An evolving real estate reality

Buyers, sellers adapt to shifts in the Methow market

BY ANN MCCREARY

Describing the Methow Valley real estate market over the past three years, local brokers have used terms like “frenzied,” “competitive,” and “heartbreaking.”

As 2023 unfolds, brokers are using words like “balanced,” “stable” and “normal” to describe the changes they are seeing in the local real estate scene.

However, they don’t anticipate a return to a pre-pandemic “normal” any time soon, if ever. That’s because the factors that have contributed to the high demand and volatility of the local real estate market — namely the in-migration of people able to work remotely — will continue to impact the valley, they say.

With the onset of the COVID-19 pandemic in 2020, office workers turned into telecommuters almost overnight, and communities like the Methow Valley became meccas — dubbed “zoom towns” — for people fleeing urban areas to live and work remotely in more tranquil surroundings.

“The zoom town frenzy pace has slowed, but it has not stopped,” said Heather Marrone, designated broker/owner of Blue Sky Real Estate in Winthrop.

“I don’t’ think it will ever stop because the description of so many jobs has shifted forever from the pandemic. As long as jobs continue to increase their remote aspects or options, Methow Valley buyers will continue to fit that profile,”

Single family homes

Marrone said.

The buying frenzy “has definitely slowed down a lot,” said Ina Clark, managing broker/owner of Mountain to River Realty in Winthrop. “However, our location with good schools and incredible outdoor recreation will continue to be desirable.”

Cooling Trend

Despite its continued desirability, the valley is following national and regional trends with a real estate market that has gone from red hot to lukewarm. The overheated market began cooling off during 2022 as interest rates rose, the inventory of property was depleted, and people became concerned about inflation and reduced purchasing power. Nationwide, the number of home sales dropped 18% in 2022 compared to 2021, according to the National Association of Realtors.

In the Methow Valley, the real estate frenzy was in full force as 2022 began, with intense competition among buyers for a paltry inventory of homes and properties. Bidding wars were common, often won by cash transactions well over asking price. But things began to shift as the year progressed, said Marrone.

“[The year] 2022 could be divided into two parts. January through July, and then the rest of the year. The pace actually started to slow by the beginning of July, but it took about a month to close out the transactions that came under contract during the ‘superhot’ market,” she said.

During the first part of the year, homes in the valley sold at an average of 5% over the listing price. During the second half of the year, average sales had dropped to about 4% below listing price, she said.

“But the style of home and location greatly influence that number,” Marrone noted. “For example, modern homes in any valley location ran closer to 10% above list price. Homes in the Mazama area also averaged closer to 10% above list. Those homes are now selling around list price versus selling below list. There are always exceptions, but that is the trend we see right now,” she said in February.

Competition for desirable properties was still intense at the beginning of 2023, Clark said. “Recently I had seven offers on a home and four of them were in cash,” she said.

The pool of cash buyers is shrinking, however, said Adam Rynd, designated broker/owner of Coldwell Banker Cascade Real Estate in Winthrop.

“Much of that is due to the declines in the stock market, and particularly technology stock values. The reality [stocks] in order to generate cash to re-invest in real estate,” Rynd said.

“That may be an investment property, a second home, or a new primary residence in a community they love, like the Methow Valley, “he said. “With stock values down ... the number of cash buyers and the amount of cash they have to invest has also fallen.”

Interest Rates

For buyers who need to finance a home, rising interest rates in 2022, which reached 7% toward the end of the year, created sticker shock and are expected to contribute to a slowdown in home sales nationwide this year, according to real estate market economists. In the early months of 2023, rates had dropped to the 6% range.

“We felt a pause for sure when [interest rates] were around 7%,” said Marrone. “Many buyers paused the search as homes they could afford at 3% went beyond what they could afford at 7%. Now that we are in the low 6’s and speculation is that within in a year we could be in the low 5’s, buyers at or below our median price point are poking their heads out again. Buyers who could leverage investments and buy cash also paused for a bit ... to see where the real estate market was going.”

