On January 22, my office hosted renowned economist and housing market specialist Matthew Gardner, who shared his 2025 Economic & Housing Market Forecast. We spent an hour listening to his keen analysis and insights, which included a look back at 2024, some discussion about what to expect with the new administration, and a look ahead to 2025 and beyond. Please let me know if you want to receive a link to the recording or a PDF of his PowerPoint slide deck.

He expertly broke down his presentation using a macro-to-micro approach, starting with the national economy and then narrowing down locally by presenting stats, figures, and predictions about the King and Snohomish County economies and housing markets. Here are my top takeaways.

✅ NATIONAL ECONOMY:

Inflation has become “sticky”! It slowly trended down in 2024 but could tread water in 2025, depending on what happens with tariffs under the new administration. If tariffs are instituted across the board, many countries are predicted to respond by implementing their own tariffs, which would increase the cost of goods.

The Federal Funds Rate will slowly decrease over the course of 2025. Until we get clarity on proposed tariffs on U.S. trade partners, the Federal Reserve will remain aggressive with rates to combat inflation. The current consensus is for the Fed to make two rate cuts instead of four, with the first possibly being in February. NOTE: The Federal Funds Rate is the short-term interest rate (credit cards, car loans, etc.), not Mortgage Rates.

There is no sign of a recession. The balance of inflation, rates, and the overall health of the economy has created a soft landing that avoided a recession. In fact, GDP is up by 2% and the textbook definition of a recession is when the GDP decreases over two successive quarters.

Tepid job growth in 2025. The labor market has cooled nationally after the “catch-up” period seen after the pandemic. Going forward, proposed immigration reform could weigh on labor force growth and hamper job creation. Weak labor force growth keeps the unemployment rate from rising in any meaningful way and is anticipated to peak around 4%.

✅ GREATER SEATTLE AREA JOB MARKET:

Job growth is still happening, yet ever so slightly! Jobs expanded by 1.2% in 2024 and should expand by 1.5% in 2025. The tech sector props up King County, and Snohomish County did have a relatively positive recovery post-Boeing strike. The construction sector is down, and some businesses will “wait and see” about growth once the administration starts to take shape with trade and immigration policies, which will directly affect labor costs.

✅ GREATER SEATTLE HOUSING MARKET:

Inventory will increase in 2025 over 2024 by 8-10%. In 2024, inventory increased by 14% over 2023, which saw the lowest levels since the Great Recession. Lower inventory has been driven by the “lock-in” effect created by the previous low interest rates. Moves have been less discretionary and more so motivated by death, divorce, and diapers. More discretionary moves will happen when homeowners see mortgage rates closer to within 2% of their current rate. However, equity levels are high (over 50% of homeowners have 50% or more equity), enabling buyers who are also sellers to reposition their equity to a home that better fits their lifestyle, should the monthly payment work for them.

Mortgage rates will modestly decrease throughout 2025 and should end up in the low 6%. The biggest headwind is deficit spending now that inflation has settled. This spending will keep the 10-year treasury high, which will have a direct impact on mortgage rates. These are two key factors to watch if you’re waiting for mortgage rates to drop significantly.

Prices increased in King and Snohomish counties in 2024 and are expected to grow again in 2025 despite stubborn mortgage rates. In King County, inventory was up by 10%, sales were up 12%, and the median price was up 10.7% year-over-year. Price growth is predicted to increase by 4% in 2025, which is higher than the historical national annual average. In Snohomish County, inventory was up by 17%, sales were up 8%, and the median price was up 9.9% year-over-year. Price growth is predicted to increase by 5% in 2025.

Affordability is the biggest challenge. With price growth steady coupled with higher interest rates, monthly payments have grown faster than incomes. This has put first-time homebuyers at a disadvantage in core job center locations. Down payment assistance (gift funds) from family and/or high-paying salaries in the tech, biotech, and big corporate companies have differentiated the ability of some first-time homebuyers compared to others with limited down payment funds and higher debt-to-income ratios.

The American Dream is still alive! Homeownership has proven to be one of the strongest hedges against inflation and the single most lucrative wealth-building asset a household can have over time. A key piece of advice for first-time homebuyers would be to do what you can with what you have, which may mean buying a smaller property or going further out in location. Regardless of where one buys, this will put them on the trajectory of building household wealth through real estate and open up an opportunity to upgrade later. In fact, the net worth of a homeowner in 2023 was $396,200 vs. $10,400 of a renter.

This is certainly a lot to unpack as we head into 2025. Stay tuned for even more insights on what we learned from Matthew in my next newsletter. In the meantime, I am here to encourage you and point out that this is a lot of good news. We look forward to more moderate growth in 2025, which is good. Severe increases are not healthy. While we are combating an affordability crisis, the steady wave of moderation on top of incredibly high equity levels should play out to create a stable and fruitful 2025 real estate market.

If you are curious about how all of this relates to your real estate goals or you know someone that needs some guidance, please reach out. I will continue to help keep you well informed so you can be empowered to make strong decisions.

