The holiday season came and went in a flash with so much going on.  As I reflect on the joys that the holiday season brings, one thing that I love is that our office makes it a priority to come together as a team to lift up our neighbors in need.  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 $3,115 and 1,787 pounds of food for Volunteers of America Western Washington food banks, just in time for the holidays. The current need in our area is high, and our local food banks need all the help they can get. These numbers are all thanks to friends and clients like you. Thank you for your generosity!
 
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 WA Kids in Transition, who work with social workers in the Edmonds School District to collect wish lists from students living in shelters, tents, cars, transitional housing, or other temporary housing. Together, the brokers in our office provided gifts and hygiene items for 28 kids.
 
Then we provided $3,700 in grocery gift cards for 13 families, comprised of 60 individuals. Some of these families are unemployed or living in transitional housing, some are walking through grief and loss, and some are coming out of domestic violence. It is our privilege to partner with Pioneer Human Services, to help relieve some of the burdens for these families.
 
Next, we always put together a volunteer group at Christmas House in Everett. Christmas House is a 100% volunteer, non-profit organization that provides an opportunity for qualifying, low-income, Snohomish County parents to select free holiday gifts for their children age infant-18. This is an amazing day 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 2024, 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 2024 and beyond.

Are you curious about the economy during these changing times? 
Are you trying to make financial plans, but crave credible information to assist you?
 
Please join me for a very special virtual live event:
 
AN ECONOMIC FORECAST FOR 2024 & BEYOND
with Matthew Gardner
Nationally Recognized Economist
 
Wednesday, January 17, 2024  • 6:30 pm – 8 pm
 
Presentation from 6:30-7:30 pm, Q&A to follow
 
Please RSVP to me via phone, text, or email by January 12th, 2024 to receive an emailed link to access the event.

As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data. With over 30 years of professional experience, he provides valuable insights into the real estate industry and housing market, including quarterly regional reports, monthly videos, and timely analysis of the latest trends. Below the Top 10, you will find information inviting you to the live, virtual Economic Forecast Event I am hosting in January. Please reach out if you would like to attend.

1. Still no housing bubble
This was number one on my list last year and, so far, my forecast was spot on. The reason why I’m calling it out again is because the market performed better in 2023 than I expected. Continued price growth, combined with significantly higher mortgage rates, might suggest to some that the market will implode in 2024, but I find this implausible.

2. Mortgage rates will drop, but not quickly
The U.S. economy has been remarkably resilient, which has led the Federal Reserve to indicate that they will keep mortgage rates higher for longer to tame inflation. But data shows inflation and the broader economy are starting to slow, which should allow mortgage rates to ease in 2024. That said, I think rates will only fall to around 6% by the end of the year.

3. Listing activity will rise modestly
Although I expect a modest increase in listing activity in 2024, many homeowners will be hesitant to sell and lose their current mortgage rate. The latest data shows 80% of mortgaged homeowners in the U.S. have rates at or below 5%. Although they may not be inclined to sell right now, when rates fall to within 1.5% of their current rate, some will be motivated to move.

4. Home prices will rise, but not much
While many forecasters said home prices would fall in 2023, that was not the case, as the lack of inventory propped up home values. Given that it’s unlikely that there will be a significant increase in the number of homes for sale, I don’t expect prices to drop in 2024. However, growth will be a very modest 1%, which is the lowest pace seen for many years, but growth all the same.

5. Home values in markets that crashed will recover
During the pandemic, there were a number of more affordable markets across the country that experienced significant price increases, followed by price declines post-pandemic. I expected home prices in those areas to take longer to recover than the rest of the nation, but I’m surprised by how quickly they have started to grow, with most markets having either matched their historic highs or getting close to it – even in the face of very high borrowing costs. In 2024, I expect prices to match or exceed their 2022 highs in the vast majority of metro areas across the country.

6. New construction will gain market share
Although new construction remains tepid, builders are benefiting from the lack of supply in the resale market and are taking a greater share of listings. While this might sound like a positive for builders, it’s coming at a cost through lower list prices and increased incentives such as mortgage rate buy-downs. Although material costs have softened, it will remain very hard for builders to deliver enough housing to meet the demand.