“Since November, mortgage rates have continued to fall, and I believe we are going to see historically average interest rates by the end of summer,” Rynd said. “Many buyers that were waiting for better home pricing and lower mortgage rates are now reaching out to resume their searches. It’s an encouraging sign and I expect we will find more eager buyer activity after our snow melts in the Methow Valley.”

The Methow Valley’s real estate market has a pronounced seasonal ebb and flow, with spring and summer bringing a lot more action in terms of listings and sales. So the real impact of interest rates on sales and prices likely won’t be known until later in the year.

“The question ... becomes whether buyers will restart their home search in the spring despite higher mortgage rates, or if sellers will have to lower prices further to entice the buyers back into the market. I believe the latter is more likely,” said David Gardner, chief economist for Windermere Realty.

Interest rates are low in comparison to a 20-year cycle, said Bob Monetta, owner/broker of Windermere Methow Valley Real Estate.

“Lower interest rates will help the first-time home buyer and the local buyer most,” he said. “Out-ofarea buyers have higher down payments and usually higher incomes and are not affected as much.”

Price Correction

Real estate sales last year saw an increase of 8% in overall sales dollar volume in the Methow Valley, although the number of sales were 14% lower than the previous year, according to a report on the 2022 real estate market compiled by Windermere Real Estate.

The majority of single family home sales in the Methow Valley occurred in the $500,000-$700,000 range, while luxury home sales (above $800,000) increased 31%, according to the Windermere report.

Local brokers describe a “correction” in prices of homes recently listed for sale. “We’ve seen a flattening of home prices and I expect that to continue for the next 12 to 18 months,” said Rynd. “Many sellers were perhaps too aggressive in listing their homes for more than they were realistically worth in the past year. Now were seeing ‘corrections’ to those prices more than we’re seeing real price drops.”

Rynd said he hopes that the next year will bring “a new equilibrium as home prices flatten or stabilize and interest rates also stabilize, with declines coming toward the end of 2023. Many industry leaders are hoping for more balance in real estate.”

“List prices are starting more conservatively this year for sure,” Marrone said. “This is not exact math, but I estimate about a 10% correction from last year. This is a dip in the curve, but the trend is still up.”

That upward trend in prices pushed the median home price in the valley at the end of 2022 to $640,000. In 2021 the median home price was $500,000; in 2020 it was $420,000; and in 2019 it was $360,000, according to Blue Sky Real Estate figures.

Land prices showed similar upward trends, almost doubling over the same period. At the end of 2022 the median land price was $208,000; in 2021 it was $175,000; in 2020 it was $115,000; and in 2019 it was $105,000.

Impacts On Locals

As prices have soared in recent years, it has become difficult or impossible for many local residents to buy property — a growing source of community concern and a problem for local employers who are struggling to find and keep employees who are priced out of the housing market.

“Up to about 2018, it was realistic for many locals to own homes in the valley, especially if they were dual income,” Marrone said. “The median house price in 2018 was $319,000. Unless you have been able to double your income since 2018 — with a current median sale price of $640,000 — you aren’t buying a home.”

A study of the Methow Valley economy released in 2022 by TwispWorks found that the valley is undergoing a “rural restructuring” as a result of growth fueled by “amenity migration” — the influx of people in search of community and lifestyle. These well-financed newcomers have competed for scarce properties, driving up prices and shattering sales records.

Almost one-third of the valley’s residents were working remotely the economic study found, and their annual income was almost four times the median yearly income ($57,779) of families that live and work in the Methow Valley.

The influx of remote workers has changed the valley forever, said Delene Monetta, owner/broker of Windermere Methow Valley Real Estate. The transformation of the valley into a so-called zoom town “is old news now. The zoomies are here to stay,” she said.

“Affordability will remain a significant challenge, as long as demand for homes exceeds supply,” said Rynd. “Coldwell Banker is very supportive of the work being done by Methow Valley Housing Trust to provide more affordable housing units. We hope to see more support from Okanogan