2018 Year End Walla Walla Valley Real Estate in Review

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REAL ESTATE

Walla Walla REAL ESTATE REVIEW

John L. Scott Walla Walla 10 S. 4th Ave, Walla Walla, WA 99362

EQUAL HOUSING

OPPORTUNITY

Office Leader: Dennis Gisi, dgisi@johnlscott.com This office is independently owned and operated

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INDEX 2

FOMC TACKLING THE HOUSING AFFORDABILITY CRISIS INTRODUCTION WALLA WALLA COLLEGE PLACE MILTON FREEWATER DENNIS GISI

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John L. Scott Walla Walla 10 S. 4�� Ave, Walla Walla, WA 99362 EQUAL HOUSING

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This office is independently owned and operated

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REAL ESTATE

FOMC

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Fantastic News This means the Fed will actually look at the economic indicators and determine adjusts as opposed to blindly following a previous plan.

We still have a flight to quality as investor purchase CMO’s at a premium over the market. CMO’s are Collateralized Mortgage Obligations like first deed 10, 15, and 30 year fixed or variable rate loans. Many economist see this premium going away toward the 2nd half of the year. What does this mean? Currently 30 year fixed rate loans are priced at approx. 5.3% but the premium investors are willing to pay for those loans in their investment pool pushes the rate down to 4 7/8% which is what your borrower pays. Many economists believe the year end rate will be 5.3% for a 30 year fixed loans which means the investor willingness to pay more for quality of the debt will fade.

See below for the Fed (Federal Open Market Committee) announcement. Let me know if you have questions.

As expected, the Fed maintained the target range for the federal funds rate at 2-1/4 to 2-1/2 percent – NO CHANGE; also dropped language that more rate hikes would be warranted – MORE CAUTIOUS APPROACH; and said they would consider adjusting the reduction of the portfolio if conditions warrant – ON HOLD FOR NOW.

Rates and Market Fed Funds Target: 2-1/4 to 2-1/2 % Market Reaction: stock market jumped and bond yields declined about 5bp

The FOMC Announced the Following 10-0 vote Economic activity has been rising at a solid rate Inflation remains near 2%

The Statement Information received since the Federal Open Market Committee met in December indicates that the labor market has continued to strengthen and that economic activity has been rising at a solid rate. Job gains have been strong, on average, in recent months, and the unemployment rate has remained low. Household spending has continued to grow strongly, while growth of business fixed investment has moderated from its rapid pace earlier last year.

On a 12-month basis, both overall inflation and inflation for items other than food and energy remain near 2 percent. Although market-based measures of inflation compensation have moved lower in recent months, survey-based measures of longer-term inflation expectations are little changed.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. In support of these goals, the Committee decided to maintain the target range for the federal funds rate at 2-1/4 to 2-1/2 percent. The Committee continues to view sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective as the most likely outcomes. In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

Voting for the FOMC monetary policy action were : Jerome H. Powell, Chairman; John C. Williams, Vice Chairman; Michelle W. Bowman; Lael Brainard; James Bullard; Richard H. Clarida; Charles L. Evans; Esther L. George; Randal K. Quarles; and Eric S. Rosengren.

Best regards, | President & CEO | PCBB

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TACKLING THE HOUSING AFFORDABILITY CRISIS 4

Olympia Somehow I found myself in Olympia for the Washington Association of Realtor’s Legislative Session on Hill Day. It turns out that I was nominated to the Legislative Steering Committee. I am proud to have been asked and hope I can contribute to this in a way the benefits those in the real estate and building industry. Below is an excerpt of our 2019 Legislative mission “ Tackling the Housing Affordability Crisis.”

Legislative Priorities Reform Condominium Liability Laws Increase Urban & Suburban Housing Supply in Urban Growth Areas Aligning the Short Subdivision Process with Ecology’s SEPA Regulations Support the Housing Trust Fund for Homeownership State Funding Support for Housing, Homelessness, & Infrastructure REET & Lodging Tax - Local Funding Tools for Housing & Homelessness Expanding the Multi-Family Tax Exemption Program

Tackling the housing affordability crisis The lack of housing opportunities have reached crisis level in Washington State. This issue affects us all, creating a burden on home owners, renters, employers and on. Washington REALTORS® is pleased to announce a coalition comprised of non-profits and for profits called "Unlock the Door for Affordable Homeownership". Together, we're working with our elected officials on legislation surrounding condo liability, buildable lands, zoning requirements and more.