Reflecting on the joy of the holiday season always brings with it gratitude. One of the most important pieces of my business is working with an office that always makes it a priority to come together as a team throughout the year to lift up our neighbors in need and give back to our communities. Our collective gratitude runs deep, and spreading some love and support within our community is the best way we can celebrate everything we are thankful for.

This year our holiday food drive brought in $1,372 and 1,422 pounds of food for Volunteers of America Western Washington food banks. These numbers are all thanks to friends and clients like you. Thank you for your generosity! The current need in our area is high, and our local food banks need all the help they can get.

Next, we had the absolute joy of helping bring some Christmas magic to homeless/housing-insecure youth in our area. We partnered again this year with Washington Kids in Transition, who work with social workers in Edmonds School District schools (includes the communities of Edmonds, Lynnwood, Brier & Mountlake Terrace) to collect wish lists from homeless/housing insecure students living in shelters, tents, cars, transitional housing or other temporary housing and partners with the community to fulfill those wishes. The brokers in my office all came together and we adopted the wish lists of 24 local youth, who would have otherwise gone without this holiday season.

The rest of the year, Washington Kids in Transition provides emergency closets (coats, diapers, toiletries, etc.), hotel vouchers, utility assistance, rental deposits, and recently started a teen mentorship program. This new program is in high demand, but does not yet have reliable funding, so we decided to also raise funds for that as well over the holiday. We raised a total of $3,815 for this new program, which helps teens learn basic life skills as well as have fun activities they otherwise wouldn’t have access to.

Another holiday staple at my office is putting together volunteer groups at Christmas House and also Holly House this year. Both organizations are local non-profits (100% volunteer-run) that provide opportunities for qualifying, low-income parents to select free holiday gifts for their children. This is always an amazing time helping families in need have a joyful Christmas.

You can access any of the links above to learn more about these organizations or to donate yourself.  As we head into 2025, our commitment to giving back to the community that we serve will remain a cornerstone of our business. Here’s to a happy, healthy, and heartwarming 2025 and beyond.

As we head into the holidays and mark the final stretch of the year, I wanted to report on the 2024 real estate market and where we might be headed in 2025. To set the stage, I must mention the ride that it has been over the last five years. Since 2019, we have experienced some key market factors that have influenced market activity and prices.

2019 was a year of recovery after the market corrected in 2018 (due to the Seattle Head Tax), and we all know what happened in 2020. The pandemic threw the real estate market into a frothy uptick from mid-2020 to mid-2022, fueled by work-from-home moves and historically low interest rates. Sales counts and price appreciation were ” off the charts,” specifically in 2021. Once interest rates climbed over 5% in the spring of 2022, price appreciation capped, started to correct, and sales declined. Since then, prices have recovered and stabilized, and the sales count has slowly started to increase.

After reviewing the last 10 years of closed sales, we are down about 25% YTD in King County and 30% in Snohomish County from a normal average closed sales rate. This has remained stubborn due to the lock-in effect that the previous low rates have created. For example, many homeowners who purchased or re-financed to obtain a rate of 3-4% are holding tight to their monthly payments. This has caused many people to stay in homes that don’t ideally fit their lifestyle due to wanting to keep the monthly payment and overall affordability.

This has created tight inventory, which has insulated prices and helped the market recover from the 2022 correction. The dance between rates and low inventory is directly related, and despite rates being higher in 2024 than they were in 2022, prices remain strong. A seller’s market is defined by 0-2 months of inventory (if no new homes came to market, we would sell out of homes in this amount of time), a balanced market is 2-4 months, and a buyer’s market is 4+ months. Over the last 5 years, we have primarily been in a seller’s market. This has caused prices to increase by 59% in Snohomish County over the last 5 years and by 42% in King County.

The age-old principle of supply and demand has had the most significant impact on prices despite volatile interest rates. Several experts predict that interest rates will slowly decrease throughout 2025. As you can see from the chart below, we will not return to the historic levels we saw in 2020-2021 (we may never). As would-be sellers contemplate the lock-in effect vs. what they want/need out of their housing and line it up against interest rates, we should see a gradual increase in closed sales in 2025 over 2024. The market is slowly starting to accept this new normal. Also, in some cases, moves cannot be delayed due to life circumstances, and the lock-in effect is not a driver.

Another aspect to point out is the trends we typically see in post-election years. Historical data indicates increased closed sales, lower interest rates, and price growth. This data, coupled with pent-up seller demand and gradually decreasing interest rates, should drive sales to increase slightly and prices to appreciate and remain stable.  Most homeowners are sitting on well-established equity, enabling them to make fluid moves.

If you or someone you know is considering buying, selling, or both, now is a great time to reach out. Executing a purchase and/or sale and a move takes strategic planning to achieve the best outcome. I love helping my clients identify their goals, curate a detailed list of items to create the ideal results, and help guide the process to a successful finish. A new year brings a fresh start, and why not start to verbalize, visualize, and start your planning now, whether your goals are immediate or in the distant future? Please use me as your real estate resource, as my goal is to be your trusted advisor rooted in data and market education.

