Happy New Year! This year is going to be a tough call for projections. We have favorable interest rate trends that should act as a relief valve for slow activity. We also have some instability in in general economic flows and that could move the valve the other way a bit.
Allot of aging boomers are selling off their larger family sized homes looking to move to warmer climates or just downsize into a smaller one level home. Normally this is a great thing as it provides a boost in the local market. The troubling thing in our current situation in the USA is that demand for resale homes over 2200 SF is falling. Families are notably smaller on average these days and home prices have gotten expensive making larger homes less attainable for families.
That said, I find that a 2000 SF two story home is often less expensive than a 1500 SF ranch style home. These small to mid sized ranch homes on a single floor are coveted by both new home buyers and older downsize crowds. The down-sizers typically hold a buying advantage often paying in cash or with huge down payments and the ability to outbid entry level buyers.
Entry level buyers should not hesitate to look at a bigger 1990s-mid 2000's two story home as pricing is often favorable versus competing against retirees with more money for the 1500 SF ranch homes.
Lower interest rates will attract buyers that have been sitting on the fence for the last couple years waiting for more buying power. These buyers, mostly entry level need to be careful because the window to act is often very tight. Once rates establish themselves at a clearly lower level, the market tends to pickup and prices rise. Even with lower rates a higher home price can thwart buyers just as much as a higher interest rate. Picking up a house today at 6.5% can and will payoff later even if rates drop further. You locked in a lower home price and can refinance later at a lower rate when the time is right.
People looking for a value for money opportunity should look at 15-30 year old resale homes with two stories and 1800-2200 SF. This is the current sweet spot in real estate for entry level and mid tier buyers with $450-600k in buying power.
I feel like the 2026 has potential to see a small to medium increase in activity which would likely start moving prices up again perhaps as soon as this summer. I do not see a boom on the horizon especially if the legislature decides to add an income tax. Do not be fooled by politicians that say only the "rich" will pay the tax, we all pay the tax if not directly, indirectly. Our strong real estate market is driven by the State of Washingtons booming economy. The tax load is already too high and the economy is going to suffer, greedy politicians with egregious spending habits will slow the economy and ultimately act as a counter to the real estate market.
My best guess is will should see appreciation in the low single digits this upcoming year.
