Q3 2018 Seattle-Eastside Real Estate Report

Q3 Market Snapshot for Seattle and the Eastside

 

As Q3 comes to a close, 30-year fixed-rate mortgages are at their highest levels since April 2011—now averaging just above 4.7%. Even so, they are still far lower than their 30-year trendline. A 1% increase in mortgage interest rates decreases buying power by 10%. Or said differently, a 1% rate increase has the same net effect on monthly payment as a 10% increase in the sale price. That also means if prices fell 10% but rates went up 1% your payment would remain the same. This is a far bigger factor than most people consider.

 

Both first-time and move-up home buyers, with (finally!) more homes for sale to choose from and motivated by anticipated further rate hikes nipping at their heels, will feel the urgency to get moved and settled while they can still afford to do so.

 

Our market is likely to increasingly favor buyers as interest rates cause mortgage payments to increase uncomfortably beyond the affordability ceiling governed by personal income and wages. Properly-priced turn-key homes, and those in the most desirable settings, are still commanding very attractive prices and occasionally multiple offers. Everything else is seeing slowing appreciation and market softening. Strategic positioning, savvy marketing, and expert negotiation have never been so important as they are now.

 

Q3 Market Averages for Seattle

 

Click or scroll down to find your area report:

Seattle | Eastside | Mercer Island | Condos | Waterfront

 


SEATTLE

Seattle neighborhoods that were strongly bolstered by new construction and renovation saw the strongest sales activity, and not surprisingly, the greatest correlated price growth. Up 16.4% Q3 over Q3, the Queen Anne/Magnolia area led the charge, followed closely by Madison Park/Capitol Hill at 15.9%. Lake Forest Park/Kenmore at 13.2% and West Seattle at 12.5% also fared very well. Richmond Beach/Shoreline (6.2%), Ballard/Green Lake (4%), North Seattle (3.4%), and South Seattle (0.7%) saw notable price easing and contributed to rounding Seattle out to a modest 6.3% overall Q3 2017 to Q3 2018 median price increase.

Seattle Chart

Click here to view the complete report for a neighborhood by neighborhood breakdown of Average Sale Price, size, and number of homes sold.

Seattle Report

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EASTSIDE

Sharp increases in the number of homes for sale coupled with fewer international buyer transactions has caused a few ripples in the Eastside real estate market.

Mercer Island shows the strongest Q3 over Q3 increase in median sale price (see explanation below) at 19.7%, followed by Woodinville at 12.3% and Redmond at 12.2%. Bringing up the mid-section was West Bellevue at 8.0%, East of Lake Sammamish at 7.8%. Lagging the Eastside median increase of 7.3% were Kirkland (6.9%), South Eastside (2.0%), and East Bellevue (1.8%).

Eastside Chart

Click here for the full report and neighborhood-by-neighborhood statistics!

Eastside Review

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MERCER ISLAND

The Q3 median sale price was 19.7% higher than that of Q3 2017. However, its crucial to note that Q3 of 2017 was an anomaly with many land-value sales transacting at the low end of the price spectrum. The effect was that the median sale price was 10.2% lower than Q1 of that same year. Far fewer moderately priced homes transacted in Q3 of this year.

There were 89 sales in Q3 2017 and of those sales 45 were of homes priced below $1.5 million. Compare that to Q3 of 2018 with 74 sales, of which only 28 were priced below $1.5 million. The differential of sales between the two years was almost entirely composed of entry-level and land value home sales.

To further prove this, we looked at comparable homes sold this year and last (an approach like that of the Case-Schiller index). All things being roughly equal, the median sale price of that subset of homes increased only 9.0% from Q3 2017 to Q3 2018. This number is far more in alignment with what we have truly experienced in our market.

Mercer Island Chart

Click here to view the complete report for a neighborhood by neighborhood breakdown of Average Sale Price, size, and number of homes sold.

Mercer Island Report

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CONDOS – SEATTLE & EASTSIDE

Significant new construction projects underway or announced have dampened sales of existing condos somewhat, especially where they will directly compete with the new buildings. Neighborhood safety is being weighted more carefully against urban hip now more than ever. In Seattle, median sale prices of existing condos in Downtown Seattle/Belltown (-0.4%), Queen Anne/Magnolia (-4.8%), and North Seattle (-8.0%) have all decreased while surrounding areas have seen very strong to moderate Q3-Q3 increases. This quarter’s top contenders were Richmond Beach-Shoreline (30.3%), Ballard-Green Lake (26%), and West Seattle (25%).

