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Higher interest rates are holding.

The economy's pretty flat.

And yet somehow, home prices remain high, climbing by double digits in some local submarkets.

Tonight, our expert panel is talking about market trends, mortgages, and the battle between buyers and sellers.

And our Steve Kiggins with the story of trying to find a home in Western Washington.

We're discussing what may be the largest investment you'll ever make next on northwest.

Now, The story of real estate this year is the story of big trends driving the generations younger.

Millennials experience tough job markets, a huge increase in prices, and then a pandemic, which exposed the nation's huge undersupply of new homes, sending prices through the roof again.

To make matters worse, the oldest Gen Z homebuyers are now coming into the housing market, so two generations are overlapping a bit and competing against each other for first homes.

And then there's the boomers, who own $19 trillion worth of real estate, which is 42% of the nation's real estate wealth.

They have really slowed down when it comes to downsizing, because they're not going to walk away from their 30 year, 3% fixed interest rate loans, and neither is Gen X that sits in there right behind them.

On top of all that, the homebuilders have learned some hard lessons and now build at a more measured pace.

There are just five weeks of inventory in western Washington.

A balanced market is said to lie at six months.

The result?

The median price in King County is $925,000.

That's up 14% in a year.

This despite higher interest rates in Pierce County, up 4% to 550,000.

It's now up 9% to 751,000 and 519,000 in Kitsap County, up 4% in a year.

statewide, this chart from the Office of Financial Management shows the clear trend when it comes to median home prices.

Northwest now, Steve King has more on this story.

cost of housing in our region has risen so fast.

It's put some people completely out of the market, but not everyone out of the game.

Tonight we meet one couple who tells us this new economic reality has forced them to rethink everything.

The Hansen family says they didn't just want a new house.

They want to move into a walkable community.

They wanted the property big enough to start a hobby garden in the backyard.

Well, they found exactly what they were looking for.

The cost them only $30,000.

If it will be fun to do you know things outside?

Yeah.

We want to keep the house, you know, as it's part of its neighborhood.

And it is traditional.

So we're not looking to, like, demolish it and totally renovate it for Brandon and make a Hansen and baby boy Luca.

The big moving day is just around the corner.

Yeah, I guess it just feels like a little faster.

Like we can move things along faster than we had originally thought at first.

The search for a new abode in the Seattle area meant prices forced their hunt beyond the city's limits.

By Fall City, you were like Ashford or.

Yeah, just a little out of the way.

Marble Mountains or concrete, like North Cascades.

Then I only want a house.

They also want a community with a change of pace.

We're young enough that, like, I don't know.

That's what we hear a lot from the older folks is like, oh, you know, you're young, so have to do that while you're young or have adventure all your young.

So last year, the Hansens began their new adventure, and they purchased a 100 year old farmhouse sitting on about an acre of land big enough to begin a garden.

But there's a catch.

The home is nowhere near Seattle.

Instead, it's all the way in Okayama, Japan, and cost them around $30,000 for both home and the property.

But they have to leave the United States to live their American dream.

The house is cute, and we really like it.

I like it's has like, a cute little, like, Japanese garden in the front of it.

The couple is already familiar with Japan.

They feel like they have a leg up.

Having already lived in the region for a couple of years.

They believe the change in pace and culture will be positive for their first child.

It's an opportunity they feel is quickly vanishing in their home country, as affordability and a sense of home awaits them across the Pacific.

It's not just as straightforward as, oh, we graduate, get a job, save up.

You know, like it's just also feels a little out of your control when it's like interest rates in Seattle.

Steve Keegan's northwest now.

Joining us now are longtime Northwest now guests Skyler Olsen, the chief economist at Zillow, Michael Urbano, president of the Seattle King County Realtors, Jasmine Jefferson, the president of the Tacoma Pierce Association of Realtors.

And Robert Klippsten with Evergreen Home Loans, who's been our mortgage guru for more than a decade now and currently serves as the president of the Puget Sound Mortgage Lenders Association.

Welcome all of you to northwest.

Now great to have our annual discussion about the real estate market here in western Washington.

Skylar, I want to talk with you taking sort of a market wide look here.

A Zillow study says that you guys just came out with you need $213,000 in income to afford the median home in Seattle.

So talk a little bit about trends and affordability, maybe through that lens.

