling back.

The region saw double-digit price growth in Orange County, but the overall trend has shown price growth starting to slow. In fact, prices in Los Angeles County rose by only 1.2% year over year.

A period of reversion was inevitable, especially because artificially low mortgage rates could not continue forever. It’s worth remembering that owners saw home values skyrocket over the past few years. This adjustment to home values will only be temporary, and owners still have ample equity in their homes.

A map showing the real estate home prices percentage changes for various counties in Southern California. Different colors correspond to different tiers of percentage change. Los Angeles County has a percentage change in the 0% to 2.4% range. San Bernardino and San Diego are in the 5% to 7.4% change range, Riverside is in the 7.5% to 9.9% range, and Orange is in the 10%+ range.

A bar graph showing the annual change in home sale prices for various counties in Southern California from Q3 2021 to Q3 2022. Orange County tops the list at 10.8%, followed by Riverside at 8.6%, San Bernardino at 7%, San Diego at 5.7%, and Los Angeles at 1.2%.

Mortgage Rates

This remains an uncertain period for mortgage rates. When the Federal Reserve slowed bond purchases in 2013, investors were accused of having a “taper tantrum,” and we are seeing a similar reaction today. The Fed appears to be content to watch the housing market go through a period of pain as they throw all their tools at reducing inflation.

As a result, mortgage rates are out of sync with treasury yields, which not only continues to push rates much higher, but also creates violent swings in both directions. My current forecast calls for rates to peak in the fourth quarter of this year before starting to slowly pull back. That said, they will remain in the 6% range until the end of 2023.

A bar graph showing the mortgage rates from 2020 to the present, as well as Matthew Gardner's forecasted mortgage rates through Q4 2023. After the 5.62% figure in Q3 2022, he forecasts mortgage rates continuing to climb to 6.7% in Q4 2022, 6.55% in Q1 2023, 6.35% in Q2 2023, 6.15% in Q3 2023, and 5.60% in Q4 2023.

Southern California Days on Market

In the third quarter of 2022, the average time it took to sell a home in the region was 25 days, which is 7 more than a year ago and 9 more days than in the second quarter.

Compared to the second quarter of 2022, market time rose in all counties covered by this report.

Homes in San Diego County continue to sell at a faster rate than other markets in the region. All counties saw market time increase year over year.

More homes for sale and higher financing costs have led to increased days on market. That said, it’s important to put the data into perspective; in the third quarter of 2019, the average market time in the region was 42 days.

A bar graph showing the average days on market for homes in various counties in Southern California for Q3 2022. San Diego County has the lowest DOM at 21, followed by Orange at 23, Los Angeles at 25, San Bernardino at 28, and Riverside at 29.

Conclusions

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

The housing market has entered a period of transition following the overheated conditions in 2020-2021. Though the headline numbers are far from buoyant, it’s important to understand that the region is only reverting back to where it was before the pandemic. Any belief that the area is going to experience the same meltdown as it went through in the late 2000s is simply inaccurate. There will be an uncomfortable period, but a return to fundamentals is necessary.

A speedometer graph indicating a balanced market, leaning toward a seller's market in Southern California in Q3 2022.

As such, I have moved the needle more in favor of buyers as the region continues to trend back toward balance.

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 Q3 2022 Southern California Real Estate Market Update appeared first on Windermere Real Estate.

Q3 2022 Central and Southern Oregon Real Estate Market Update

The following analysis of select counties of the Central and Southern Oregon 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 Central and Southern Oregon counties covered by this report continue to see jobs return. The region is only 1,130 jobs shy of pre-pandemic peak employment. The Medford metropolitan statistical area (MSA) is still lagging, with employment levels 2,530 shy of the peak in January 2020. The other markets that have yet to see a full job recovery are Klamath County (-200 jobs) and Josephine County (-40 jobs). The area’s unemployment rate was 4.1%, down from 5.3% a year ago and .1% above the pre-pandemic low. By area, the lowest jobless rate was in Bend (3.6%) and the highest was in Klamath County, where 5.3% of the labor force is still without a job.

Central and Southern Oregon Home Sales

In the third quarter of 2022, 2,436 homes sold, which was a drop of 26.3% from the same period a year ago. Sales were .5% higher than in the second quarter of the year.

Compared to the second quarter of this year, sales fell in Crook, Jackson, and Josephine counties, but rose in the balance of the market areas covered by this report.

Home sales fell in all counties compared to a year ago, with significant declines in the Medford and Bend markets.

The growth in sales from the second quarter, while very small, was pleasing. The region is going through a transition, due in no small part to significantly higher financing costs, but I expect to see more stability come into play as mortgage rates start to even out.

Central and Southern Oregon Home Prices

The average home sale price in the region rose 4.8% year over year to $608,654. Prices were up .9% compared to the second quarter of 2022.

Compared to the second quarter of 2022, average prices rose in all counties other than Jackson, where prices dropped 1%.

Four out of the six counties contained in this report saw sale prices rise year over year. The two counties where prices dropped only experienced a modest decline.

