Q1 2018 Western Washington Gardner Report

W I N D E R M E R E R E A L E S TAT E P R E S E N T S

W E S T E R N W A S H I N G T O N | F I R S T Q U A R T E R 2 0 18

The following analysis of the Western 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 me.

ECONOMIC OV ERV IE W The Washington State economy added 96,900 new jobs over the past 12 months, representing an annual growth rate of 2.9%—still solidly above the national rate of 1.5%. Most of the employment gains were in the private sector, which rose by 3.4%. The public sector saw a more modest increase of 1.6%.

The strongest growth was in the Education & Health Services and Retail sectors, which added 17,300 and 16,700 jobs, respectively. The Construction sector added 10,900 new positions over the past 12 months.

Even with solid increases in jobs, the state unemployment rate held steady at 4.7%—a figure that has not moved since September of last year.

I expect the Washington State economy to continue adding jobs in 2018, but not at the same rate as last year given that we are nearing full employment. That said, we will still outperform the nation as a whole when it comes to job creation.

HOME S A LE S AC T I V I T Y ■■

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A NNUA L CH A NGE IN HOME S A LE S

Q1-2 017 TO Q1-2 018

There were 14,961 home sales during the first quarter of 2018. This is a drop of 5.4% over the same period in 2017.

Clallam County Grays Harbor County

7.7%

Clallam County saw sales rise the fastest relative to the first quarter of 2017, with an increase of 16.5%. In most of the other markets, the lack of available homes for sale slowed the number of closings during this period.

Whatcom County

3.6%

Thurston County

3.3%

Cowlitz County

-2.4%

San Juan County

-3.1%

Kitsap County

-4.6%

Island County

-5.1%

Lewis County

-5.7%

Pierce County

-6.2%

King County

-6.3%

Mason County

-7.0%

Snohomish County

-9.9%

Listing inventory in the quarter was down by 17.6% when compared to the first quarter of 2017, but pending home sales rose by 2.6% over the same period, suggesting that closings in the second quarter should be fairly robust.

The takeaway from this data is that the lack of supply continues to put a damper on sales.

I also believe that the rise in interest rates in the final quarter of 2017 likely pulled sales forward, leading to a drop in sales in the first quarter of 2018.

16.5%

Skagit County

-12.0%

Jefferson County

-17.4% -20%

THE G A R DNER R EPOR T | WINDERMERE RE A L E S TAT E

-15%

-5%

0

5%

10%

15%

20%

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HOME PR ICE S ■■

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With ongoing limited inventory, it’s not surprising that the growth in home prices continues to trend well above the long-term average. Year-over-year, average prices rose 14.4% to $468,312.

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Economic vitality in the region is leading to robust housing demand that far exceeds supply. Given the relative lack of new construction homes— something that is unlikely to change any time soon—there will continue to be pressure on the resale market. As a result, home prices will continue to rise at above-average rates in the coming year.

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When compared to the same period a year ago, price growth was strongest in Grays Harbor County at 27.5%. Ten additional counties experienced double-digit price growth.

Mortgage rates continued to rise during first quarter, and are expected to increase modestly in the coming months. By the end of the year interest rates will likely land around 4.9%, which should take some of the steam out of price growth. This is actually a good thing and should help address the challenges we face with housing affordability—especially in markets near the major job centers.

A NNUA L CH A NGE IN HOME S A LE PR ICE S WHATCOM SAN JUAN SKAGIT ISLAND SNOHOMISH

CLALLAM

JEFFERSON KITSAP GRAYS HARBOR

KING

MASON PIERCE THURSTON

0%–4.9%

LEWIS

5.0%–9.9% 10.0%–14.9%

COWLITZ

15.0%–19.9% 20.0%+

Grays Harbor County

27.5%

Lewis County

22.6%

Mason County

18.7%

Kitsap County

17.9%

Pierce County

16.2%

King County

15.5%

Snohomish County

15.2%

Thurston County

15.0%

Skagit County

13.2%

San Juan County

10.8%

Cowlitz County

10.6%

Clallam County

9.5%

Whatcom County

7.4%

Island County

4.8%

Jefferson County

4.5% 0

THE G A R DNER R EPOR T | WINDERMERE RE A L E S TAT E

Q1-2 017 TO Q1-2 018

5

10

15

20

25

30

W E S T ERN WA SHING TON | FIR S T QUA R TER 2018

DAY S ON M A R K E T

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The average number of days it took to sell a home dropped by seven days when compared to the same quarter of 2017.

home either drop or remain essentially static relative to the same period a year ago.

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King County continues to be the tightest market in Western Washington, with homes taking an average of 24 days to sell. Every county in the region saw the length of time it took to sell a

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In looking at the entire region, it took an average of 61 days to sell a home in the first quarter of this year. This is down from 68 days in the first quarter of 2017 but up by eleven days when compared to the fourth quarter of 2017.

AV ER AGE DAYS ON M A R K E T

Q1-2 018 24

Snohomish County

28

Pierce County

38

Thurston County

39

Kitsap County

41

Cowlitz County

56

Skagit County

56

Whatcom County

59

Island County

60

Mason County

74

Lewis County

76

Clallam County

82

Grays Harbor County

83

Jefferson County

84

San Juan County

117 0

25

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50

75

100

125

CONCLUS I ON S T KE AR M

SE LL ER ’S

T KE AR M

King County

Anyone expecting to see a rapid rise in the number of homes for sale in 2018 will likely be disappointed. New construction permit activity—a leading indicator—remains well below historic levels and this will continue to put increasing pressure on the resale home market.

BU YE R’ S

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This speedometer reflects the state of the region’s housing market using housing inventory, price gains, home sales, interest rates, and larger economic factors. For the first quarter of 2018, I have left the needle at the same point as fourth quarter of last year. Price growth remains strong even as sales activity slowed. All things being equal, 2018 is setting itself up to be another very good year for sellers but, unfortunately, not for buyers who will still see stiff competition for the limited number of available homes for sale.

A BOU T M AT T HE W G A R DNER Mr. Gardner is the Chief Economist for Windermere Real Estate, specializing in residential market analysis, commercial/industrial market analysis, financial analysis, and land use and regional economics. He is the former Principal of Gardner Economics, and has more than 30 years of professional experience both in the U.S. and U.K. WE S T ERN WA SHING TON | FIR S T QUA R TER 2018