Yeah, I mean, in terms of trends, home values right now in the Seattle metropolitan area aren't growing, you know, super fast.

They're going slower than pre-pandemic.

Right.

That's a lot more mild.

but that's after a really rapid uptick in home prices over the course of the pandemic, when those mortgage rates were really low.

And people might be surprised to know that home prices are not falling now that mortgage rates are really high, because in so many ways, supply pulls back and we'll talk more about that.

But if we're going to characterize affordability, you know, it's one thing to say, oh, you got to make this much.

You know, some of us, you know, when you're buying a home, that's a long run endeavor, right?

So you're going to save up for it around the time.

Let's think about it this way, too.

If I was to say about 5% of median household income in the Seattle metropolitan area, it would take you 13.5 years to get 10% down on that home.

So it is harder to get there.

So new homeowners are going to be older.

Yeah, than they used to be.

Right.

And, it is challenging.

Michael, you're in King County.

That's that's your, neck of the woods.

As the president of the association there.

is there a lot of gnashing of teeth?

People can't get that down payment?

Or is the market functioning as you'd expect it to?

Well, it's a nuanced picture, and there's a lot of different trends and trends going on.

we're certainly at least me personally, I'm disappointed that we haven't seen more of a price correction.

We were hoping that, you know, there would be kind of a healthy softening, but prices remain high simply because, inventory remains low.

And I think there was a lot of even the smart minds underestimated the so-called lock in effect of these low cost mortgages.

And so what we've lost in that is a lot of what I would call our choice buyers and sellers, where they might just be missing an amenity, or they might be a lateral or even a slightly move up or move down buyer.

A lot of those folks are locked in, so the remaining sellers are oftentimes trusts, estates, people with surplus real estate, perhaps, landlords that are liquidating and moving around property.

But that's was always the minority of the market.

The choice sellers just aren't there, which is keeping prices high.

Jasmine, Pierce County was always a place you can run away from King County, get down to buy an affordable home and all is well.

Is that true anymore?

It's still happening and we're seeing folks relocating from other states as well.

So I do think that, part of the climate issue is also going to drive traffic into Pierce County when folks see the prices in Seattle.

Yeah, yeah.

Robert, you called it, I don't know if it was last year or the year before, but said that the fed was really going to come here and kick the real estate market in the teeth.

So they raised interest rates, but it didn't kick the real estate market in the teeth.

Is it a failure?

Is it going to work?

will we will the fed see movement a sufficient to to lower rates.

What do you think.

What is today.

let's let's in the future let's be real here for a second.

going into 2024, people speculated seven moves downward.

Yeah.

And I was three then.

It was one in the last week.

Last week it was three moves downward.

This weekend it was one move downward.

And today they're talking about inflation once again is out of control.

And with that happening there's going to be no movement at all.

All I can say about interest rates is this the average interest rate since 1971 is 7.74%.

We're ahead of the market ahead of the 40 year average by 1%.

If you can afford okay, boom by now.

Yeah.

No seriously.

Interest rates.

If you can afford to buy a home to invest because appreciation will outrun.

Yeah.

The the effect on interest rates.

And I say that because, you know, when I talk to my kids about, well, you know really interest rates are still low.

It's okay Boomer.

Yeah.

You know like no they're not.

Well I think one of the kind of key issues to think about it is, you know, you maybe shouldn't be waiting for interest rates to drop anytime soon as kind of some of the lessons that we're learning when we constantly watch the Federal Reserve push off of this moment, right when the suddenly they're going to drop their policy rate and suddenly mortgage rates are going to fall.

But it's when they're confident enough that inflation is under control that might take a long time to see while we keep seeing it come back, back up again.

Right.

and so, you know, maybe not even this year, maybe in the next year, which means if you find yourself in a financial position to afford housing, if you find yourself in the life stage where you want to commit to a home, a neighborhood, it doesn't really make sense to wait if you find that home to match.

Because we're not promising you a time where rates are lower and prices are lower, right?

That's not really, I think what we can promise.

Yeah.

I always, I always, give realtors the business for the now is a good time to buy thing and you, you let it go.

And I laugh at that because there's no market condition in which now is a good time to buy, which I get.

With that said though, address that for once.

Sure.

If you're a millennial today, two years ago, if you brought in an FHA, VA, or low down payment offer, you got kicked to the curb.

There was no inventory and cash.

Buyers and well suited buyers got the properties.