Home prices don’t appear to have been significantly impacted by rising mortgage rates yet. Median list prices in the area rose in all counties other than Crook and Josephine, suggesting that home sellers are generally still confident.

A map showing the real estate home prices percentage changes for various counties in Central and Southern Oregon. Different colors correspond to different tiers of percentage change. Jefferson and Josephine County had a percentage change in the -6% to -0.1% range. Jackson is in the 0% to 4.9% change range and Klamath is in the 5% to 9.9% range. Deschutes is in the 10% to 14.9% change range, and Crook is in the 15%+ change range.

A bar graph showing the annual change in home sale prices for various counties in Central and Southern Oregon from Q3 2021 to Q3 2022. Crook county tops the list at 25.5%, followed by Deschutes at 10.6%, Klamath at 9.6%, Jackson at 4.4%, Josephine at -4.1%, and Jefferson at -5.8%.

Mortgage Rates

This remains an uncertain period for mortgage rates. When the Federal Reserve slowed bond purchases in 2013, investors were accused of having a “taper tantrum,” and we are seeing a similar reaction today. The Fed appears to be content to watch the housing market go through a period of pain as they throw all their tools at reducing inflation.

As a result, mortgage rates are out of sync with treasury yields, which not only continues to push rates much higher, but also creates violent swings in both directions. My current forecast calls for rates to peak in the fourth quarter of this year before starting to slowly pull back. That said, they will remain in the 6% range until the end of 2023.

A bar graph showing the mortgage rates from 2020 to the present, as well as Matthew Gardner's forecasted mortgage rates through Q4 2023. After the 5.62% figure in Q3 2022, he forecasts mortgage rates continuing to climb to 6.7% in Q4 2022, 6.55% in Q1 2023, 6.35% in Q2 2023, 6.15% in Q3 2023, and 5.60% in Q4 2023.

Central and Southern Oregon Days on Market

The average time it took to sell a home in the region rose 12 days compared to a year ago. It took 5 more days for a home to go under contract than it did in the second quarter of the year.

The average time it took to sell a home in the third quarter of 2022 was 33 days.

All counties saw market time rise compared to a year ago. Crook and Jefferson counties saw market time fall compared to the second quarter of this year.

Although rising, the time it took a home to sell in the third quarter remains well below the pre-pandemic average.

A bar graph showing the average days on market for homes in various counties in Central and Southern Oregon for Q3 2022. Deschutes and Jefferson County have the lowest DOM at 27, followed by Crook at 32, Jackson at 24, Josephine at 39, and Klamath at 40.

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 labor market in Central and Southern Oregon continues to improve, but the housing market is starting to experience a period of uncertainty. I mentioned in the second quarter Gardner Report that buyers and sellers may believe the market is underperforming, but this isn’t actually the case. What we are seeing is a pullback from the overstimulated market of 2020 and 2021. The primary reason for this reversion is that mortgage rates have jumped from the all-time lows that were seen during that period.

A speedometer graph indicating a balanced market, bordering on a seller's market in Central and Southern Oregon in Q3 2022.

Homeowners may feel frustrated by this slowing of activity and may also be worried that prices will decline. Though some markets may experience a very modest drop in sale prices, homeowners have seen their property values leap since the pandemic started, and an average of 56% of owners with a mortgage in Central and Southern Oregon are sitting on at least 50% equity. The region will continue to shift back toward equilibrium. As such, I moved the needle closer to signifying a more balanced market than we have seen in over a decade.

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 Q3 2022 Central and Southern Oregon Real Estate Market Update appeared first on Windermere Real Estate.

Q3 2022 Northwest Oregon and Southwest Washington Real Estate Market Update

The following analysis of select counties of the Northwest Oregon and Southwest 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 Oregon counties contained in this report continue to add jobs, but employment levels are still down 56,300 jobs from the pre-pandemic peak. As I mentioned in the second quarter Gardner Report, this is mainly due to the Portland market: Multnomah County employment levels are still down by over 83,000 jobs. Despite this, the unemployment rate within the Oregon counties in this report came in at a very healthy 3.4%, which is down from the pandemic peak of 12.8%.

Southwest Washington saw a full recovery by the summer of 2021, but the job market in that region is considerably smaller. That said, more jobs continue to be added, with employment levels now 12,800 positions higher than the pre-pandemic peak. During the third quarter, the unemployment rate was 4.6%, which is down from 14.2% at the start of the pandemic.

Northwest Oregon and Southwest Washington Home Sales

In the third quarter of 2022, 12,549 homes sold, which is 26.4% lower than a year ago and 13.8% lower than in the second quarter of 2022.

Listing activity has risen across the region, but the current level is still well below the long-term average. Lower sales can be attributed to higher financing costs and lower affordability.

Year over year, sales rose in three counties but fell in the balance of the market. Compared to the second quarter of this year, sales rose in Benton, Clatsop, Cowlitz, and Klickitat counties.

