The FOCUS on Real Estate

RE Magazine — Summer 2017

Washington REALTORS® brought together a group of renowned real estate economists to discuss the potential impacts of the new presidential administration on the industry—both on a national basis, and for the state of Washington. Directed by designated brokers from across the state and moderated by Steve Murray of Real Trends, the assembly revealed interesting insights and opinions into what we can expect for the next 1-2 years.

Real Estate Economists Weigh in on the Climate of Real Estate in Our Nation & in Washington State…

Lawrence Yun

Lawrence Yun
Chief Economist & Senior Vice President

National Association of REALTORS®

Leslie Appleton-Young

Leslie Appleton-Young
Chief Economist

California Association of REALTORS®

Brian Bonlender

Brian Bonlender
Director

Washington State Department of Commerce

Chris Gosselin

Chris Gosselin
Senior Political Representative

National Association of REALTORS®

Lawrence Yun, Chief Economist and Senior Vice President of Research at the National Association of REALTORS® kicked off the event by discussing current home-selling trends in Washington, noting that the Seattle-Bellevue area is “at or next to the top right now in terms of ‘heat level’ of market conditions.” This is clearly reflective of the strong local economy, Yun noted, acknowledging the fact that brokers in this region are increasingly interested in how long the pricing, bidding wars, and “craziness” can continue in that that market.

“I view Seattle as somewhat of a follower,” Yun pointed out. He correlated the Greater Seattle area’s growth and pricing trends to those of the San Francisco Bay area, where such trends are largely driven by the robust information technology (IT) sector. “People are moving out of the Bay Area and to Seattle because of IT jobs,” Yun explains. “What happens in the Bay Area is a good indicator of what may happen in the Seattle area.”

But that’s where the similarities end, and particularly when it comes to the cost of housing and overall cost of living. Comparing Seattle’s home prices to San Francisco’s, for example, Yun said that a “large gap” still exists between the two. For this and other reasons, he said the price increases and “heated” nature of the market is less of a concern in Washington.

In assessing the current interest rate environment, Yun said that rates are higher now than they were pre-election, and that there are two different sides to that story. Trump supporters, for example, credit the “brighter economic outlook” with pushing up rates, while the rest of the nation blames the fact that “everything coming out of Washington, D.C. right now is blowing away the budget deficit.”

“People are cynical right now,” said Yun, noting that the housing market, as a whole, is “very sensitive to market conditions,” and that higher interest rates could lead to more stabilized home sales. “Yet,” he said, “we’re seeing home sales post-election [rise] month over month.”

Generational Divide

Next, Leslie Appleton-Young, the California Association of REALTORS®’ Chief Economist discussed generational and societal trends and how both are impacting the real estate market right now. Unlike their predecessors, baby boomers are “reinventing every stage of adulthood, and not going out like their parents did,” said Appleton. “They’re not retiring at 65 and moving into [55+] communities.” A lack of retirement finances is playing a part in this trend, she acknowledged, and is boosting the residential remodeling and renovation industries to “all-time highs” right now. “Someone who owns a home in Seattle could sell it in a heartbeat right now, but where are they going to go that’s affordable?” Appleton pointed out. “Retirement just doesn’t sound that attractive; it’s more fun to be in the game.”

During a recent survey of baby boomers, Appleton said 92% have equity in their homes and 64% don’t plan to sell those homes when they retire. Fifty-two percent said their children will have fewer opportunities than they did, and 53% plan to help their offspring purchase homes (and 24% have already done so). Appleton said this climate presents the perfect opportunity to reconnect with past clients—even if those clients aren’t specifically ready to buy or sell their own homes. “It’s time to expand your [reach] to include other family members,” she advised.

Referring specifically to California, Appleton said that between 2004 and 2013 about 5 million residents moved out of the state and that 90,000 of those individuals went to Washington (primarily Seattle). Those individuals were in their 30s, educated, and had higher incomes than the norm. “The region is attracting high tech, so people are saying ‘Let’s move to Seattle,’” said Appleton. “It’s a little more affordable and we have a fabulous job offer there.”

Washington’s Housing Market

With the number one gross domestic product (GDP) in the nation in 2016, Washington “drastically stepped up its international engagement last year,” according to Brian Bonlender, Director of the Washington State Department of Commerce. “We just met with the president of Mexico last week to try to keep international bilateral trade going,” said Bonlender. “There’s a lot of uncertainty right now in terms of trade policy, and most of our work involves finding new markets or connecting those [opportunities] with buyers.

Over the last four years, the department has helped thousands of firms, resulting in about $750 million in sales and attracting about $6.3 million in investment, said Bonlender, who is optimistic about future opportunities, but somewhat pessimistic on the state’s housing market. That’s because the number of authorized building permits declined by 5.3% in 2017. “Right now we’re seeing rents and property valuations increase in nearly every part of the state,” said Bonlender, “and housing is becoming a primary concern for those moving into the Greater Seattle area.”

More to Come

Chris Gosselin, NAR Senior Political Representative, wrapped up the roundtable presentation by discussing the new administration’s tax reform package and what it means for the real estate industry. And while nothing solid has been decided yet in relation to tax reform, he encouraged real estate professionals to keep an eye on it and how it might impact homeownership. “Our goal as an association is to stay focused on homeownership,” Gosselin said. “That’s the key to ensuring that private property rights, real estate investors, and homeownership are protected.”

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