If we wait too long, the millennial generation will not be able to buy.

Yeah, because if interest rates drop, what will happen?

The inventory will get sucked up quickly.

And once again, those buyers will get kicked to the curb.

But they're waiting for their interest rate.

Some of them are.

So we have to lock arms, educate the buyers so they understand the value of real estate, outruns the interest rate.

Well, yeah.

Go ahead.

There's a lot of old folks, still living in homes, tying up homes in Seattle right now with people waiting for interest rates.

Yeah.

And I am a millennial.

So I'll say, okay, Boomer, and I'll say respectfully and with love because the appreciation rate is not being average.

So, you know, to match the interest rate.

So the cost of housing is through the roof and we have affordability index that we can track.

And they're the worst they've been in decades.

But what people do is and I think what we underestimate is it's not binary.

They don't just not buy they adjust their price points.

And this is why we have such is one of the insidious effects is how much it destroys our affordable housing.

Because what happens is, let's say that you could qualify and dual income for $700,000 at 3.5%, and now at 7%, you can only qualify for 550.

Yeah.

You don't decide you're not going to buy.

You start looking at inventory at 550 and you grab that 550 inventory and then maybe even bid it up with some help of family and friends or whatever, to 650.

And that's where in this market we will still see 20 offers on a affordable what I would refer to affectionately as Grandma's Rambler.

Yes.

And that covers King, Snohomish, Pierce.

There's no safe haven for that product anymore.

Even my friends in Eastern Washington and Spokane and the tri cities that affordable what we used to call bread and butter housing stock is the highest in demand, and that's where it gets a bit up.

So if there is any softening, it tends to be on the extremes of, you know, luxury, real estate and things that people have truly been priced low and questionable.

Correct.

But all that ends up doing is people start where they would have been in this price bracket, start looking at that price bracket, and then it's just a downstream effect.

Then I see you shaking your head vigorously.

Yes.

That this is happening.

a lot of boomers are tying up their homes though, too, and I'm sure that's happening in Pierce County.

They're locked in.

They don't want to give up that interest rate.

Right.

And also the cost of where are they going to go.

So this is their forever home.

And getting into assisted living that's extremely expensive or aging in place.

Yeah that's the new big thing.

Yeah.

So making modifications to the home, maybe bringing in more family members to live together, that's also something we're seeing a lot of.

Yeah.

Robert, I saw you getting ready to pounce.

Oh, no.

You're good.

What about talk a little bit about that lock in.

even even, you know, even looking at the trends, that relief isn't coming.

That still doesn't mean that I want to give up my three and 3.25% mortgage rate.

it doesn't really affect sellers that much, does it?

Knowing, knowing things aren't going to change that much and there isn't going to be a big price to decrease.

Doesn't does it make me want to sell?

It might motivate buyers, but it doesn't motivate sellers.

How do we get them out of their homes?

we found a lot of ways to get them out of their homes.

One of them is training them the value of money.

So the average consumer in America, and you can answer all of the economics back behind us.

But the average the average consumer carries $6,000 worth of department store debt, which is over 30% interest rate.

Now, the average interest rate on their student loans, their car loans, etc.

is 20 plus percent.

Okay, so if they have a house payment at $3,000 and they have $4,000 worth of debt, they have $7,000 with debt.

So what you have to do as a that's before financial advisor is work with your clients to show them.

If you buy the new home, there is ways that you can use the cash to buy the home and pay off the debt, and your average payment will be low.

The 7000 it will be five $6,000.

So we're finding ways to do debt consolidation purchases.

We're giving them bridge loans to pay off on and then buy the final mortgage with the debt consolidated.

That's the first piece.

The second piece is all of us need to do a better job of educating people on wealth, because I can tell you in the West alone, at last year's appreciation values, I think it was six point something percent you would with the average purchase price in the West, you would have made $33,000 in equity of your first year.

Yeah.

If you had a mortgage at five and a half versus seven and a half, you still would have made $19,000 more in appreciation and wealth than if you had waited.

So that five in a train is leaving you.

Five and a half is gone.

Yeah.

So at seven, I'm telling you, you, you.

If you don't, there is a hourglass, a sand glass that's running out of time for buying down as a baby boomer and for the millennial generation to buy their first home and gain their first wealth experience.

So, Skyler, that leads me to say, well, gee, if I'm, if I'm Pulte Homes or Sound Builder, something like that.