On the Eastside, all areas except South Bellevue (-9.3%) saw considerable increases in the Q3 median sale price. East Bellevue (37.1%), Redmond (19.1%), and Kirkland (17.6%) topped the charts.

Check out all of these factoids and more in the full condo report.

Condo Report

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WATERFRONT

The Eastside has been a hotbed of waterfront closed sale activity with as many Q3 sales as Seattle, Mercer Island, and Lake Sammamish combined. The number of active private waterfront listings for sale on the Eastside is down compared to Q3 of both 2015 and 2016, while the listing levels of Seattle, Mercer Island and Lake Sammamish waterfront properties remain about the same.

With only two closed sales in Q3, Months of Inventory—the number of homes for sale divided by the number of homes that sold—climbed dramatically on Mercer Island. Seattle, with four closed waterfront sales, saw a similar but more moderate increase. The Eastside and Lake Sammamish both experienced improvement in the Months of Inventory indicator.

The highest private waterfront Q3 sale was of a newer 6,570 square foot Hunts Point modern estate designed by Baylis Architects with 80 feet of no-bank waterfront on just over an acre of lush, private grounds for $18 million. The lowest sale was a 1,010 square feet westside Lake Sammamish 1958 beach house with 60 feet of waterfront on a shy ¼ acre lot with permitted approval for a new 5000 square foot home.

Check out the full Waterfront Report for a complete list of waterfront home sales by address and community.

Waterfront Report

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ABOUT WINDERMERE MERCER ISLAND

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© Copyright 2018, Windermere Real Estate/Mercer Island. Information and statistics derived from Northwest Multiple Listing Service and deemed accurate but not guaranteed.

Posted on October 9, 2018 at 3:46 pm
Windermere Mercer Island | Category: Economic Trends, Real Estate Trends | Tagged , , , , , , , , , , ,

Baby Boomers: Impact on the U.S. Housing Market

Originally posted on Windermere Blog

75 million Baby Boomers control nearly 80% of all U.S. wealth, and as this generation ages, retires, and inevitably downsizes, they will have a significant impact on the housing market. Windermere’s Chief Economist, Matthew Gardner, explains when we can expect to see Boomers start to sell, opening much-needed inventory and making home ownership available to younger generations.

Posted on June 30, 2017 at 11:56 am
Marianne Parks | Category: Economic Trends | Tagged , , , , ,

2017 Real Estate Forecast

Matthew Gardner, chief economist for Windermere Real Estate, was one of the presenters at this year’s Eastside Windermere Real Estate Kick Off I attended. I eagerly look forward to his forecast, because it is always so packed with useful information. And I love sharing it with you!

He covered our local economy – which is experiencing remarkable growth. The economies of the metros located in the western United States have been strong, and Washington State metro areas are currently at the top of this group. Mr. Gardner expects this economic trend to continue in 2017, along with low unemployment. The Seattle region should maintain a robust influx of people relocating here during 2017 to fill jobs in the tech sector, and escape higher priced real estate in California, especially the Bay area.

Mr. Gardner showed an interesting chart detailing the most successful spin-off companies that derived from Microsoft.  He expects the same thing to occur from the talent being hired by Amazon. He said that Amazon hires more MBAs than any other company in the world, which translates into positive economic implications for our regional business environment.

Any slowdowns reported on the employment front have been due to everyone who wants a job are already employed, a trend that will continue this year with the projected generation of new jobs. Post-recession sectors in our area seeing noteworthy growth, in addition to the tech industry, are retail and leisure. With our low unemployment numbers, Mr. Gardner said that when unemployment drops under 4% (King County’s unemployment rate in November 2016 was at 3.9%), we start seeing pay increase to retain employees. He projected a 4.5% growth in income during 2017.

Two sectors he noted as slower growing are manufacturing and construction. We’re seeing that trend play out in lower numbers of single family residential permits being issued. The lack of new construction places pressure on our regional resale market, which will contribute to our housing market’s continued low inventory in 2017.

