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5 Reasons Rising Interest Rates Won’t Wreck the Housing Market
Interest rates have been trending higher since the fall of 2017, and I fully expect they will continue in that direction – albeit relatively slowly – as we move through the balance of the year and into 2019. So what does this mean for the US housing market?
It might come as a surprise to learn that I really don’t think rising interest rates will have a major impact on the housing market. Here is my reasoning:
1. First Time Home Buyers
As interest rates rise, I expect more buyers to get off the fence and into the market; specifically, first time buyers who, made up nearly half of new mortgages in the first quarter of this year. First-time buyers are critical to the overall health of the housing market because of the subsequent chain reaction of sales that result so this is actually a positive outcome of rising rates.
2. Easing Credit Standards
Rising interest rates may actually push some lenders to modestly ease credit standards. I know this statement will cause some people to think that easing credit will immediately send us back to the days of sub-prime lending and housing bubbles, but I don’t see this happening. Even a very modest easing of credit will allow for more than one million new home buyers to qualify for a mortgage.
3. Low Unemployment
We stand today in a country with very low unemployment (currently 4.0% and likely to get close to 3.5% by year’s end). Low unemployment rates encourage employers to raise wages to keep existing talent, as well as to recruit new talent. Wage growth can, to a degree, offset increasing interest rates because, as wages rise, buyers can afford higher mortgage payments.
4. Supply
There is a clear relationship between housing supply, home prices, and interest rates. We’re already seeing a shift in inventory levels with more homes coming on the market, and I fully expect this trend to continue for the foreseeable future. This increase in supply is, in part, a result of homeowners looking to cash in on their home’s appreciation before interest rates rise too far. This, on its own, will help ease the growth of home prices and offset rising interest rates. Furthermore, if we start to see more new construction activity at the lower end of the market, this too will help.
National versus Local
Up until this point, I’ve looked at how rising interest rates might impact the housing market on a national level, but as we all know, real estate is local, and different markets react to shifts in different ways. For example, rising interest rates will be felt more in expensive housing markets, such as San Francisco, New York, Los Angeles, and Orange County, but I expect to see less impact in areas like Cleveland, Philadelphia, Pittsburg, and Detroit, where buyers spend a lower percentage of their incomes on housing. The exception to this would be if interest rates continue to rise for a prolonged period; in that case, we might see demand start to taper off, especially in the less expensive housing markets where buyers are more price sensitive.
For more than seven years, home buyers and real estate professionals alike have grown very accustomed to historically low interest rates. We always knew the time would come when they would begin to rise again, but that doesn’t mean the outlook for housing is doom and gloom. On the contrary, I believe rising interest rates will help bring us closer to a more balanced real estate market, something that is sorely needed in many markets across the country.
8 Laundry Room Updates to Fit Any Budget
Hoping to transform your tired laundry room into a sparkling clean, efficiently working space, but without the major costs of a full remodel? By not changing the layout or adding square feet, you can bring costs down while still making meaningful changes to your space. Use this guide to help you decide what to prioritize and what to put on the back burner, and give your laundry room an update that works with your space — whether your budget is $100 or $10,000.
Laundry 1: Sharon Barrett Interiors, original photo on Houzz
If your budget is about $100: Clean, de-clutter and upgrade laundry baskets that have seen better days. It’s worth spending a little more for hampers that can stand up to heavy use.
Also think about which features would be most helpful to have, such as hampers on wheels, triple-sorter bins or stackable baskets that can tuck out of the way when you’re not using them.
Laundry 2: David Charlez Designs, original photo on Houzz
If your budget is about $300: Clean up, get hampers and then give the walls a fresh coat of paint. A cheerful color can make your laundry room feel brand-new without breaking the budget — especially if you’re willing to DIY.
If your budget is about $500: Get hampers, fresh paint and then a soft new rug. You’ll appreciate the dose of color as much as the softness underfoot. If moisture is a concern (for example, if your laundry room is in the basement), you may want to choose a sturdy indoor-outdoor rug.