For more information, visit www.unlockthedoorwa.com.

View our TV and Radio Ads here: https://www.warealtor.org/government/unlock-the-door

We met with Legislators: The 8th Legislative District: Senator Sharon Brown Rep. Brad Klippert Rep. Matt Boenhke The 9th Legislative District: Senator Mark Schoessler Rep. Mary Dye Rep. Joe Scmick (unavailable) The 16th Legislative District: Senator Maureen Walsh Rep. Skylar Rude Rep. Bill Jenkin (unavailable) Our methodology is we were not asking for money to support this agenda but only for their support to address and issue with the help our the Washington Association of Realtors. I am pleased to announce we have a fantastic group of Legislators representing our districts and look forward to success during this long legislative session.

Let me know if you have questions.

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Intro

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Introduction I have fielded many questions regarding the future of the housing market as many people (usually those “off the street”) feel the market is going to slow or possibly crash because of high home prices and higher interest rates. . The primary reason is jobs. We are in a extremely viable job market. Jobs are available across the board, from unskilled labor to very skilled scientists and doctors. Currently, there are 738 full time positions listed on Indeed.com as well as another 361 part-time. Of those positions there are 462, 259 and 234 jobs in Kennewick, Richland and Pasco respectively.

At John L. Scott Real Estate Pasco 23% of our business comes from relocation for quality high paying positions.

Some of those this last year went to work for Amazon, Burlington Northern, Lamb Weston, Kadlec Hospital, various school districts, JLG Equipment and many more. Not included in this are those who are relocating in retirement for the sunshine, golf, wine and roads less traveled.

My last report discussed interest rates and the loss of purchasing power as interest rates go up. This is a key element to the housing market but what most people missed including myself is the “Nervous Factor”. The definition of the Nervous Factor is “How do the individual investors feel about the economy and world affairs.

Interest Rates today should be around 4.98% based on the 30-year US Treasury. However, the average rate with no point spread was 4.25-4.75% for the 30-year fixed rate mortgage loan. Why? There is so much money in the economy that investors were willing to pay a premium in order to get a collateralized mortgage. This is typically called the “flight to quality” so the investors can sleep at night. The beneficiaries are … The home borrowers purchasing new or existing homes. This along with jobs is bolstering our housing market locally and nationally.

Let’s look at each of our cities in the Walla Walla, College Place and Milton Freewater.

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REAL ESTATE

Walla Walla

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Walla Walla They call Walla Walla steady eddy for a reason; the monthly numbers were very consistent for 2018. Looking at the chart for 2018 you can see we steadily climbed out of last winter and steadily increased inventory and sales until the end of the year.

Sales were up approximately 4.12% for the year. However, a longer view is sales were down 2.97% over December 31, 2016. . The strongest segments of the market were between $600-700,000 with a 116% growth rate, $500-550,000 (100% growth) and finally $350-400, 000 (61.8% growth) respectively. The declines occurred in the following segments, $550-600,00, $150-200,000 and finally $200-250,000.

In my opinion, the most important reason for the upswing is the pre-retirement and retirement markets with many west siders moving to Walla Walla to get out of the rain and high density living.

The biggest reason for the decline is the lack of available land at affordable prices to motivate developers into taking a risk that builders and eventually homeowners will purchase the final product. The second reason is demand has outplaced supply for several years as Walla Walla does not have a strong builder market.

The average days on market in Walla Walla is 58 days.

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REAL ESTATE

College Place 7

College Place They call Walla Walla steady eddy for a reason and College Place was no different. The monthly numbers were very consistent for 2018. Looking at the chart for 2018 you can see we steadily climbed out of last winter and steadily increased inventory and sales until the end of the year.

Sales were up approximately .67% for the year. However, a longer view is sales were down 10.7% over December 31, 2016. The strongest segments of the market were between $350-400,000 with a 160% growth rate, $250-300,000 (80% growth) and finally those homes up to $150, 000 (66.7% growth) respectively. The declines occurred in the following segments, $450-500,00, $150-200,000 and finally $200-250,000. I think it is interesting to note that the strongest growth was in some categories were those left behind by Walla Walla particularly in the under $200,000 range.