Western Washington home prices will experience continued growth this year. Mr. Gardner did stress that housing affordability is an issue that needs to be addressed. King County homes are not affordable for many first time home buyers, which is driving homebuyers to purchase outside of larger King Country cities. He mentioned the trend of people communting from bedroom communities like Marysville and Cle Elum to their jobs in Seattle and Bellevue. Some commuters are even opting to purchase homes in Spokane, where real estate is much more affordable than in Western Washington, and then bulk buying airplane tickets to fly back and forth weekly from their jobs on the west side of the mountains to their homes in Spokane.

The change in the presidential administration was also discussed. Mr. Gardner forecast that this change won’t affect our housing market in 2017. He stated it takes time for rhetoric to become policy. In the Seattle area we should see a seller’s market persist this year, increases in home prices, and continual job growth in the next 12 months.

Photo credit: Frances Gaul

 

Posted on January 19, 2017 at 1:18 pm
Marianne Parks | Category: Economic Trends, Real Estate Trends | Tagged , ,

Interest Rates, Post-Election

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We’ve seen some volatility in mortgage interest rates since the presidential election. When Freddie Mac released the fixed and adjustable rates on Thursday, November 17th, they had gone up considerably. 30-year fixed rate mortgages jumped from 3.57% the week before to 3.94%. 15-year fixed rate mortgages climbed from 2.88% to 3.14%. 5-year adjustable rate mortgages followed suit, jumping from 2.88% to 3.07%.

However, we need to keep things in perspective. At this time a year ago, 30-year fixed rate mortgages were 3.97%.

When the Federal Reserve meets December 14th, it would not be surprising to see an increase in short-term rates. It’s projected they will increase them a quarter of an interest point at this meeting. If the Federal Reserve does move forward with a rate increase, there’s talk of slowly increasing mortgage rates to follow. The uptrend is expected to be modest, until we see stronger inflation, or until the Fed decided to move the 10-year Treasury Bond Rate closer to a “norm” of 3%.

On November 11th, Kiplinger mentioned in their Economic Forecast for 2017 that they projected the 10-year Treasury Bond Rate would remain at 2.1%, until the end of 2016. However, this past week we saw it rise to 2.34%. Erin Lantz, vice president of mortgages for Zillow Group, is quoted as saying, “There is a flight to safety of assets outside the U.S.,” in response to the jump in yields for the 10-year Treasury Bonds.  Kiplinger had projected in their economic forecast we should see the 10-year Treasury note yielding around 2.5 by the end of 2017, with the average 30-year fixed rate mortgage moving upward toward 4.3%, and 15-year fixed rates around 3.6%. These are economic indicators we will need to monitor closely in upcoming days.

Until we know more know about the policy proposals President-Elect Trump will bring to the table, there may be a sustained increase level of uncertainty mirrored in interest rate levels. Erin Lantz stressed patience for home buyers, “Consumers considering buying or refinancing now should stay patient, as we’ll likely see rates stabilize once markets find a new equilibrium.”  Freddie Mac’s chief economist, Sean Becketti, surmised that those who were waiting to see what interest rates were going to do will jump off the fence, under certain circumstances, “If rates stick at these levels, expect a final burst of home sales and refinances as ‘fence sitters’ try to beat further increases, then a marked slowdown in housing activity.”

The Wall Street Journal surveyed 57 economists between November 9th and 11th, asking for their forecast for 2017 and beyond. The average forecasts delivered by this group for growth, inflation and interest rates – in both 2017 and 2018 – all reported slight upward movement, when compared to their survey responses given before the election in October. Many of the responding economists added the caveat that their estimates were tentative. “Anyone who tells you they absolutely know what will happen under a Trump presidency is probably lying,” said Megan Greene, chief economist at Manulife Asset Management. There is definite concern regarding White House missteps, and the potential for trade wars to erupt. A number of economists continue to worry about a decline in business investment. Robert Dietz, chief economist at the National Association of Home Builders shared, “Uncertainty on major policy issues limits hiring and investment decisions.” Across the board, however, the economist respondents to the WSJ survey estimate about a 1 in 5 chance of dipping into recession within the next 12 months. These replies are a slight decline when compared to data collected over the past three months, but are up from 14% a year ago.