As 2024 starts to come to a close, I want to spend some time talking about first-time homebuyers. Even if you already own a home, this is an important message to share; it can change someone’s life! In 2023, according to the National Association of Realtors (NAR) 2023 Profile of Home Buyers and Sellers, first-time home buyers represented 24% of the market share, which was down from 32% in 2022. First-time homebuyers are a critical part of the real estate market cycle, and we need to empower this group to invest in their future. They are also the audience that purchases inventory, enabling sellers to move on to their next home, which creates a domino effect as it travels up the market.

Often, first-time homebuyers purchase entry-level properties such as condos, townhomes, or smaller single-family residential homes based on affordability. It is also important to note that a buyer does not need a 20% down payment to purchase a home. In fact, according to NAR, the typical down payment for a first-time homebuyer in 2023 was 8%. There are loan programs that only require 3% down payments and even assistance programs requiring zero down. It is important to explore options so one knows their opportunity potential. For example, lenders will often advise borrowers to focus on saving vs. paying down debt in order to better qualify for a loan.

Sometimes, first-time homebuyers are able to skip that first level of home ownership and purchase a home that they plan to be in for many years, yet that is rare. I have found that it is critical that first-time homebuyers are focused on what monthly payment they feel comfortable taking on and commit to shopping at that price point. They then apply that price point to a combination of location, property type, and the condition/features they can afford.

The primary benefit of ditching the rent payment and becoming a first-time homebuyer is getting on the trajectory of building household wealth. As you can see from the charts below, real estate has appreciated in both King and Snohomish counties over the last 10 years, whether it be a condo or a single-family residential property. This appreciation becomes a nest egg of savings for the homeowner over time.

 

For example, if you use the data from the Snohomish County Condo chart, a first-time homebuyer who bought a condo in 2020, the median price in the market was $379,000. That is now $533,000, which is a 41% gain. Granted, these are raw numbers and represent a 30,000-foot view of the market, which illustrates the trends. We can’t simply apply the percentage growth in the market overall; we would analyze comparable properties in the specific area of the subject property to find the accurate value. The appreciation trend, however, shows that the first-time homebuyer who bought in 2020 is now sitting on a healthy nest egg of savings to utilize to purchase their next home if they desire a different property based on life changes. Plus, there is no other investment vehicle that allows tax-free capital gains up to $500,000.I point this out because I often encounter would-be first-time homebuyers who call off their search because they cannot afford the type of home or area they want, and continue to rent in the hopes of saving more to afford what they want later. While I would never want anyone to buy a home they don’t want, I do encourage my clients to consider what they can compromise on in order to start building wealth through homeownership sooner rather than later. Even if you apply the home appreciation for condos in Snohomish County prior to the pandemic, the median price in 2015 was $246,000, and four years later, it was $353,000, which is a 44% gain. Most people would not be able to save that much over that period of time, hence the advantage of building wealth via homeownership.

An exercise I often use with my buyer clients is applying the Triangle of Buyer Clarity to their budget and search. I am the first person to say that shopping for a home is exciting and even romantic, which results in starry eyes focused on dream homes and HGTV lore. I find that the quicker a buyer is able to put the dreaming part aside and get to the brass tacks of the market, the quicker they succeed in a purchase. Monthly payment is the single most important element to focus on to bring clarity to a buyer’s search. This figure should direct the price range for a buyer, which will determine which location, condition/features, and property type they can afford.

 

As you can see from the example of the Triangle of Buyer Clarity, buyers often have to adapt their search to meet their budget needs; it is rarely the perfect balance of an equilateral triangle. That could mean adapting by buying a townhome instead of a single-family home, going to a location that is a little further out, or being OK with a 90’s kitchen instead of a perfectly modern masterpiece. Getting into the market is more important than finding the perfect fit. The good news is that market trends show that townhomes, all locations throughout each county, and even 90’s kitchens appreciate! One could even tap into their equity down the road once it is built up and remodel that 90’s kitchen.Homeownership provides many benefits. Wealth-building opportunities are huge because we all need a place to live, so why not pay your own mortgage and gain appreciation instead of building your landlord’s portfolio? There are tax benefits, too, as you can use the interest as a write-off. Plus, you get the freedom to make your house your own and build a community where you live. You can paint the walls and dig in the dirt, and you don’t have to answer to your landlord. Overall, homeownership provides stability, freedom, and community. Helping my clients gain tangible and intangible benefits is the primary goal I work towards.

This is why I couldn’t let 2024 end without giving a shout-out to the would-be first-time homebuyers out there. My best piece of advice if you are considering buying your first home is to come up with a plan. I offer all of my clients a buyer consultation meeting where we review the market trends, apply their goals and search criteria, get them connected with a reputable lender, and devise a custom plan for them. The plan could start right away or sometime in the future; what matters is working towards the goal.

My mission is to help people gain the benefits of homeownership when they are ready. When I hand off the keys to a first-time homebuyer, it is one of the most rewarding aspects of my job because I know we have changed their lives for the better. If you are a potential first-time buyer or know someone who is, please reach out, I’d be honored to help.