This is happening WAAAYYY too fast!

Last Sunday (8-7) we celebrated Aubrey’s 2^nd birthday.  Wait…. What?!?  Yep, it has already been 2 years and it seems to have gone by in a blur.  She is almost 3ft tall (benefits of a tall mother), talking in nearly complete sentences, counting to 15 (sometimes 20), singing her ABC’s, recognizing and remembering pretty much EVERYTHING, and making it abundantly clear that she has her own opinion of just what should be happening at any given moment as well as what consequences will befall those who do not get in line with the program.  HAHAHA.  She loves doing Montessori pre-school 3 half-days each week as well as gymnastics twice each week and she is absolutely smitten with planes, helicopters, motorcycles, trash trucks, buses….and pretty much anything with a motor…Hmmmm.  She is also overwhelmingly happy, full of the wonder and excitement that comes with childhood, open to all the possibilities of life, trusting, playful and loving.  What can I say…we are head-over-heels in Love, and it continues to grow.  All is as it should be.

 

I Repeat…..this is happening WAAAYYY too fast!

And if you thought those 2 years went by quick, check out the shift in the market caused by how fast (and how far) the interest rates went up. The rise in average 30yr fixed rates from 3.05% on Dec 23, 2021, to 5.81% on June 23, 2022, represents a 90% increase in interest rates (that’s nearly DOUBLE) in 6 months.  It had the effect of causing a 39% rise in the Principle & Interest payment!  Historically speaking this is far faster of a rise than at any time in history.  The next closest would be a 27% rise in interest rates in 1980 over a 3.5-month period.  Is it any wonder that we have seen such a drop off in demand?  Few buyers can stomach that much of a shift in their payment (or that much of a shift downward in what they can now buy), and for buyers at the entry level, it can very well mean they are officially out of the market based on what they can now afford for a purchase price.  Normally when we see a rise in interest rates, there is about a 1–2-month lag while the buyers adjust to the new “norm”, but this big of a shift may take longer to find its balance.  Happily, rates have been bouncing down since that week in June and ended last week at a national average of 5.22% (up from 4.99% the week before).  This is tied closely to what is happening with inflation, and as the Fed’s policies continue to reign it in (fuel prices have certainly come back down off their highs), we may see rates either stabilize or continue to drop a bit.  It is unlikely, however, that we will get back to the lows fueled by the Fed’s buying of Mortgage-Backed Securities as that policy is winding down since June 1 2022 and will continue (even accelerating starting in Sept) to do so.  

Meanwhile, sellers are feeling the effects of that lower demand.  Inventories are on the rise and have reached levels not seen for over 3 years now (still low by historical comparison but moving up). Homes priced at what would have been an attractive price 3 months ago are now sitting longer with no offers and having to reduce their asking price to get the attention needed to produce an offer.  The offers are not nearly as aggressive as they were 6 months ago and the expectation that the price will go above the asking price is quickly becoming a thing of the past.  Even new construction is feeling the squeeze and many large builders have lowered prices between 5-15% over the last 1-2 months.  Overall, the average sale price in Kitsap for July this year is just about even with last year (up less than 1%).  That follows a steep drop in the average sale price from this June.  The first half of August has seen the average sale price creeping up again (2%), but last August was up also, so year over year we may not see much gain if any at all.  This is in stark contrast to the stats from the first quarter of this year where we were 12-15% ahead of the previous year.  Volume has also fallen off.  In May, we peaked at about 500 units ahead of the previous year, and we are now 84 units behind.  This combined with slightly higher numbers of new listings thus far (about 150 units ahead of last year’s listings in the first 7 months) explains the rise in inventories.

Brake Check….

With so much happening so fast, it would be easy to get a bit melodramatic or even succumb to an anxiety driven panic about another coming housing crash like that of 2007/2008, but the market basics simply don’t support that happening.  What we are experiencing is bounce back from last year’s massive gains and a market that is returning to a more normal and balanced market.  So……what does it all mean?

For Buyers—Some gains—Prices have finally stopped going up at an outrageous pace and are in-fact leveling out and beginning to retract (some areas are seeing meaningful price reductions). Additionally, we are seeing a little bit of relief on the interest rates.  Who knows how long that will last or if it will continue to drop, but for now, it has improved from 2 months ago.  Additionally, there is more inventory and less competition (less….not none), so you are more likely able to negotiate both on terms and on inspection items.  All good news for buyers.  However, the strain caused by the years of big price increases and the recent rocket-like trajectory of interest rates still leave you in a less affordable market than the past several years.  Nevertheless, if home ownership is on your radar, it is still better to do it sooner vs later.  Affordability improving dramatically is not likely, and the longer you wait, the less equity building you do.  Even if we do see rates soften in the next year or so, you will be better off to buy today and refinance if/when rates go down.  And while renting is an option, it is not a good one. Rents are still marching up and will likely continue so long as buying is much more expensive.

For Sellers—BON VOYAGE—Still thinking it’s a Seller’s market?...Think again. That ship has sailed.  Yes, there is still good demand.  Yes, there are still homes seeing multiple offers.  Yes, the average sale price is still right at asking price.  However, prices have stalled and are beginning to soften (and not so softly in some areas!), market times are expanding, builders and other sellers are reducing prices, multiple offers are only on homes that appear underpriced, and inspections are now part of every transaction.  In short there is more competition among sellers and more inventory, and… Buyers Know It!  Proper preparation, presentation, and pricing continue to rule the day and remain crucial to maximizing your sale.  If selling near the top of the market is important to you…consider a sale sooner vs later. Prices may recover a little bit of their vigor and continue an upward trend, but make no mistake, it will feel very different and be a mere shadow of the price growth sellers have become accustomed to.  More likely is that you will see prices slip a bit more before we turn the corner.  One thing for sure, you will continue to lose ground in the tug-of-war over who controls the negotiations.

For Investors—Opportunity—Lowering prices and climbing inventory are sure to produce a few great deals over the next several months.  Many investors will be pulling back just like many home buyers.  This can leave the door open for the smart investor to pick up properties whose owners are nervous and willing to take a deeper cut now in hopes of avoiding an even deeper one later.  It’s a good time to pay close attention.  Some Multi-family offerings are starting to make more sense as well.

It's the Lease we can do…. (yes, pun intended)

If you, like many we know, are starting to think about maybe holding onto that house and starting your rental portfolio (which we think can be a GREAT idea), or you own or want to own multi-family properties, we can help you with that as well.  REally Property Management, our sister company, has been in business just over a year now and the results have been amazing.  Our focus on Asset Management vs. simple rent collection is providing landlords with superior outcomes in terms of returns, property maintenance and condition, and tenant satisfaction. In-depth knowledge of the current Laws and strict adherence to trust account banking requirements (its fascinating how many PM companies don’t have the correct bank accounts to protect your deposits) ensure maximum protection of both your monies and your assets.  Tenants are loving the level of technology making rent payments and maintenance requests a breeze.  We’d be happy to share what we know and how we can help you grow.  Give us a call anytime!

Taking Time Out!

Despite so much happening so fast, we have indeed managed to take some “time outs” (no…not the kind we think about giving Aubrey so she can reflect on the efficacy of her attempts to make the world behave properly…lolol!).  Evenings spent on the deck with a nice glass of wine, a weekend afternoon in the pool, a diving/fishing trip to Neah Bay.  Finding time to enjoy time is most welcomed.  We hope that all of you, our friends and family, are slowing down and fining time to enjoy the ride as well.