Q1 2022 Gardner Report for Western Washington

Q1 2022

Western Washington

This analysis of the Western Washington real estate market is provided

by Windermere Real Estate Chief Economist Matthew Gardner to help you make informed real estate decisions.

windermere.com

The post-COVID job recovery continues. Though data showed the number of jobs dropped in January, February saw gains that almost offset the jobs lost the prior month.

Q1 2022

Western Washington

ECONOMIC OVERVIEW Home Sales ❱

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In the first quarter of 2022, 15,134 homes sold, representing a drop of 5.8% from the same period a year ago, and down 31.7% from the fourth quarter.

Yet again, supply-side constraints limited sales.

Every county except Snohomish showed lower inventory levels than a year ago.

Sales grew in five counties across the region but were lower across the balance of the counties contained in this report. Compared to the fourth quarter, sales were lower across all market areas.

The ratio of pending sales (demand) to active listings (supply) showed pending sales outpacing listings by a factor of 6.7. Clearly, the significant jump in mortgage rates in the first quarter has not yet impacted demand. Rather it appears to have stimulated buyers partly due to FOMO (Fear of Missing Out)!

As of February (March data is not yet available), the region had recovered all but 47,000 of the more than 300,000 jobs lost due to the pandemic. Of note is that employment levels in Grays Harbor, Thurston, San Juan, and Clallam counties are now above their pre-pandemic levels.

In February, the regional unemployment rate rose to 4.1% from 3.7% in December. Although this may be disconcerting, an improving economy has led more unemployed persons to start looking for a job, which has pushed the jobless rate higher. I expect the regional economy to continue expanding as we move into the spring and summer, with a full job recovery not far away.

Annual Change in Home Sales by County / Q1 2021 to Q1 2022 15.9%

THURSTON

6.8%

KITSAP

4.5%

MASON

2.6%

CLALLAM

1.3%

COWLITZ

-3.8%

LEWIS PIERCE

-4.3%

SNOHOMISH

-4.5% -5.3%

GRAYS HARBOR

-6.5%

ISLAND

-8.7%

WHATCOM

-9.7%

SK AGIT

-10.4%

JEFFERSON

-11.8%

KING SAN JUAN

-31.1% -30%

-20%

-10%

0

10%

Q1 2022 Western Washington

20%

GARDNER REPORT

Home Prices

26.3%

JEFFERSON

26.1%

Compared to the same period a year ago, price growth was again strongest in San Juan County, but all markets saw prices rising more than 10% from a year ago.

ISLAND

Relative to the final quarter of 2021, all but Kitsap (-2.7%), Mason (-1.5%), Skagit (-1.8%), Jefferson (-6.3%), and Clallam (-0.1%) counties saw home prices rise.

PIERCE

13.6%

GRAYS HARBOR

13.5%

KITSAP

11.9%

SK AGIT

11.6% 10.3%

MASON

LEWIS

15.0% to 19.9% COWLITZ

10%

20%

30%

40%

50%

60%

70%

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 speed of the surge in rates is due to the market having quickly priced in the seven-to-eight rate increase that the Fed is expected to implement 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.

5.0%

Q3

Q4

4.72%

Mortgage Rates 4.74%

THURSTON

30.0%+

COWLITZ

4.75%

KING

PIERCE

25.0% to 29.9%

13.7%

4.65%

KITSAP

GRAYS MASON HARBOR

20.0% to 24.9%

THURSTON

4.5% 4.0% 3.5%

3.79%

SNOHOMISH

CLALLAM

10.0% to 14.9%

14.2%

CLALLAM

0

ISLAND

JEFFERSON

15.1%

3.0% 2.5%

Q1

Q2

Q3

2020

Q4

Q1

Q2

Q3

3.08%

SKAGIT

16.7%

LEWIS

2.87%

SAN JUAN

17.6%

KING

3.00%

WHATCOM

21.0%

2.88%

The market remains supply starved. While increases in “new” listings suggest that more choice is coming to market, it remains insufficient to meet demand.

22.5%

WHATCOM

2.76%

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SNOHOMISH

2.95%

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66.1%

SAN JUAN

3.23%

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Although financing costs have jumped, this has yet to prove to be an obstacle to buyers, as prices rose 16.4% year-over-year to an average of $738,152.

Naturally, there is a lag between rates rising and any impact on market prices. It will be interesting to see what, if any, effect this has in the next quarter’s report.

3.51%

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Annual Change in Home Sale Prices by County / Q1 2021 to Q1 2022

Q4

Q1

2021

Q2

2022

Q1 2023

NOTE: Our forecast excludes points and will therefore show rates that are lower than you may be quoted.

Q1 2022 Western Washington

GARDNER REPORT

Days on Market ❱

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Average Days on Market by County / Q1 2022

It took an average of 25 days for a home to go pending in the first quarter of 2022. This was 4 fewer days than in the same quarter of 2020, but 2 days more than in the fourth quarter of 2021.

SNOHOMISH

PIERCE

15

Snohomish, King, and Pierce counties were the tightest markets in Western Washington, with homes taking an average of 11 to 15 days to sell. The greatest drop in market time compared to a year ago was in San Juan County, where it took 23 fewer days for homes to sell.

THURSTON

15

All but five counties saw average time on market drop from the same period a year ago, but the markets where it took longer to sell a home saw the length of time increase only marginally.

JEFFERSON

23

SK AGIT

23

Quarter over quarter, market time dropped in Snohomish, King, and Pierce counties. Jefferson and Clallam counties also saw modest improvement.

In the balance of the region the length of time a home was on the market rose, but seasonality undoubtedly played a part.

11 14

KING

17

KITSAP

20

ISLAND

22

WHATCOM

24

MASON COWLITZ

27

CLALLAM

27 35

GRAYS HARBOR

36

LEWIS

62

SAN JUAN

10

0

20

30

40

M

’S ER

SE

LL

ER

T

BUY

ET

RKE

Given all the factors discussed above, I have decided to leave the needle in the same position as the last quarter. The market still heavily favors sellers, but if rates rise much further, headwinds will likely increase.

K AR

MA

of increase starts to soften, it may be an indication of an inflection point, but it does not appear to be that way yet.

’S

The numbers have yet to indicate that demand is waning amid rising interest rates, but this is sure to become a greater factor as we move into the spring. A leading indicator I pay attention to is changes to list prices and, in most counties, these continue to increase. This suggests that sellers remain confident they will be able to find a buyer even in the face of higher borrowing costs. If this pace

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.

About Matthew Gardner

Conclusions

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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.

©2022 Windermere Real Estate Services Co. All rights reserved.

Q1 2022 Western Washington

GARDNER REPORT