The Gig Harbor area has had several years of above average economic and home price growth, as well as local employment growth due to expansion in our area. However, we have also had low home inventory during this time.
As I write this article during the fourth quarter of 2019, we are still experiencing a seller’s market, multiple-offer situations, high buyer demand and low mortgage rates.
Year in Review
2019 mid-fourth quarter housing statistics for Gig Harbor, Fox Island and the Key Peninsula show home sales were down 16 percent due to low inventory; however, home sale prices were up 6.1 percent year-to-date, with a median sales price of $520,000. That is $30,000 higher than the previous year’s median sales price. The average number of days it took to sell a home in 2019 was 56 days, which was only 10 days more than in 2018.
Currently, the absorption rate for our area is 2.3 months. Absorption rate provides insight on the rate at which houses are selling. It is the rate at which available homes are sold in a certain area during a given time and is calculated by dividing the average number of sales per month by the total number of available homes in that area.
A buyer’s market is when there are more than six months of inventory available based on closed sales, and a seller’s market is when there are less than three months of inventory available. A neutral market is between three and six months of inventory based on closed sales. Based on the above statistics, the Gig Harbor area is now in a seller’s market.
While we don’t have a crystal ball, we do have Windermere Real Estate's chief economist, Matthew Gardner, to provide valuable insight on the real estate forecast for this area. Although his 2020 Market Forecast Report had not yet been published at the time this article was written, Gardner says he “expects home prices to continue appreciating as we move through 2020, but the pace of growth will continue to slow.” Based on the 2019 housing market and record low interest rates, if these trends continue, our housing market will continue to experience solid growth.
Affordability issues in Seattle and the Eastside are driving buyers further out from these population centers. This is leading to a rise in population in areas such as Gig Harbor, Key Peninsula and Fox Island and resulting in above-average price growth.
Gardner also “expects to see a significant increase in residents between 25 and 44 years of age as well as over 65” in the Gig Harbor area. This rise in population can, in part, be attributed to our beautiful surroundings, our amazing community, as well as the reputation of our top-notch schools. Gig Harbor was recently ranked in the top four cities in the nation to retire as well as the number one place to retire in Washington state.
According to loan officer Debbie Mishko with American Pacific Mortgage, “The Gross Domestic Product is actually flat-to-good, which is why the Fed recently cut rates three times, resulting in a positive yield curve causing rates to move up from their lows of a few months back. Furthermore, we do not expect the Fed to cut rates again anytime soon as the economy is plugging along at a very decent clip, unemployment is still very low, whereby rates are trending up as 2019 comes to a close.
Rising mortgage rates are not necessarily bad for the housing market as a healthy vibrant economy is generally better for the housing market, as compared to low interest rates and a slow economy or even a recession. With that said, rates are still very low, and even though they have moved up slightly and may actually continue to move up minimally, the long-term prognosis is a potential slowing of the economy. If this happens, we could see a decline in interest rates and a slowing of the economy in 2020.”
First Time Buyers
There are a variety of options in our marketplace for first-time buyers. Many potential buyers are confused about required down payment amounts and purchasing options, causing them to stall their home search. We always encourage a potential first-time buyer to consult with a mortgage broker to see if the timing is right for them to make a move into their first home. They are often surprised that now is a good time for them to buy.
The National Association of Realtors statistics show that homeowners are staying in their homes longer than in the past, and oftentimes remodeling rather than relocating, thereby paying off their mortgages and increasing their home equity. Utilizing the equity in your home to purchase a second home is an excellent investment option while interest rates are still low. With the steady growth of home values in our area, many Gig Harbor homeowners have no idea how much equity they currently have in their home. Your real estate broker can prepare a market analysis for you to give you an idea of your financial position and ideas on how to leverage that equity.
Changes to Washington State Real Estate Excise Tax
Starting in January 2020, owners of residential real estate will see some significant changes in their Real Estate Excise Tax (REET) obligations when they decide to sell, due to the passage of Senate Bill 5998.
As it stands today, excise taxes are calculated at a flat rate of 1.28 percent, with municipalities adding their own tax on top of the state tax. The current excise tax for home sellers in Gig Harbor is 1.78 percent. The newly passed legislation changes this to a tiered system as follows:
• 1.1 percent if the selling price is equal to or less than $500,000 (1.6 percent total*)
• 1.28 percent on the portion of the selling price that is greater than $500,000 but equal to or less than $1,500,000 (1.78 percent total*)
• 2.75 percent on the portion of the selling price that is greater than $1.5 million but equal to or less than $3 million (3.25 percent total*)
• 3 percent on the portion of the selling price that is greater than $3 million (3.5 percent total*)
In general, most home sellers will not be adversely affected by this change, as homes priced at or below $1.5 million will benefit from a tax cut; the increases primarily impact high-end home sellers. Given current home values in Gig Harbor, a majority of home sellers are expected to receive a tax cut on the sale of residential real estate in our area.
2019 was an extraordinary year for our Gig Harbor real estate market, and as we ring in the new year, we look forward to a strong start in 2020!
Clearly many variables will impact our local real estate market in 2020, including upcoming elections and the economy. However, I hope this Gig Harbor current housing market overview will help you in making better-informed real estate decisions.
For further questions or for information about our housing market, you can contact Sandy Jones, Windermere Real Estate Gig Harbor/Downtown, at firstname.lastname@example.org or 253.514.1988.