We’ll have to be patient, as Erin Lantz suggested, until we see more concrete policy language from the Trump transition team. Continue to keep in mind how low our interest rates are now – they are historically low, and on par year-over-year. If you have any questions regarding interest rates, and the current state of our housing market, let’s schedule a time to talk. Please email me at marianne@windermere.com.

photo credit: pixabay

Posted on November 22, 2016 at 1:32 pm
Marianne Parks | Category: Economic Trends | Tagged , , , , , , ,

What We Know (and Don’t Know) About the Impact of Brexit

This blog post authored by Matthew Gardner originally appears on Windermere Blog on June 27, 2016.

The decision of the British public to leave the European Union is a historic one for many reasons, not least of which was the almost uniform belief that there was absolutely no way that the public would vote to dissolve a partnership that had been in existence since the UK became a member nation back in 1973. However, rightly or not, the people decided that it was time to leave.

As both an economist, and native of the UK, I’ve been bombarded with questions from people about what impact Brexit will have on the global economy and U.S. housing market. I’ll start with the economy.

Since last Thursday’s announcement, there have been exceptional ripples around the global economy that were felt here in the U.S. too. This isn’t all that surprising given that the vast majority of us believed that the UK would vote to remain in the EU; however, I believe things will start to settle down as soon as the smoke clears. The only problem is that the smoke remains remarkably dense.

The British government does not appear to be in any hurry to invoke Article 50 of the Lisbon Treaty, which allows a member country to leave the conglomerate. Additionally, nobody appears able to provide any definitive data as to what the effect of the UK leaving will really have on the European or global economies.

As a result, you have those who suggest that it will lead to a “modest” recession in the UK, as well as extremists who are forecasting a return of the 4-horsemen of the apocalypse. But in reality, no one really knows, and it is that type of uncertainty that feeds on itself and can cause wild fluctuations in the market.

It’s important to understand that last Thursday’s vote does not confirm an actual exit from the European Union. There is a prolonged process of leaving that is set out in the EU Treaty which requires a “cooling off” period. And during this time, even confident political leaders, such as Boris Johnson who championed the exit campaign, might be tempted by reforms that would see Great Britain actually remaining in the EU.

The EU itself has been shaken by the vote, and there are already signs that many of its leaders are talking about moving away from the Federal structure of the Union in favor of a looser, intergovernmental agreement, that would allow greater sovereignty for its member states.

This is clearly an obvious attempt to accommodate what is already a groundswell of opposition to the Union that is much wider than just Britain, and now includes France, Spain, Greece and Portugal, all of whom are considering their own exits.

So what does this mean for the U.S.?

As far as any direct impact of the Brexit on the U.S. economy is concerned, I foresee a continued period of volatility given the aforementioned uncertainty. That said, any predictable effects on the U.S. will be limited to a “headwind” to growth, but not enough to drive us into a recession. Our financial system is solid and U.S. exposure to European debt is still limited. I wouldn’t be surprised to see a slowdown in U.S. exports as the dollar continues to gain strength against European currencies, but those effects will be fairly modest.

As for the impact on housing, U.S. real estate markets could actually benefit. Uncertain economic times almost always lead to a “flight to safety”, which means global capital could pour into the United States bond market at an aggressive rate. With this capital injection, the interest rate on bonds would be driven down, resulting in a drop on mortgage rates. And a drop in mortgage rates makes it cheaper to borrow money to buy a home.

On the flip side, one thing that concerns me about lower interest rates is that it could draw more buyers into the market, compounding already competitive conditions, and driving up home prices. And housing affordability would inevitably take yet another hit.

Let’s not fool ourselves; what we’re seeing is a divorce between the UK and a majority of Europe. And like most divorces, there are no good decisions that will make everybody happy. We need to be prepared for the fact that it is going to be a very ugly, nasty, brutal, lawyer-riddled, expensive divorce.

My biggest concern for the U.S. is that the Federal Reserve must now pause in its desire to raise interest rates (I now believe that we will not see another increase this year as a result of Brexit). This is troubling because we need to normalize rates in preparation for a recession that is surely on the way in the next couple of years. The longer we put that off, the less prepared we will be when our economy eventually turns down. 

content_mgardnerphoto_bw_Matthew 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 over 25 years of professional experience both in the U.S. and U.K. 

Posted on July 3, 2016 at 3:22 pm
Marianne Parks | Category: Economic Trends, Real Estate Trends | Tagged , , , ,