Friday, May 26, 2023

Inslee signs legislation effectively ending SFR zoning

This post has large portion excerpted from a May 23 post on Retiring to Washington State by Rod Sager.

Washington is not the first state to effectively end the Single Family Residence (SFR) zoning but they are the latest. As a real estate professional I have mixed feelings about this legislation. Although it is designed to help increase available housing and decrease suburban sprawl, it could have negative consequences for the very people it claim to help. Only time will tell of course. This new law could have serious side effect on propriety values and how the law is applied and what the courts say about its authority over existing CCRs will be paramount to its success or failure.

The idea is that SFR neighborhoods consume allot of space and tends to be more expensive housing that excludes allot lower income people from affording. Allowing multifamily projects in these neighborhoods helps to increase housing that is traditionally more affordable. 

So what does the law really do? Well it states that cities with 25,000 to 75,000 people can not zone SFR and must allow at least duplex style (2 units) MFR (Multi Family Residential). In cities with more than 75,000 people which in Clark County means Vancouver only, four flexes are the minimum threshold. So in effect neighbors living in SFR neighborhoods could apply to convert their single family home into a duplex or four-plex depending on the size of their city. Having a bunch of four-flex units would definitely change the character of a neighborhood; generally for the worse. Quiet neighborhoods could become crowded, and obviously filled with renters that often do not take pride in the upkeep and presentation of the home. The upside is that more affordable housing becomes available and that could take pressure off rental prices.

There is another downside that I am 99% certain our legislators and governor are not smart enough to see. Politicians are usually not the brightest bulbs on the tree. That is that the dream of living in a quiet single family home neighborhood will likely evaporate for the people at the lower end of the middle class. A piece of the American Dream will be taken away from the very people the law is designed to help. Why is that, you ask? Because neighborhoods lacking duplexes and four flexes will slowly become more rare and thus more expensive pushing pricing even higher. Neighborhoods with a mix of SFR and MFR will become more affordable, but the true single family home experience will be missing.

So what does this have to do with retirees? Ah that is the question and the answer could be rather favorable. If this law survives the inevitable legal challenges, retirees living in a large house will legally have an option previously unavailable. Rather than sell the house and downsize, they could convert the house to multi-family and stay put utilizing one of the units as their own and renting the other(s) out to subsidize their income at a time when extra income is most appreciated. 

This will not be the solution for everyone and I am not sure whether this legislation will supercede deed restrictions (CCRs). It is worth watching for retirees that would like to stay in their current home but either cannot justify the expense of a large home or is unwilling to keep the larger space clean and tidy. This could provide income from an asset that very well may be paid off already. Not a bad way to go. 

As I understand the law, and let's be really clear here: I am a Realtor® not a lawyer, The laws does NOT prevent developers from building single family homes, it simply strips local government of the right to zone exclusively for single family homes. 

Locally, Vancouver is the only city in Clark County and in fact all of Southwest Washington that will be subject to the four-flex requirement. Battle Ground and Camas are large enough to fall into the duplex category as is Longview in Cowlitz County. Everywhere else in Clark County and Southwest Washington will be exempt from the restrictions this law places on zoning. So people living in Vancouver's unincorporated areas, which is nearly half of Vancouver's residents, should also be exempt from this law. Again I am not a lawyer so if you have genuine concerns consult an attorney or your local governing agency for clarification.  

The bottom line is that CCRs authority against the authority of this legislation will be a critical factor in determining whether this law will have more negatives than positive or more positives than negatives. If deed restrictions prevail then the law should be mostly favorable. Property rights are a big part of out constitutional rights and I take them very seriously. If you own property you should too.

Friday, May 19, 2023

National Median Creeps up to $375k

Yes you read that right. According to recent reports from the NAR the national median sales price was at $375k and change. There are still many parts of the USA where the median home price is well under $200,000 in fact even one county in the notoriously expensive California is under $200k. Here in Clark County we sit well above that with a mark around $500k. Prices are holding steady in most markets but some are falling and others rising. 

As real estate prices climb higher the more expensive markets can sometimes experience a more dramatic correction. People start to look elsewhere for work and sometimes an exodus begins. Looking at you California. But good jobs are an important factor and Washington State tends to have a great job market. Employers for the most part are staying in Washington rather than relocating and that bodes well for the local economy and real estate market. 

Washington State remains a fast growing state. Last census it was tied for 5th nationwide for growth with Florida at 1.37% year over year population growth. So long as demand remains high in the Evergreen State, real estate values should hold steady and strong.

