The Northwest region is headed towards a balanced market that slightly favors sellers, according to a new analysis from Windermere Real Estate Chief Economist Matthew Gardner. In his quarterly Gardner Report, Gardner looked Western Washington data from the last three months.
When it comes to the local economy, he found, the likelihood of a 2023 recession is down to approximately 50%. While employment growth was 3.6% in the first quarter, three counties have still not recovered from pandemic job losses: Skagit, Snohomish and Whatcom.
“I expect the pace of job growth to continue to slow as businesses remain concerned about a contraction in consumer spending, as well as facing tighter credit conditions following recent bank failures,” Gardner said.
Meanwhile, home sales are down significantly from last year with 10,335 homes sold in the first quarter. That’s a decrease of almost 40% from Q1 2022 and nearly 19% lower than Q4 2022. Furthermore, home sales were lower in every single county in Northwest Washington.
Taking a closer look at the Seattle area, prices were down 31.7% in King County, 29.7% in Pierce County and 32.4% in Snohomish County.
Average home prices are also down — overall, the average home sale price fell 6.9% to $692,866. Prices fell by even larger margins in Snohomish and Grays Harbor. Average prices rose in Kitsap, Skagit, Lewis, San Juan and Whatcom Counties.
However, median listing prices are actually up in all but two counties. “This suggests that sellers are getting a little more comfortable with the market,” Gardner said. “If listing prices continue to rise, one can surmise that home prices will follow suit.”
In the first quarter of 2022, mortgage rates were significantly lower than they are today at 3.82%. However, that number had skyrocketed to nearly 7% by the end of last year. At the end of Q1 2023 though, the average mortgage rate was down to 6.37%. Gardner predicts that rates will continue to trend downward into 2024, falling below 6% in the second half of 2023.
“Even with the March Consumer Price Index report showing inflation slowing, I still expect the Federal Reserve to raise short-term rates one more time following their May meeting before pausing rate increases,” he said. “This should be the catalyst that allows mortgage rates to start trending lower at a more consistent pace than we have seen so far this year.”
Days on the market are also up from the frenzied selling pace of early 2022. The average home sold in 56 days during the first quarter, up 32 days year over year and 16 days from the end of 2022.
Average days on the market remains lowest in King County at 41 days. The county with the greatest year-over-year increase was Grays Harbor, where it took an average of 76 days for a home to sell. That’s up 41 days from Q4 2022.
Despite the fact that the regional economy is still recovering from the pandemic, Gardner predicts that the area is heading toward a balanced market “that ever so slightly favors sellers.”
“Whatever the case may be, I am not seeing any signs of panic in the market,” Gardner concluded. “Even in the face of higher financing costs, low inventory levels support home values, and the data suggests that the worst of the price declines are now behind us.”