Here I come to throw 300 homes on the ground out past Eatonville.

They're not doing that anymore.

They've learned they've learned inventory discipline.

Right?

Yeah.

I mean, I think something that's going on, you know, for builders, of course, is that they it's easier to respond to, you know, that fast housing appreciation now that things are going a little bit slower.

You know, we haven't seen that.

We did see a bit of a boom in single family building, you know, around the Seattle metropolitan area.

But more recently it's just down to kind of that pre-pandemic or a bit even softer.

And we haven't seen it swing back again, like say that does in Florida or Texas or is it the regulatory environment here?

It is dramatic.

It is a dramatic difference in terms of how easy it is to build, maybe elsewhere versus here.

there are costs in Washington almost in permitting and regulation.

And maybe it's something that I'll kind of point out is we, you know, we've made this the starting point of this, right, to say, like, hey, we're going to, you know, challenge, single family density.

You know, we're going to, you know, try and allow people to add accessory dwelling units in their backyards or something else, but something, let's say California found out, is that you can't end there.

Right?

You got to say, hey, we're going to allow more things.

Then you got to go on to enabling more things, helping more people do it, and clarifying what it is to get it done so that the permanent time is shorter so that people can actually get that change to start happening.

So even, you know, those first few strides that Washington has made, it'll take a little while to get to a place where it really is easy to get that to come back.

In the meantime, there's I may have some good news, let's say, whether or not this bears out, but this, you know, this interest rate lock and idea in the numbers, what that looks like for the Seattle metropolitan area is new listings from existing owners were a third down from normal, right.

Like really dramatic pullback now just February numbers.

So like everyone started knocking on wood.

Hope of this maintains.

But as time goes on people have to get that money out of their house because they're going to retire, you know whatever.

So time heals a little bit of the lock and maybe not if you're holding below 3%, by the way.

But yeah, for folks that are only above four, maybe 5%, you know, time happens, life happens, they move on.

February numbers was only 8% down from normal.

And that's a more price cut.

That's the wealth management piece.

Because even if I had the money, in a lump, I'm not I'm still not going to pay off a 275 interest rate.

I'm going to take the arbitrage on that number.

I don't want to get into finance here, but from a wealth management perspective, I'm not paying it off, even if I had it right.

You talked about that.

I think you the term for what you talked about, Michael was the missing middle.

how difficult that it is under these scenarios for that missing middle piece.

You know, we can pass laws in Olympia, but they don't necessarily translate to homes into that missing middle.

Absolutely.

And I think sometimes we overestimate the power of state government in the building industry, particularly single family homes.

Most of that in the our local associations in our state association, Realtors are very active in advocacy and at every level of government and municipal oversight.

so the state can pass and make alterations to single family zoning.

But it's up to the municipalities and jurisdictions to have the infrastructure and the ability to process building permits and to do comprehensive planning.

We are very grateful right now.

I served on the City of Bellevue Comprehensive Planning Commission.

I know Seattle's in there.

So the comp planning for the next and those are usually done in ten or even 20 year increments.

And so it's looking good.

Absolutely.

So housing the secret is out because as Robert said, not just the wealth effect of purchasing, but there's no safe haven on rent either.

So it's so the delta between, you know, and a lot of times realtors say, well, why do you why are you concerned about affordable rent?

Because people need to save for a down payment.

And when your average one bedroom in King County is running $1,800, you can't save for a down payment.

Even with all the great FHA and other programs we have.

So that's a big deal.

But until we kind of can increase that housing stock and I agree, the regulatory environment is huge.

but our infrastructure is huge too.

Yeah.

Because in the old days you used to drive to qualify as a Bellevue guy.

I used to sell homes in South King County all the time, Federal Way, even to Pierce County.

But until you can pack up your job and move it, that's tough.

Now, Jasmine, what do you think needs to be done?

What's the solution to some of this?

Is there a regulatory issue you have in mind, or as the head of your association, or are you guys promoting anything policy?

We're definitely looking at home in Tacoma.

We know that across the state, other cities are also looking at home in Tacoma and really focusing on the missing middle.

the gridlocked just doesn't seem to be loosening up because like Michael said, with the infrastructure, there has to be some given right now.

Nobody wants to give.

Yeah, yeah, I'm going to ask.

There are two realtors here.