Laundry 3: ACQUIRE, original photo on Houzz
If your budget is about $700: Get hampers, fresh paint and a new rug, and then swap out the lighting.
Ample lighting is important when you’re trying to check laundry for stains and read labels, so pay attention to the recommended wattage of any light fixture you are considering — anything less than 75 watts may not shed enough light (especially if it’s the sole light source in the room).
Laundry 4: CVI Design – Carly Visser, original photo on Houzz
If your budget is about $1,200: Tackle all the above, and then treat your space to some bonus storage and extras, like an ironing station, a drying rack or open shelves. If your laundry room is small, look for space-saving designs like folding drying racks, retractable clotheslines and wall-mounted ironing boards.
If your budget is about $3,500: What’s next? New appliances! A new washer and dryer can work more efficiently than older models, operate more quietly and get your clothes cleaner.
If you’re going from top-loading to front-loading machines, consider adding a countertop above to hold supplies and act as a surface for folding. Not in the market for a new set? Give your old machines a thorough cleaning to keep them running well (and smelling fresh).
Laundry 5: colorTHEORY Boston, original photo on Houzz
If your budget is about $5,000: If you have more room in the budget, think about replacing the laundry room sink and faucet. If you’re hoping to avoid additional installation costs, choose a new model that is the same size as the old one. If you don’t already have a sink in the laundry room, adding one will require more extensive help from a plumber, and costs will be significantly more.
Laundry 6: Dina Bandman Interiors, original photo on Houzz
If your budget is about $10,000: So you have the hampers, paint, rug, lighting, storage, appliances and sink. If you still have room in the budget, think about tackling a bigger project like installing a new tile floor or a pet-washing station. Your furry friend may not thank you but sure will look cute sitting in that tub.
Broker’s Perspective: Housing Inventory Increase
Our brokers are deeply connected to the issues that face local home-buyers and sellers. In this series of blogs, “The Broker’s Perspective” Windermere Stanwood and Camano Island brokers provide insight into current market trends and topics. This week, we discuss the King 5 feature on increased housing inventory with broker, Jill Vail.
King County home buyers saw relief in July, but it’s not the same story across the region. King County’s real estate market continued to see a cooling effect in July with year-over-year inventory up and sales down, the Northwest Multiple Listing Service reported Monday.
Housing inventory – or how long it would take to sell all houses on the market without more being listed – improved 6.5 percent since last July, according to the Northwest MLS. At the same time, pending sales and closed sales are down 7 percent and 3.4 percent, respectively.
“It has been a long time coming, but we finally have some solidly good news for buyers in the Puget Sound area,” OB Jacobi, president of Windermere Real Estate, said in a statement.
In July, Seattle and King County saw the highest housing supply levels since 2015, according to Robert Wasser, owner of Prospera Real Estate.
Industry leaders said the increased inventory has had a calming effect on prices as sellers have had to let go of expectations of multiple offers or massive price escalations.
However, it isn’t the same story across the state. Of all counties in Western Washington, King County saw the largest gains in inventory year-over-year. Snohomish County inventory improved slightly, but Pierce County saw a decrease in inventory coupled with more pending sales and increased prices. “Pierce County has, for a handful of years, been the affordability solution for buyers who would otherwise buy in King County,” Northwest MLS director Mike Larson said. “I think the craziness of the King County market has magnified that fact even more.”
Industry leaders cautioned that while the market has cooled, it is by no means cold. King County still only has 1.57 months of inventory, which is below a healthy inventory of four or five months, according to President and COO of Coldwell Banker Bain Mike Grady. “We are still a seller’s market,” Broker Keith Bruce said. “Much more inventory is needed to meet the overall demand for quality homes in Seattle.”
Jill’s Perspective
I often have clients asking if we are seeing the same craziness in our real estate market as they are in King County. The good news is that our market was never as frenzied as it was for our urban neighbors. We had multiple offers and escalated prices but never to the tune that they did in Seattle. Our market still needs some corrections, but we are not seeing the significant increase in inventory that Seattle is seeing. No market can sustain the kind of price increases they saw in Seattle, so some adjustments were due.