The region is acting like most across the country. More homes are becoming available, but many would-be buyers are waiting for mortgage rates to stabilize or drop, which is impacting sales.

Northwest Oregon and Southwest Washington Home Prices

The average home sale price in the region rose 5% year over year to $566,595. Prices were 3.9% lower than in the second quarter of this year.

Relative to the second quarter of 2022, average prices rose in Benton, Clatsop, Lincoln, and Wasco counties. They remained static in Marion County but fell in the balance of the markets.

All but five counties saw average sale prices rise compared to a year ago, but the pace of growth is certainly slowing.

Clearly, rising mortgage rates have started to impact home prices. Median list prices are still rising in almost all markets compared to the second quarter, which suggests that sellers continue to be confident. That said, I expect to see either list prices start to soften or sellers take their homes off the market until they see conditions improving.

A map showing the real estate home prices percentage changes for various counties in Northwest Oregon and Southwest Washington. Different colors correspond to different tiers of percentage change. Wasco County is the only county with a percentage change in the 12%+ range. Lincoln, Benton, Columbia, Washington, and Hood River counties are in the 8% to 11.9% change range, Lane, Marion, Polk, Clark, and Clatsop are in the 4% to 7.9% change range, Multnomah and Clackamas counties are in the 0% to 3.9% change range, and Cowlitz, Skamania, Klickitat, Yamhill, and Linn counties are in the -9% to -0.1% change range.

A bar graph showing the annual change in home sale prices for various counties in Northwest Oregon and Southwest Washington from Q3 2021 to Q3 2022. Wasco county tops the list at 33.1%, followed by Benton at 11.9%, Hood River at 9.5%, Lincoln at 9.4%, Washington at 9.1%, Columbia at 8.5%, Marion at 7.8%, Clatsop at 7.7%, Clark at 7.4%, Lane at 5.3%, Polk at 5.2%, Multnomah at 3.8%, Clackamas at 2%, Linn at -0.3%, Yamhill at -1%, Cowlitz at -1.2%, Klickitat at -5.5%, and Skamania at -8.4%.

Mortgage Rates

This remains an uncertain period for mortgage rates. When the Federal Reserve slowed bond purchases in 2013, investors were accused of having a “taper tantrum,” and we are seeing a similar reaction today. The Fed appears to be content to watch the housing market go through a period of pain as they throw all their tools at reducing inflation.

As a result, mortgage rates are out of sync with treasury yields, which not only continues to push rates much higher, but also creates violent swings in both directions. My current forecast calls for rates to peak in the fourth quarter of this year before starting to slowly pull back. That said, they will remain in the 6% range until the end of 2023.

A bar graph showing the mortgage rates from 2020 to the present, as well as Matthew Gardner's forecasted mortgage rates through Q4 2023. After the 5.62% figure in Q3 2022, he forecasts mortgage rates continuing to climb to 6.7% in Q4 2022, 6.55% in Q1 2023, 6.35% in Q2 2023, 6.15% in Q3 2023, and 5.60% in Q4 2023.

Northwest Oregon and Southwest Washington Days on Market

The average number of days it took to sell a home in the region rose eight days compared to the same period a year ago. It took five more days for homes to sell compared to the second quarter of this year.

The average time it took to sell a home in the third quarter of 2022 was 38 days.

Lincoln County was the only market where the length of time it took for a home to sell fell compared to the same period a year ago. Compared to the second quarter of 2022, market time fell in Hood River, Linn, and Skamania counties.

Although days on market have risen, they are still well below the pre-pandemic level. As mentioned earlier, uncertainty surrounding the housing market (mainly due to mortgage rates) is making buyers significantly more cautious. I expect this to change as we move into the new year.

A bar graph showing the average days on market for homes in various counties in Northwest Oregon and Southwest Washington for Q3 2022. Washington County has the lowest DOM at 19, followed by Columbia at 21, Yamhill and Clackamas at 22, Lane, Clark, and Multnomah at 23, Hood River at 24, Cowlitz at 27, Clatsop at 29, Skamania at 38, Wasco at 40, Klickitat at 45, Marion at 61, Linn and Lincoln at 62, Polk at 69, and Benton at 77.

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 labor market is slowly recovering, the specter of an economic slowdown in 2023 is starting to weigh on the market. The rapid pace of home-price growth in 2020 and 2021 was never going to last forever. The market is currently going through a period of reversion, which will slow it to a more sustainable pace. Although this may be painful to watch for some, it is necessary. Sellers have seen the value of their homes skyrocket over the past two years, so even if we experience a modest downturn in home prices, they are still in a very good situation. I would add that 58% of homeowners with a mortgage in Northwest Oregon/ Southwest Washington have more than 50% equity in their homes.

A speedometer graph indicating what is barely a seller's market in Northwest Oregon and Southwest Washington in Q3 2022.

All that considered, I am moving the needle more toward balance, but until buyers and sellers start to feel more confident in the local and national economy, the market is likely to continue experiencing uncertainty. This will lead to lower sales activity and put downward pressure on prices.

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.

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