The Gardner Report: Western Washington Economic and Real Estate Report – 4th Quarter 2020
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 your Windermere agent.
REGIONAL ECONOMIC OVERVIEW
After the COVID-19-induced declines, employment levels in Western Washington continue to rebuild. Interestingly, the state re-benchmarked employment numbers, which showed that the region lost fewer jobs than originally reported. That said, regional employment is still 133,000 jobs lower than during the 2020 peak in February. The return of jobs will continue, but much depends on new COVID-19 infection rates and when the Governor can reopen sections of the economy that are still shut down. Unemployment levels also continue to improve. At the end of the quarter, the unemployment rate was a very respectable 5.5%, down from the peak rate of 16.6% in April. The rate varies across Western Washington, with a low of 4.3% in King County and a high of 9.6% in Grays Harbor County. My current forecast calls for employment levels to continue to improve as we move through the spring. More robust growth won’t happen until a vaccine becomes widely distributed, which is unlikely to happen before the summer.
WESTERN WASHINGTON HOME SALES
❱ Sales continued to impress, with 23,357 transactions in the quarter. This was an increase of 26.6% from the same period in 2019, but 8.3% lower than in the third quarter of last year, likely due to seasonality.
❱ Listing activity remained very low, even given seasonality. Total available inventory was 37.3% lower than a year ago and 31.2% lower than in the third quarter of 2020.
❱ Sales rose in all counties, with San Juan County seeing the greatest increase. This makes me wonder if buyers are actively looking in more remote markets given ongoing COVID-19 related concerns.
❱ Pending sales—a good gauge of future closings—were 25% higher than a year ago but down 31% compared to the third quarter of 2020. This is unsurprising, given limited inventory and seasonal factors.
WESTERN WASHINGTON HOME PRICES
❱ Home price growth in Western Washington continued the trend of above-average appreciation. Prices were up 17.4% compared to a year ago, with an average sale price of $617,475.
❱ Year-over year price growth was strongest in Lewis and Grays Harbor counties. Home prices declined in San Juan County which is notoriously volatile because of its small size.
❱ It is interesting to note that home prices were only 1% higher than third quarter of 2020. Even as mortgage rates continued to drop during the quarter, price growth slowed, and we may well be hitting an affordability ceiling in some markets.
❱ Mortgage rates will stay competitive as we move through 2021, but I expect to see price growth moderate as we run into affordability issues, especially in the more expensive counties.
DAYS ON MARKET
❱ 2020 ended with a flourish as the average number of days it took to sell a home in the final quarter dropped by a very significant 16 days compared to a year ago.
❱ Snohomish County was again the tightest market in Western Washington, with homes taking an average of only 15 days to sell. The only county that saw the length of time it took to sell a home rise compared to the same period a year ago was small Jefferson County, but it was only an increase of four days.
❱ Across the region, it took an average of 31 days to sell a home in the quarter. It is also worth noting that, even as we entered the winter months, it took an average of five fewer days to sell a home than in the third quarter of last year.
❱ The takeaway here is that demand clearly remains strong, and competition for the few homes available to buy continues to push days on market lower.
CONCLUSIONS
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.
Demand has clearly not been impacted by COVID-19, mortgage rates are still very favorable, and limited supply is causing the region’s housing market to remain incredibly active. Because of these conditions, I am moving the needle even further in favor of sellers.
2021 is likely to lead more homeowners to choose to move if they can work from home, which will continue to drive sales growth and should also lead to more inventory. That said, affordability concerns in markets close to Western Washington’s job centers, in combination with modestly rising mortgage rates, should slow the rapid home price appreciation we have seen for several years. I, for one, think that is a good thing.
ABOUT MATTHEW GARDNER
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.
In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.
NWMLS Year End Market Recap – Northwest MLS brokers tally more than $56 billion in home sales during 2020
KIRKLAND, Washington. (January 19, 2021) – Northwest Multiple Listing Service member-brokers reported 95,760 closed sales during 2020 valued at more than $56 billion. Both the number of transactions and dollar value eclipsed the totals for 2019.
Last year’s sales of residential (single family) homes and condominiums outgained 2019 by 3,257 transactions for a 3.5% increase. Of the total completed sales, around 87% (83,410) were single family homes and the remaining 13% (12,350) were condominiums. The activity in the Northwest MLS report reflects the work of more than 32,000 brokers in 23 counties. Collectively, these counties encompass more than 82% of the state’s population.
The area-wide median price for last year’s sales of single family homes and condominiums (combined) was $475,000, a year-over-year (YOY) gain of nearly 11.8% from 2019’s figure of $425,000.
Prices for single family homes (excluding condominiums) increased about 12.6% system-wide, jumping from $435,000 in 2019 to last year’s median price of $490,000. A comparison of counties shows King County with the highest median price for single family homes at $724,950 (up 7.4% from 2019); Ferry County had the lowest median at $161,500 (up 7.7% from the prior year). On a percentage basis, Kittitas County experienced the largest price gain at nearly 21% (jumping from $351,200 to $424,925).
Condo prices area-wide rose about 7%, from $355,000 in 2019 to $380,000 for last year’s sales. In King County, which accounted for 55.7% of all condo sales, the median price was $430,000, up $25,000 (6.2%) from 2019.
Inventory was sparse throughout the year as brokers scrambled to replenish supply. The number of pending sales (mutually accepted offers) exceeded the number of new listings added to inventory in all but two months (March and April, when strict pandemic-induced restrictions were imposed). At the start of 2020 there was 1.5 months of inventory but as the year closed, supply dwindled to 0.53 months (about two weeks), well below the 4-to-6-month range industry insiders use as an indicator of a “balanced” or neutral market, favoring neither buyers nor sellers.
Sales of high-end homes surged compared to 2019. Single family homes that sold for $1 million or more during 2020 topped the previous year by 2,014 units, rising from 6,299 to 8,313 for a jump of nearly 32%. Included in last year’s tally were 82 homes that sold for $5 million or more. The highest priced sale, at $17 million, was in Medina.
Condos that sold for $500,000 or more also outpaced 2019 with brokers reporting 3,552 such sales versus 2,951 for a YOY increase of 20.4%. Last year’s luxury sales included 576 condos that commanded $1 million or more, topped by a $9.5 million residence at the Four Seasons in downtown Seattle.
Among other highlights in its annual compilation of statistics, Northwest Multiple Listing Service reported:
- Brokers added 110,595 new listings during the course of the year, just shy of the 2019 total of 110,940. July was the busiest month with members adding 12,514 new listings to the database.
- Pending sales totaled 118,600 for the year, for an average of 9,883 per month. Last year’s total was about 3.7% higher than 2019.
- Eight counties ended 2020 with double-digit gains in closed sales, led by San Juan County (up 46.6% and Chelan County (up 15.26%) – two areas dubbed as “Zoom towns” as sought-after destinations by migrating “work-from-home” (WFH) workers.
- The median price for a 3-bedroom home ranged from $212,000 in Ferry County to $745,000 in San Juan County.
- For the new construction component involving Northwest MLS brokers, newly built condos that sold last year continued to fetch higher prices than single family homes. Last year’s closings included 11,134 newly built single family homes that sold for a median price of $569,993 and 1,289 condos that sold for a median price of $647,700.
- Prices vary widely when comparing school districts in the MLS service area. In six districts, the median sales price for single family homes was $1 million or higher, led by Mercer Island at $1.7 million. Other districts in this seven-figure segment were three others in King County: Bellevue, Issaquah and Lake Washington, along with Bainbridge Island (in Kitsap County), and Shaw Island (in San Juan County).