7. Housing affordability will get worse
With home prices continuing to rise and the pace of borrowing costs far exceeding income growth, affordability will likely erode further in 2024. For affordability to improve, it would require either a significant drop in home values, a significant drop in mortgage rates, a significant increase in household incomes, or some combination of the three. But I’m afraid this is very unlikely. First-time home buyers will be the hardest hit by this continued lack of affordable housing.

8. Government needs to continue taking housing seriously
The government has started to take housing and affordability more seriously, with several states already having adopted new land use policies aimed at releasing developable land. In 2024, I hope cities and counties will continue to ease their restrictive land use policies. I also hope they’ll continue to streamline the permitting process and reduce the fees that are charged to builders, as these costs are passed directly onto the home buyer, which further impacts affordability.

9. Foreclosure activity won’t impact the market
Many expected that the end of forbearance would bring a veritable tsunami of homes to market, but that didn’t happen. At its peak, almost 1-in-10 homes in America were in the program, but that has fallen to below 1%. That said, foreclosure starts have picked up, but still remain well below pre-pandemic levels. Look for delinquency levels to continue rising in 2024, but they will only be returning to the long-term average and are not a cause for concern.

10. Sales will rise but remain the lowest in 15 years
2023 will likely be remembered as the year when home sales were the lowest since the housing bubble burst in 2008. I expect the number of homes for sale to improve modestly in 2024 which, combined with mortgage rates trending lower, should result in about 4.4 million home sales. Ultimately though, demand exceeding supply will mean that sellers will still have the upper hand.

Are you curious about the economy during these changing times?  
Are you trying to make financial plans, but crave credible information to assist you?
 
Please join me for a very special virtual live event:
 
AN ECONOMIC FORECAST FOR 2024 & BEYOND
with Matthew Gardner
Chief Economist for Windermere Real Estate
 
Wednesday, January 17, 2024  • 6:30 pm – 8 pm
 
Presentation from 6:30-7:30 pm, Q&A to follow
 
Please RSVP to me via phone, text, or email by January 12th, 2024 to receive an emailed link to access the event.

The question that many potential buyers are asking themselves right now is: should I wait for rates to drop before I buy? Higher interest rates have certainly made monthly payments higher and challenged overall affordability, however it is important to consider creative financing options and what the impact on prices will be once rates lower.

Experts predict rates to decrease over the next 12-18 months. In fact, we have seen rates drop half a point over the last 30 days. Currently, the 30-year conventional rate is hovering about 7.5%. We saw a correction in prices when rates jumped by a point and crested 6% in mid-2022. Since Dec 2022, prices found their bottom, and price appreciation started happening again. Year-to-date, the average interest rate has been around 7% and prices have not been in a free fall, they have grown and remain stable.

Just like the correction that happened in 2022, it is safe to say there is a correlation between prices and rates. If the experts are correct and rates fall over the course of the next year or so, we should anticipate prices to increase. That is what hangs in the balance when making the decision of whether to buy now or later. The example to the right shows the effect that price appreciation will have despite rates being lower. It was not that long ago that we were experiencing bidding wars where homes escalated in the double digits. As you can see, the higher price results in a higher payment even with the lower rate.

If one is able to afford a purchase now with today’s rate, they can refinance when rates go down and save themselves a lot of money on their payment while keeping a fixed price. Additionally, if a buyer can secure a rate buydown, such as a 2-1 buydown, the higher rates can be overcome and a refinance can fix the rate when the rates drop.

Here is an example: let’s say you are shopping for a house and have the same $800,000 budget and a 20% down payment with today’s rate of 7.5%. The monthly principal and interest payment would be $4,475.00. You could do a 2-1 buydown (2-points lower in year one and 1-point lower in year 2) which would have your payment in year one be based on an interest rate of 5.5% with a monthly principal and interest payment of $3,534 – a savings of $841.00 per month. For year two, the monthly principal and interest would be based on 6.5% resulting in a monthly payment of $4.045.00, a $430.00 per month savings. The total savings in monthly payments with the 2-1 buy-down over the two years would be $15,252.00.
 
The roughly $15,000 in monthly payment savings is paid upfront at closing and in some cases paid by the seller. The buyer still needs to qualify based on the 7.5% interest rate as the payments will convert to the payment based on the 7.5% in year three moving forward. The strategy here is to never have the payment increase to 7.5% because the buyer plans to refinance when rates come down, and will permanently fix their rate below 7.5%. A bonus is that if the entire $15,000 credit has not been used yet, in some cases those funds can be applied towards the refinance.