Even though reports indicate that housing inventory has increased in King County, Camano Island inventory has actually decreased since the same time last year. Listings are down almost 20%, from 124 to 100 residential listings. Inventory in Stanwood is a little different, though. It has increased by 10%, from 94 to 103 homes at this same time last year. Stanwood’s market is affected by the new construction communities that have been popping up. Some new homes have come on the market over the past year, making up for a lack of new construction over the last 10 years, which is great for buyers.
While the market is slowly correcting itself, make no mistake—it is still a seller’s market. The average days on market has decreased sharply. A year ago, the average days on market for sold homes was 60. Currently, we are down to only 43 days. There are still some strong upward pressures on prices, too. A year ago, Camano Island’s months of inventory was at 2.4. Currently, we are seeing only 2/3 of that, at 1.6 months. Stanwood is up to 1.5 months from 1.2 this time last year. A balanced market should be 3-6 months and we have a way to go before we get to that level.
So, it’s still a great time to sell in Stanwood and Camano Island. I have buyers out there waiting for the right home to come on the market for them. We are starting to see an improvement in conditions for buyers, but they still need to act fast when they see that great house come on the market. Some buyers are still learning that the hard way. It is important for buyers to keep an eye on the market and hire a professional who can help them act quickly and be competitive.
Jill Vail | Windermere Stanwood and Camano Island Broker
This quirky century-old schoolhouse is yours for $695,000
The two-acre property on the Stillaguamish River in Silvana includes a replica Old West town.
SILVANA — The old schoolhouse here and the quirky property it sits on, complete with a Wild West-style town in the back yard, is up for sale.
The asking price is $695,000.
The school was built around 1907, part of the Silvana School District that eventually was absorbed into the Arlington School District.
A larger, two-story school was constructed later. Lessons were moved there, and the older schoolhouse became a gymnasium.
The 1907 school outlasted its newer neighbor, which has been torn down. The building off Pioneer Highway — with white walls and a red roof — has been a private residence for at least two decades.
Michael Berg, 71, bought the school and property in 1997 for $80,000. He estimates he’s put upward of $400,000 into improvements. He lives there and uses it as an art studio, mainly for metal and bead work.
A European style fountain, multiple outbuildings and lawn sculptures dot the landscape of the old Silvana Schoolhouse. (Kevin Clark / The Herald)
The building has been raised on a foundation above the 100-year flood level. A new bell tower sits on top. A little white chapel, saloon, restrooms, changing rooms, clubhouse, fire pit, fountains and greenhouse are among the features out back. The large yard has been the site of weddings, family reunions and memorials.
A photo album shows the building two decades ago, a shell. It’s still not finished inside, but there is electricity, plumbing and telephone line, along with the new foundation, windows and other improvements.
The replica Old West town out back was purchased around 1998 from a man in Lake Stevens and moved to Silvana. Behind the yard, a field spreads out, and then there’s the Stillaguamish River. Trains sound their whistles as they rumble over nearby tracks.
The view from the back porch of old Silvana Schoolhouse (Kevin Clark / The Herald)
Berg plans to move to Arizona, where he has family. He’d like to sell to someone who will improve and enjoy the property.
“I really love it,” he said. “I think whoever buys it will really love it, too.”
Molly Alumbaugh, a Realtor with the Windermere offices in Stanwood and Camano Island, said the property is definitely one of the more interesting ones she’s worked on.
The building is about 3,300 square feet, including unfinished areas. The property includes about two acres.
The Silvana School and its pupils in 1908. (Courtesy of Robin Monson Sather. Published in “Early Stillaguamish Valley Schools” by the Stillaguamish Valley Genealogical Society)
Most of the people Alumbaugh has heard from so far are interested in the schoolhouse and yard as an event venue, she said. They like its history and character.
“With rustic farmhouse and Western weddings all the rage, someone could really go to town with this,” she said.
How Zoning and Regulatory Costs Impact Housing Affordability
Windermere Real Estate Chief Economist Matthew Gardner explains the ways zoning rules and regulatory costs can limit housing affordability.
