Friday the 13th... Boo! Prices are softening.

MLS Listed Home 4/2024 C. Rod Sager 2024

It's a spooky Friday the 13th for real estate. Our markets are in a soft slide which means sellers need to price their homes well. There is no tolerance in the market for overpriced listings. Seller's should price their homes in the bottom half of the comp range. There is a thing called "chasing the market down" and it is a real thing. Pricing high and waiting for the "ideal buyer" is an effective play when the market is rising, but it can end in catastrophe in a declining market. No one shows up and you lower the price, but by the time you respond to the market you are still too high. Buyers are looking for value more than ever before and in the entry level market there are value opportunities everywhere. Well priced homes are often seeing multiple offers, so the buyers are out there, but they are not offering on overpriced listings. 

I believe we are going to coast to a gentle landing as the market adjusts to a more normal interest rate range. We just came off one of the longest periods of below average rates in decades and it takes a while for the market to compensate for it. Keep in mind that certain homes will always have the upper hand in the market place. Modern homes or older homes that have been updated to modern styles and themes in good condition will always sell first over unusual layouts or non-conforming builds. No matter how nice a place is, people tend to gravitate towards tradition floor plans with good flow and an updated look. 

Having good curb appeal is a great idea in any market and as things tighten up for sellers curb appeal gets more and more important. You generally want the first three impressions of the house to be positive. Curb appeal, the front porch, and the first rooms visible upon entry should all be as perfect as possible. If a buyer gets three good impressions right off the bat, they will be naturally inclined to accept other negatives about the house. The adage of Kitchens and Bathrooms should be the first upgrades and look as good as possible also holds true.

I do not want to sound the alarms of a doomed market. That is not where we are at all. There is currently about three months of inventory and that still is considered a mild seller's market. But inventory levels have been rising all year long and we could see dead neutral conditions by autumn. Keep your property clean and tidy, make it shine as best you can while showing, and price it in the bottom half of the comp range. You will sell it in 30-45 days at or near full price. 

Are we in a market slide?

The query in the title of this article is a wiggly mess of answers depending on who you ask. Overall I would say we are in a slide in several key sub-markets. I mentioned that Portland's glut of city condos, particularly in the South Waterfront are pushing prices down on Vancouver's entry level and mid-tier condos Downtown. 

The entry level has been plagued with a lack of qualified buyers in the market. Up till recently, perhaps the last 12 months, inventory was tight enough that the lack of buyers was not causing any real downward pressure on prices int he entry level. But alas, now we have more than 3 months inventory, which is by no means considered allot of inventory, but it is way more than we have had and now the lack of buyers is noticeable.  

The other weird aspect of our current market is in the process of correcting itself, but we have been in a slightly declining market but the median home price has continued to rise. I alluded to this in previous posts, the entry level has been slow but the mid-tier has been busy. Prices have been falling on home in the sub $600k market due mostly to that lack of qualified buyers. Meanwhile houses in the middle tier from $700k-$1.2m have been selling well and that has pushed the median price up rather than down. Prices have been coming down across the board but we are simply selling more of the expensive houses relative to the entry level and that creates a literal mirage that prices are rising. They are not.

This market has been fairly flat with prices in a slight decline. Sellers have to be careful here. If a house has been on the market for 90 days with no offers, the first offer could be the best offer. I would say it is more likely the best offer than not. 

Clark County has been the Portland-Vancouver metro area's only strong growth county for several years now. We have been riding a wave of Portland migration that is now starting to slow a bit. We are also seeing more out-migration than has been typical. Some are fleeing our expensive home market, others are leaving the State of Washington for political reasons. Washington has always been a blue state but it has seen a drastic change in the recent ten years seemingly mimicking California. Washington has become a wet version of California, that may be pushing some of the moderate and conservative people out. This could explain the increase in inventory running against the trend of sitting on those 3% mortgages.   

Our current Governor seems to be determined to destroy the Washington tech economy as well as the broad economy. This is not a blue-state vs red-state issue. It is a California issue. Emulating a failed state is a bad idea whether that state is red or blue. We seem hell-bent on chasing the "golden" state over the edge and into the abyss. I am not here to advocate for any one political world view, quite the contrary actually, but politics has been a driver of real estate as voters sometimes vote with their feet, we have seen it in California and now it could be happening here.

Hopefully the legislators in Olympia will see the cliff, and steer us back to the good ole Washington we all know and love. If our state starts to see an exodus like California and Oregon have seen, we could be headed for a market correction.

Strange Market Conditions, Middle and High End outpacing Entry Level

Our local market conditions over the last two years has clearly and concisely shown an increase in the median home price for Clark County. However the entry level market has slowed down substantially. A house that would easily sell for $500k two years ago now sits on the market for several months or the inpatient owner lowers the price. Meanwhile the middle and top of the price range remains hot largely due to a lack of inventory and increased demand from migrating Portlanders, and some Californians. 

I have beat this to death over the last couple years, but the reality is the middle and high end market loves the fact that they are sitting on a 3% mortgage and they just don't want to sell. People that have $700k or more to spend will outbid others to get the house in the upper end low inventory scenario we see now.

This is the weird state of affairs where the top half of the price range is in higher demand than the bottom. This is rare probably less than 10% of the time. I believe we are about to shift away from this trend as wages have crept up a bit and entry level buyers are returning to the market. For now, the top half rules the roost and it won't last long so those of you sitting on a house worth more than $600k, now could be the time to sell. There is a ceiling on how high end, super lux properties are still going to sit awhile since people with more than $2 million to spend remain few and far between.

Another anomaly in the local market is condominiums. The local condo market is getting negative pressure from across the river in Portland. This is particularly strong in the city center of Vancouver. Portland's South Waterfront and to a lesser degree the Pearl District is seeing a virtual glut of urban condos and prices have fallen sharply in the entry level Sub $400k range. This has made the now very popular Downtown Vancouver a more expensive alternative, whereas we used to be the value leader in city condos.

This soft entry level market will almost certainly, barring a major economic downturn, turnaround and return as the driving force of the housing market. Any first time homebuyers that qualify for $400-$500k should saddle up and go get a house before we return to a busy low end. It is already showing signs of recovering.

Strange market anomalies are often the best time to act, not always, but often, I believe for entry level buyers in the sub $500k range and upper end seller's between $700k-$1.5m, now is the time.