The real estate market locally is slipping with prices falling gently for now. Like any other industry, housing has a supply and demand scale that directly affects pricing. For the last several years our market has had extremely tight inventory. For a couple of those years we saw super low interest rates that created an intense demand for real estate which drove prices up at a feverish pace. Low mortgage rates create demand by offering access to loans for people with less income. During this time however few people wanted to sell their homes. Washington State has been the top rated place to live by several surveys since 2018. Look no further than Downtown Vancouver which has five new tower cranes operating on large scale urban development. Money is pouring into the local economy, so that is good.
But alas, the economic conditions began deteriorating last year, and interest rates have risen dramatically. This has eliminated a large portion of the demand for housing. People have been 'priced out' of the market due to the higher cost of borrowing. However the market has only slid a little bit. Often during economic turmoil people sell the house adding inventory and further reducing price pressure. That isn't happening right now. Homeowners are for the most part staying put. So even though demand has fallen due to the expensive cost of money, inventory which was super tight remains fairly low although it is softening up.
The real killer is inflation. If inflationary pressures continue to outpace earnings, some people will be compelled to sell and as inventory builds and demand fades, prices can plummet. We have the advantage locally of being one of the best places to live in the metro area, we have external demand coming from other states seeking the jobs, lifestyle, etc offered here. We also have additional external sales pressure coming from Seattle area residents fleeing high living costs in that area. These factors are helping to stabilize prices that otherwise may have fallen much more than we have seen thus far.
Governments at state, local, and federal levels have policies that can have serious effects on real estate markets for better or worse. Government spending the federal level creates inflationary pressures, state and local legislation can cause ripples in the industry as well.
I have noticed that election turnout for the Presidential elections is almost always higher than the midterm elections and off year elections in odd years is even lower yet. Furthering the evidence is special elections not held on the official Election Day of first Tuesday in November have the lowest turnout of all. What this means is that crafty politicians tend to slip sneaky legislation through during elections with lower turnout. Washington state has imposed a huge increase in the gasoline tax and that will eventually come before the voters. But the timing means it will likely appear on the ballot during next year's off year election. This gives the state a free year of this tax before the voters have the opportunity to vote it out. Fewer voters will vote not he issue at all in an odd year. Voters whether right or left or straight down the center, should vote in every election.
Elections for your local leaders are also often on the odd years like the Vancouver City Council and Mayor which are elected in odd numbered years when turnout tends to be lower. We the people should vote in every election every November. Regardless of how you feel about politics and what your personal ideology is, you get to exercise your will once a year, and it does matter. Some of these off year elections literally come down to a handful of votes.
What does all this election talk have to do with real estate? Everything; politicians create policy and legislation that has tremendous effects on our markets in general, our lifestyle, and so on. The decisions made by these elected officials have both benefits and consequences to our daily lives and the real estate market is included.
Portland was once the darling city of America, and in just a few short years it has digressed into a third world cess-pool. This was mostly due to policies and legislation passed by elected officials there. The sensitive issues on homelessness, crime, traffic, taxes, jobs, and other local issues translates into how desirable it is to live somewhere. Undesirable locations tend to suffer in real estate values. Desirable places tends to be expensive.
So, are prices headed for the cliff? Maybe. The federal government needs to reign in spending and focus on economic development. Local officials need to work on cleaning up crime, homelessness, fix traffic issues, and bring good high paying jobs to the area. I do not know what will happen next year on inflation and economy front. That will largely depend on how things turn out in the next election. If this economy turns into a prolonged inflationary period like we saw from 1977-1983 we could be in for a serious crisis, and if Vancouver starts making the same mistakes as Portland, we could suffer their fate as well. Let's not do that, OK?
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