For people retiring some are looking to the sun belt, others looking for tax breaks and cheaper houses. Washington is actually decent on taxes for retirees but obviously housing costs are high. But it seems that national median may be growing at a faster clip than the median here in Washington State. As that happens our affordability handicap is reduced. The lack of a state income tax tends to be a real draw for retirees. Washington has a strong economy with good jobs attracting the younger crowd, and good senior tax setups attract the older folks.

Friday, May 12, 2023

Will the lovely mid-spring weather bring out new listings?

I do hope so, inventory has been real tight for over a year now. Pleasant weather tends to stir up real estate. Buyers start thinking about looking in good weather as it is always nice to be out in fine conditions. Sellers often start thinking about moving in the nice weather which is definitely preferred over bad weather. There has always been a bit of a perk in the market place during the mid to late spring.

I have mentioned a lot about our local market and the conditions we face. Very tight inventory is keeping prices steady and a lack of buyers is keeping prices from skyrocketing. Overall I would bet that we see a seasonal uptick in both buyers and sellers but not likely a change in the balance. It should remain a sellers market though the summer and fall seasons. 

Homeowners will continue to cling to their 2.5-3% mortgages until such time that they are compelled to move for a job change or new family members, etc. One thing I am seeing for the first time in decades frankly is the use of the assumption clause in VA and FHA loans. There is an advantage in that a qualified borrower can assume the loan at the original low rate. However if the house has seen sizable equity gain over the last few years, which it almost certainly has, the borrower has to come up with a large downpayment to take advantage of the assumption. 

I will write an article about assuming loans in the next week or so as I feel this is going to pick up steam in the marketplace over the next few years.

Meanwhile the market remains a bit rough for buyers but not as hectic and crazy as a few years ago. Many listings are seeing multiple offers but some are staying on the market over a month before seeing an offer. So buyers can at least take a breath for now.

Friday, May 5, 2023

Market Update for Q2, 2023

The local MLS, Regional Multiple Listing Service has improved their reporting this year with an excellent display of data. I have been mentioning for quite some time that our market is red hot in the 110% of median and lower, and has cooled off considerably in the upper price ranges. There are some notable exceptions with Downtown Vancouver high end condos which seem to be doing just fine.

Year over year the median price is down 2.9% but based on the full set of data the MLS provides, the upper end market is lacking sales and thus the median is coming down. Remember that the median is simply the "middle" so when fewer expensive homes are sold the middle becomes a lower number. The actual asking price of a standard 3 bed 2 bath house is about the same as it was last year but this year the house is getting 1-2 offers whereas last year it was getting 3-6 offers and way over asking. That is also leading to the median drop. 

This data does not suggest the market is dropping as much as it suggests its rate of growth is slowing. There is a difference and it matters. People become nervous about buying a home if they think its value is a bout to drop. So far indicators support mild real estate appreciation over the next 12 months. Of course anything can happen in the economic cycle and projections are just that. But there is no alarm bells going off here. The slowdown is two-fold: first the abrupt rise in interest rates eliminated at least half of the buyers in the local market. Under different circumstances that would have crashed our local market. But the market was so tight on inventory that it just took some needed pressure off and it was actually a healthy adjustment. The second factor which is keeping inventory lower than it would normally be is that fact the homeowners are reluctant to give up their low interest loan to buy another home elsewhere. Many homeowners that might be ready to move up to a bigger home, or a place with some land, etc, are sitting on a 30 year note with 25 to go at 3% sometimes less. The move up will put them in a new loan at 6.5% or more. This is stifling inventory. Unfortunately the government acted too quickly and created a scenario where rates rose almost instantly rather than a gradual rise over the course of several months. A gradual rise would have been a much smoother transition from hot market to normal market. The quick rise basically slammed on the brakes.

So when looking at the data you see that sales are down, but new listings are down about the same amount, marketing time is up a little and median price is down slightly. With just 1.5 months of inventory this is still a sellers market and we won't see a neutral market until inventory gets up around 3-5 months. Once the inventory moves to six months or longer the market transitions to a buyers market.

It's easy for doomsayers to persist with sales numbers so much lower than last year but the real truth is that the only people really feeling a big difference in the market this year over last year are the people at the very entry level from last year who no longer qualify and real estate agents who are all fighting for a slice of a shrinking pie. Some agents may sing the songs of doom, but the market is actually still doing well despite the governments best efforts to crash it.

Looking forward to Q3 I'd say the chances of an increase in buyers is slim, but the chances of increased listings is 50/50. An increase in listings with no change in buyers will soften the Markey up a bit and make things a little easier on buyers without too much downward price pressure. Buyers should keep in mind that interest rates are not high right now they are average, we just came off a 10 year period with below average rates. It may feel like they are high but we are finally back to "normal" and I believe the nation will adjust to mortgage rates in the 6s.