You see, there are many options to consider when a buyer is balancing rates, prices, payments, and their desire to make a move. I understand that I am in the business of helping people navigate big life changes while ensuring their financial investment is sound. I felt it was an important message to share these examples in case you or someone you know was thinking about making a purchase but was feeling confused or stifled by the current rate environment. If you want to learn more or need a referral to a reputable lender, please reach out. It is always my goal to help keep my clients well-informed and empower strong decisions.

On January 1, 2024, major changes to the Law of Agency will go into effect. These changes result from the real estate industry in the state of Washington wanting to elevate the level of transparency and consumer protection surrounding buyer representation. Senate Bill 5191 was voted into law requiring adjustments in how brokers operate when working with buyers.
 
Before I get into the details of the specific changes below, I wanted to explain why these changes are being made and the benefits to the consumer. It has been a long time coming for the buyer side of a transaction to be better defined with regards to representation, compensation, and the level of commitment the buyer and broker have to each other.
 
The seller side of a transaction has always required a separate contract (a Listing Agreement) that outlines these three important items. It has always been a bit shocking to me that the state did not require such a contract for a buyer and broker. Under new legislation set to take effect on January 1, 2024, buyers and brokers will be required to have a signed contract, a Buyer Brokerage Service Agreement (BBSA). This new contract will provide a consistent and professional guidepost to help everyone understand the buyer and broker relationship, just like a seller and broker do when they enter into a listing agreement.
 
The opportunity to set clear expectations through this new agreement and give both parties the choice to willingly agree to them will help buyers understand how their broker gets paid, cover industry norms, dig into who represents who and where that advocacy starts and ends, and communicate a transparent commitment to each other. I think this is powerful and meaningful for both buyers and brokers. Buying a home is a serious matter and outlining via a contract what is mandated by state law both clarifies and formalizes the relationship for both sides. Most importantly, it is a choice of who the buyer and broker enter into a contract with. The conversations that will surround these choices will be empowering for all parties involved.

Let’s face it, buying a house is not an easy task, nor is guiding someone successfully through the process. It is about time the law follows the call of duty and requires a clear explanation of how buyer representation works and encourage a clearly communicated partnership. I’ve always believed that having consistent processes in my business leads to a better outcome for my clients. This advancement for our industry will elevate these processes and in turn, raise the bar.

I plan to embrace these changes, as I see them as a benefit to my clients and our industry. The clarity these agreements provide will lead to fewer surprises, stronger bonds, and higher efficiency. I am prepared and excited to embrace this as a benefit for all parties involved in a real estate transaction.

Key Revisions
For years, real estate brokerage firms were only required to enter into written agreements with sellers, not buyers. Beginning on January 1, 2024, the Agency Law will require firms to enter into a written “brokerage services agreement” with any party the firm represents, both sellers and buyers. This change is to ensure that buyers (in addition to sellers) clearly understand the terms of the firm’s representation and compensation.
 
The services agreement with buyers must include:

• The term of the agreement (how long the buyer and broker are committed to working together);
• The name of the broker appointed to be the buyer’s agent;
• Whether the agency relationship is exclusive or non-exclusive;
• Whether the buyer consents to the individual broker representing both the buyer and the seller in the same transaction (referred to as “limited dual agency”);
• Whether the buyer consents to the broker’s designated broker/managing broker’s limited dual agency;
• The amount the firm will be compensated and who will pay the compensation; and
• Any other agreements between the parties.

All of these options are outlined in the new BBSA contract and will be presented and discussed before deciding to embark on the home-buying journey together. It will eliminate any guesswork and encourage a strong work relationship surrounding an incredibly important task. This will help my clients understand my level of commitment and professionalism, and how I help my clients achieve effective results.

I have provided the links to the new Agency Pamphlet and the revisions to Senate Bill 5191 below for your review. If you have any questions or are thinking about making a purchase in 2024, please reach out. It is always my goal to help keep my clients well-informed and empower strong decisions. I am happy to bring this information to you ahead of the change, so you are well prepared should you have any real estate changes coming your way in the future.


Revised Pamphlet. The pamphlet entitled “Real Estate Brokerage in Washington” provides an overview of the revised Agency Law.
Revised Agency Law. Substitute Senate Bill 5191 sets forth the revised Agency Law in its entirety.