In my opinion, the most important reason for the upswing is the pre-retirement and retirement markets have pushed prices up in Walla Walla. Now people are looking to other areas particularly College Place for more affordable housing.

The biggest reason for the decline is the lack of available land at affordable prices to motivate developers into taking a risk that builders and eventually homeowners will purchase the final product. The second reason is demand has outplaced supply for several years as Walla Walla does not have a strong builder market.

The average days on market in College Place is 46 days. The shorter days on market is due to lower price points and more demand than the higher price points in Walla Walla.

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REAL ESTATE

Milton Freewater 8

Milton Freewater They call Walla Walla steady eddy for a reason and College Place was no different. Milton Freewater was completely opposite looking at the charts the number were strong over last winter and into this spring and started trailing off in July throughout the rest of the year.

Sales were down approximately 12.9% for the year after having been up 11.6% in 2017. However, a longer view is sales were down 2.9% over December 31, 2017. The strongest segments of the market were between $200-250,000 with a 80% growth rate, $150-200,000 (47.1% growth) respectively. The declines occurred in the following segments, $250-300,00, $300-350,000 and finally under $150,000. I think it is interesting to note that the strongest growth was in some categories were those left behind by Walla Walla particularly in the under $250,000 range.

In my opinion, the most important reason for the upswing is the pre-retirement and retirement markets have pushed prices up in Walla Walla. Now people are looking to other areas particularly Milton-Freewater for more affordable housing. The attitude of not moving to Oregon because of their income tax due to affordable housing is disappearing.

The biggest reason for the decline is the lack of available land at affordable prices to motivate developers into taking a risk that builders and eventually homeowners will purchase the final product. It is just tough to build in these segments due to the continual rise in construction costs.

The average days on market in Milton Freewater is 70 days.

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DENNIS GISI

REAL ESTATE

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Real Estate Experience

Land Management

Dennis Gisi has been Owner- Broker, Chairman and CEO since 2010 of D. Gisi & Assoc. LLC, dba John L Scott Tri Cities Pasco, a real estate brokerage firm specializing in the sale and leasing of residential and commercial property.

He is also a Co-Owner Broker of the John L. Scott Real Estate offices in Walla Walla, WA and Milton-Freewater and Hermiston Oregon.

Responsible for managing 48,000 acres of land in Washington, Oregon, Idaho USA and Alberta, Canada Land Consisted of: Dryland Farming Irrigated Framing Orchards Timber Grazing Wetlands Oil Leases Owner of Single and Multi-Family Residences Pullman, College Place, and Walla Walla, WA

Specific (private) Real Estate Investments, projects; Residential Development Pasco WA Desert Plateau = 56 lots Wilson Meadows =118 lots Desert Sunset = 100 lots West Vineyard Estates = 25 lots Fox Hollow = 29 lots Eagle Crest Neighborhood = 65 lots West Richland WA Kingview V – 32 lots.

For a total of 425 lots

Private- Commercial Development Construction and Leaseback West Pasco Library, Pasco WA Wayne Dalton Building Distribution Center - Vista Field Kennewick WA Office Warehouse - Vista Field, Kennewick WA Women's Clinic, Walla Walla General Hospital Walla Walla, WA Bank Building for Bank Reale, Pasco WA Environmental Cleanup and Historical Design 51 E Main, Walla Walla WA

Banking Experience Founder, Director – Bank Reale, Pasco WA Retired Chairman, CEO -Bank Reale, Pasco WA Past Director of Strategic Planning – Baker Boyer Bank, Walla Walla WA Past VP – Trust and Investment Officer, Baker Boyer Bank, Walla Walla, WA Past Certified Financial Planner and Client Investment Manager- American Express, Walla Walla WA

Community Service Appointee to the Washington State Assoc. of Realtors – Legislative and Finance Committees Finance Council of St. Patrick’s Catholic Church in Walla Walla, WA, Former -Treasurer of the Washington State Foundation for Early Learning (FEL), Board Member to Thrive by 5 Governor's Appointee to Financial Education Public Private Partnership, (FEPPP).

Past President-Board Member – Pasco Chamber of Commerce.

Residential Construction R & D Homes, Inc. Tri Cities, WA Gisi Construction (Residential Bldr.) Walla Walla, WA

509-520-0505 Dgisi@johnlscott.com