Simple Steps for Maintaining Air Quality in Your Home
Most of us tend to think of air pollution as something that occurs outdoors where car exhaust and factory fumes proliferate, but there’s such a thing as indoor air pollution, too. Since the 1950s, the number of synthetic chemicals used in products for the home has increased drastically, while at the same time, homes have become much tighter and better insulated. As a result, the EPA estimates that indoor pollutants today are anywhere from five to 70 times higher than pollutants in outside air.
Luckily, there are many ways to reduce indoor air pollution. We all know that buying organic and natural home materials and cleaning supplies can improve the air quality in our homes, but there are several other measures you can take as well.
How pollutants get into our homes
Potentially toxic ingredients are found in many materials throughout the home, and they leach out into the air as Volatile Organic Compounds or VOCs. If you open a can of paint, you can probably smell those VOCs. The “new car smell” is another example of this. The smell seems to dissipate after a while, but VOCs can actually “off-gas” for a long time, even after a noticeable smell is gone.
We all know to use paint and glue in a well-ventilated room, but there are many other materials that don’t come with that warning. For instance, there are chemicals, such as formaldehyde, in the resin used to make most cabinets and plywood particle board. It’s also in wall paneling and closet shelves, and in certain wood finishes used on cabinets and furniture. The problems aren’t just with wood, either. Fabrics—everything from draperies to upholstery, bedding, and carpets—are a potent source of VOCs.
The good news about VOCs is that they do dissipate with time. For that reason, the highest levels of VOCs are usually found in new homes or remodels. If you are concerned about VOCs, there are several products you can buy that are either low- or no-VOC. You can also have your home professionally tested.
How to reduce VOCs in your home
Make smart choices in building materials.
- For floors, use tile or solid wood—hardwood, bamboo, or cork – instead of composites.
- Instead of using pressed particle board or indoor plywood, choose solid wood or outdoor-quality plywood that uses a less toxic form of formaldehyde.
- Choose low-VOC or VOC-free paints and finishes.
Purify the air that’s there.
- Make sure your rooms have adequate ventilation, and air out newly renovated or refurnished areas for at least a week, if possible.
- Clean duct work and furnace filters regularly.
- Install air cleaners if needed.
- Use only environmentally responsible cleaning chemicals.
- Plants can help clean the air: good nonpoisonous options include bamboo palm, lady palm, parlor palm, and moth orchids.
- Air out freshly dry-cleaned clothes or choose a “green” cleaner.
Fight the carpet demons.
- Choose “Green Label” carpeting or a natural fiber such as wool or sisal.
- Use nails instead of glue to secure carpet.
- Install carpet LAST after completing painting projects, wall coverings, and other high-VOC processes.
- Air out newly carpeted areas before using.
- Use a HEPA vacuum or a central vac system that vents outdoors.
Prevent Mold.
- Clean up water leaks fast.
- Use dehumidifiers, if necessary, to keep humidity below 60 percent.
- Don’t carpet rooms that stay damp.
- Insulate pipes, crawl spaces, and windows to eliminate condensation.
- Kill mold before it gets a grip with one-half cup of bleach per gallon of water.
We hope this information is helpful. If you would like to learn more about VOCs and indoor air quality, please visit http://www.epa.gov/iaq/.
Letter: Thanks to neighborhood, Camano’s National Night Out was a success
Dear Editor: Camano neighbors gathered Aug. 7 at the Utsalady Ladies Aid Building for a giant block party to celebrate a night out against crime. Along with food and fun, information was available from local resource groups for making the community and neighborhoods on Camano Island safer places.
Participating groups were: Camano Island Fire and Rescue, Island County Sheriff Mark Brown and Sheriff’s Citizens Patrol, Camano Law Enforcement and support foundation, Island County Animal Patrol, Stanwood/Camano Amateur Radio Club & Amateur Radio Emergency Service, Camano Preparedness Group, American Legion, Camano Community Center, Island County Transit, Island County Chamber of Commerce, Windermere Real Estate and Utsalady Ladies Aid.
The Utsalady Ladies Aid members and I want to thank the neighborhood residents, the local law enforcement agencies and others for participating in this event and bringing to us important information about crime prevention and preparedness.