I wasn't going to do the Nar settlement, but case but now that it's settled, I'd be remiss not to.

So just give me 30s each of you first of all, Michael, the National Association of Realtors, with a lot of paperwork is required in this state.

We'll have will it have any impact on the price of homes or the real estate market at all, do you think?

Or or is it all inside baseball in your industry?

I think it's to be determined.

I think on prices of home, I don't see a great impact.

At the end of the day, it's still competitive.

Market sellers have always been able to negotiate their compensation and fee structure.

I think it's good and transparent and full disclosure, I am on the board of directors for the National Association, and as local president, I've talked to no less than 300 brokers over the last two weeks.

On the Sky is falling.

Yeah, yeah, but it's really not.

We're excited.

Washington State leads the way in transparency.

We spent four years preparing for this day.

So make no mistake, anybody that is frustrated with any are from a macro perspective, I think may be missing the point that there were some practices in other parts of the country that we needed to clean up.

And so oftentimes brokers in Washington state don't even realize even some of our leadership that when the word MLS is used in all capitalization inside a media report that's referring to wholly owned MLS is by Na.

Most of our region, particularly in western Washington, is serviced by the Northwest Multiple Listing Service, which is completely independent from the realtor organizations.

So the structures are already there.

Correct.

So the main terms that were offered as part of the settlement we've put into practice over the last many years.

So we're I'm personally excited and enthusiastic about the settlement.

It gives us an opportunity to move forward.

And I think it's going to continue to raise the bar on professionalism.

Bob's hourglass on this, Robert's hourglass on this show is starting to run out.

The sand is running.

So I want to give our last 2.5 minutes here to go down the line.

Best advice to either buyers or sellers.

Hey, and more information and understand kind of what you can access.

Right.

So you know when things are affordable as you mentioned, maybe explore a different price point.

You know, move down to Pierce County, right.

Different areas to kind of explore, but also seek out, different opportunities, down payment assistance programs.

You know, you can seek on Zillow.

Every page has, you know, something that you might have a qualification for or different mortgage products.

I'm sure you'll get down there down to two minutes.

So, Michael, a brief take on your best advice to buyers or sellers.

Be patient, especially on the buyer side.

I think, you know, finding a home is just like finding a partner in life.

You know, you hope that it's perfect.

You have an idea and a vision that you wake up one day and say, you know, I'm ready to commit to somebody and I have an idea of who they are.

I'd spend a lot of money.

Yes, but exactly.

But in reality, houses and and buying a house is messy and murky.

Just like finding a partner to to be involved with.

And don't let perfection be the enemy of progress.

Get on the housing ladder one way or another if you have to.

If you had an idea of a yard, maybe look at a townhome.

If you're looking at a town, you might have to look to a condo, but at least you're in the game and kind of can start setting.

Jasmine.

Your best advice?

Think of it as relational and less transactional.

You talked a lot about the wealth conversation and getting educated.

A lot of times, buyers and sellers don't talk to the real estate professional or lender until further down the line when they think they've done all the research and there's not really enough time to do the strategic planning that we've been talking about, or when they're just prepared enough to blow up a deal.

Correct?

Yes, yes.

Robert.

Robert, your best advice?

Always align yourself with a true professional.

You will always get your money's worth when you pay for knowledge and wisdom on any side of the real estate transaction, make sure you're aligned with the right human being that will find the home and make you allow you to win the dream of homeownership.

Yeah, I didn't get to this, but I think the Nar settlement could have an impact.

A washing out hobbyist to some degree, which, you know, you can make your own opinion as to whether that's a good thing or not going forward.

Everybody, I know that 20 minutes goes quickly, but I thought there was a lot of great information packed into it.

I thank all of you for coming to northwest now.

Yeah.

Thank you.

Thanks for having us.

Thank you.

A lot of real estate analysts say that we're going to see a silver tsunami of housing inventory come onto the market when boomers start selling more aggressively.

As this decade wears on.

The bottom line, don't count on it.

Aging in place is the new trend, and with so many barriers to new home building in markets like Western Washington, chances are homes are going to stay expensive relative to incomes for a long time.

I hope this program got you thinking and talking.

You can find this program on the web at kbtc.org.

Stream it through the PBS app, listen on Spotify and Apple Podcasts.

That is going to do it for this edition of northwest.

Now, until next time, I'm Tom Layson.

Thanks for watching.

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