On June 5, the King County Association of Realtors presented their 18th annual briefing on housing issues to candidates and elected officials. The goal is always to provide information on what every state legislative candidate needs to know about our state and local economy and the legislation needed to help recover our housing market.
Why is the status of the housing market so important? Realtors are not the only ones promoting the economic impact of the housing market. According to the last census, the estimated economic impact of real estate activities, new home construction spending and home improvement spending with multiplier effects for local businesses is $70.5 billion.
Since housing and jobs fuel the economy, the program began with a presentation from Dr. John Mitchell, an economist with 41 years of experience in making economic predictions on the nation and the region.
His presentation entitled “Tides Do Turn” drew a picture of hope balanced with understanding that slow growth is to be expected. His conclusion was, “The process of unwinding the unrealized expectations, broken dreams, irresponsible behavior and long term contracts will take years, but it is well underway.”
Dr. Mitchell's remarks encompassed the following statements. June marks the third birthday of the end of the recession and the beginning of the recovery. Even though there are signs of improvement, employment is still 5.03 million below the 2007 peak, fiscal policy is on auto pilot in a polarized environment, Europe is on the front page again and even Facebook is below the IPO price. According to Core Logic, 22 percent of homeowners nationwide are still underwater and Case-Shiller estimates home prices back to 2002 levels.
But those are national figures and, as we all know, every area is unique. Jeff Clabaugh, a reporter for the Washington Business Journal, wrote in an article on May 31st, “The Seattle-Tacoma-Bellevue metropolitan area economy ranks as the No. 3 strongest in the nation, as measured by independent economic research firm Policam Corp.” And Policam’s President, William Firth, stated, “The top-rated areas have had rapid, consistent growth in both size and quality for an extended period of time.”
Reports are abundant that herald the increase in home sales and the rise in home prices, although slight. One indicator of improvement is the fact that new residential permits are on par to greatly exceed last year’s based on reports from Dr. Mitchell. Job growth in Seattle grew 2.8 percent while Spokane’s job growth fell 2.8 percent enforcing the fact that every area is different. Interest rates are at record lows and are expected to stay that way into 2014. Multiple offers are being reported with some contracts resulting in $15,000 to $20,000 over asking price. With one home receiving 20 offers, appraisers are beginning to evaluate the impact of so many buyers willing to exceed the listing price.
Although economic predictions are not always accurate, it is comforting to see several well-respected economists with similar views. Matthew Gardner, a principal with Gardner Economics, reported an increase in employment in Washington State of 1.6 percent from one year ago. On a more positive note, Snohomish reported a 4.6 percent increase, King County reported a 3.2 percent increase and Whatcom had a 2.5 percent increase. These numbers do not account for the large number of job losses experienced in earlier years.
Mr. Gardner believes that Washington will see a recovery of the job market earlier than the rest of the country based on our exposure to the Asian markets.
In the housing market, there was a 13.7 percent increase in sales. King County home prices increased 4.9 percent in the first quarter.
Numbers alone do not always give an accurate picture of local economic conditions. Statistics vary greatly and should be considered as only one indicator of what the future holds.