Thanks to everyone involved in making this first National Night Out celebration on Camano Island so successful.
Broker’s Perspective: Is New Construction Declining?
Our brokers are deeply connected to the issues that face local home-buyers and sellers. In this series of blogs, “The Broker’s Perspective” Windermere Stanwood and Camano Island brokers provide insight into current market trends and topics. This week, we discuss The Seattle Times article on the looming housing market slowdown with broker, Dianna Pence.
The U.S. housing market — particularly in cutthroat areas like Seattle, Silicon Valley and Austin, Texas — appears to be headed for the broadest slowdown in years. Buyers are getting squeezed by rising mortgage rates and by prices climbing about twice as fast as incomes, and there’s only so far they can stretch.
“This could be the very beginning of a turning point,” said Robert Shiller, a Nobel Prize-winning economist who is famed for warning of the dot-com and housing bubbles, in an interview. He stressed that he isn’t ready to make that call yet.
A slew of figures released this week gives ample evidence of at least a cooling.
• Existing-home sales dropped in June for a third straight month. Purchases of new homes are at their slowest pace in eight months.
• Inventory, which plunged for years, has begun to grow again as buyers move to the sidelines, sapping the fuel for surging home values.
• Prices for existing homes climbed 6.4 percent in May, the smallest year-over-year gain since early 2017, and have gained the least over three months since 2012, according to the Federal Housing Finance Agency.
• Shares of PulteGroup fell as much as 4.9 percent Thursday morning after the national homebuilder reported that orders had declined 1 percent from a year earlier, blaming rising mortgage rates.
This new wariness was noticeable in the latest consumer-sentiment data from the University of Michigan. In its preliminary July survey, 65 percent of Americans said it’s a good time to buy a home, the lowest since 2008, when the economy was still in recession.
The homeownership rate in the second quarter was 64.3 percent, up from 63.7 percent a year earlier, according to U.S. Census Bureau data released Thursday.
Homeownership still remains out of reach for many Americans, especially for first-time and younger buyers. For existing homes, the median price climbed in June to a record $276,900, while properties typically stayed on the market for 26 days, unchanged from the prior three months, according to the National Association of Realtors.
Dianna’s Perspective
I work closely with Titan Homes, a local builder, so I’m familiar with the new construction market in our area.
In the last three months, new construction sales figures were up. The Stanwood-Camano market currently has 31 pending sales; 12 closed in July which is the lowest number in the last four months. Currently, there are 28 active listings.
We saw a decline in new construction after the economic downturn nearly a decade ago. Many of the builders had chosen to leave the industry and find alternate vocations. We’re now on a building uptick with the largest challenge being able to find affordable land to build on as well as subcontractors who aren’t overloaded with work already. Recently, we’ve found ourselves moving off of Camano Island in search of property as there isn’t much development potential left on the island.
All that being said, the buying market is still hot and we’re seeing a lot of people moving into our area. The need for new housing remains high.
Dianna Pence | Windermere Stanwood and Camano Island Broker
Rotary announces parade winners
Seventy-six entries in this year’s Stanwood Camano Community Parade marched west through downtown Stanwood for about hour on Saturday, Aug. 4.
Dan Sailer, chair of the parade committee, said kids, teens and adults came ready to see a grand parade with entries from all over the area competing for top honors.
The parade, hosted by the Stanwood Camano Rotary, began with a flyover by the Black Jacks and featured various groups, bands and performers —many tossing handfuls of candy to the children lining the route.
Among the dignitaries were Grand Marshal Jeff Ericson. Sailer said the parade is made possible by local sponsors, including Josephine Caring Community, Stanwood Redi-Mix, Windermere Real Estate, Camano Island Management, Les Schwab, Greenworks, and The UPS Store.
“The Rotary Parade Committee would like to thank the following people for making this year’s Parade possible: Trevor Harrison; city of Stanwood Public Works; Stanwood Police Department; announcer Don Wick; Four Square Church for supplying the PA system; tables and chairs; judges Terry Vedders, Krystal Sunburg, Kjersti Sunburg and Jaime Eagle; and the Country Store for providing their parking lot as a staging area for the parade,” Sailer said. “And of course the amazing people of Stanwood, Camano Island and Warm Beach for coming out and supporting the Parade year after year.”
Parade Winners
Best of Show: Cedarhome Baptist Church
Band/Musical: Stanwood 4-Square Church
Equestrian: Ixtapa
Best Service Club: Lions
Best Float: Sons of Norway
Best Auto: Windemere
Drill/Marching: Stanwood High School Cheer
Youth Category: Stanwood Youth Football and Cheer
The Broker’s Perspective: Price Increases
Our brokers are deeply connected to the issues that face local home-buyers and sellers. In this series of blogs, “The Broker’s Perspective” Windermere Stanwood and Camano Island brokers provide insight into current market trends and topics. This week, we discuss Mortgage Orb’s article on the current home price forecast for Western Washington market with broker, Kelly Ruhoff.
U.S. home prices are forecast to increase 4.4% over the next 12 months, however, most of that increase will be driven by price gains in the Western states, according to Veros Real Estate Solutions’ VeroFORECAST report.
“Washington State and Nevada occupy six of the ten highest-appreciating MSAs in the U.S. and the remaining four are in California, Oregon and Idaho,” says Eric Fox, vide president of statistical and economic modeling at Veros, in a statement. “This is the 24th quarter in a row where this index has forecast overall appreciation. Interestingly, the metro markets that are projected to appreciate the most over the next 12 months in this VeroFORECAST release are also among the most populated, while the markets that are expected to depreciate most are all among the least populated. For example, the average population of the top 25 metros is 1.7 million and the average population of the bottom 25 metros is 318,000.”
Metropolitan markets that are expected to see the highest home price appreciation over the next 12 months include Seattle-Tacoma-Bellevue, Wash. (+11.1%); Olympia, Wash. (+9.8%); Bremerton-Silverdale, Wash. (+9.8%); San Jose-Sunnyvale-Santa Clara, Calif. (+9.5%); Carson City, Nev. (+9.5%); Reno-Sparks, Nev. (+9.5%); Mount Vernon-Anacortes, Wash. (+9.4%); Pocatello, Idaho (+9.4%); San Francisco-Oakland-Fremont, Calif. (+9.2%); and Eugene-Springfield, Ore. (+9.1%).
“There are several factors driving up home prices in the Seattle area, including a thriving economy and a lack of buildable land,” says Economist Matthew Gardner, with Seattle-based Windermere Real Estate. “There is also growing demand for housing thanks to the substantial in-migration of technology workers from the Bay Area who are relocating to Seattle because of the robust job market and relatively inexpensive home prices when compared to those in San Francisco.” Read the full article from mortgageorb.com.
Kelly’s Perspective
It’s a crazy market, and difficult for potential buyers to navigate. Buyers have little time to think about a purchase – compared to their parents who would advise them to, “Sleep on it.”
Though the average home on Camano is on the market for 44 days, many turn much quicker. It leaves many sellers stressed out as a result – since cash buyers often want to close quickly. Prices have gone up 9 percent on Camano and 14 percent in Stanwood compared to one year ago. Just two years ago the average sale price for a home on Camano was $362, 391 and now it is $459,810. That is almost a $100,000 increase for the average home price.
In addition, the build-able land is hard to find in Stanwood and on Camano Island with the infrastructure buyers are looking to find. Many and most buyers of vacant land I work with want water and septic already installed. Add to that the desire for privacy and most buyers can’t afford the purchase price.
I do have prospective clients who would like to move to Camano Island who both work from home. However, it’s getting more and more difficult for tech workers to get qualified for the view, 3-bedroom, 2-bath home they so desire.
That’s why it takes a patient buyer and organized seller in this fast moving market. As someone who has purchased several homes and sold several more without the use of a real estate agent, I would be afraid to do that today. I see my role as a representative for my clients as more important than ever. Kelly Ruhoff | Windermere Stanwood and Camano Island Broker
