Washington housing market freezes ahead of potential recession

Pending home sales have dropped more than 30% year-over-year across the nation, the lowest level since 2015, according to a new housing market report from Redfin.

The most significant declines were in Las Vegas, Phoenix, and Austin — each witnessing a drop larger than 50% on average.

“It’s best described that we ended the year with a whimper rather than a roar,” said Matthew Gardner, Chief Economist for Windermere Real Estate, on Seattle’s Morning News. “We know the number of homes for sale is certainly significantly higher than we’ve seen, but the number of sales is down. And, depending on how you look at it, we’re seeing a retraction in pricing.

“So, is the market changing? Well, yeah, I think the market is, and it’s going to be interesting to see how this year plays out.”

The housing market fizzled out at the end of 2022 due to rising mortgage rates, worries over an upcoming recession, and record-low new listings alongside the typical late-year culprits slowing down business — extreme weather and the holidays.

This December in King County, the number of sold homes crashed by 43% year-over-year and 39% in Snohomish County. Pierce County saw the worst decline at 50%.

“What are real estate agents doing?” asked Dave Ross, co-host of Seattle’s Morning News. “Are they doing jigsaw puzzles all day? This sounds catastrophic.”

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“The overall numbers are down. However, it depends on how you kind of carve it up,” Gardner said regarding the region’s housing market. “We are certainly in a quieter period right now. I think there are a lot of fence sitters who are waiting for either prices to collapse or mortgage rates to drop. You have to think about the winter lull as well, which is fairly normal.”

The silver lining is the value of homes in King, Snohomish, and Pierce counties have only dropped by a few percent (approximately 2% according to Gardner), meaning, while it remains challenging to sell a property, the actual value is mostly standing pat.

“But again, it’s how you pass the numbers. If you were comparing directly the sale prices in Dec. 2022 and Dec. 2021, yes, you’re right, they’re down very modestly a couple of points,” Gardner said. “But you have to look at the bigger picture. And in aggregate, if you take the median sale price for the whole of 2022 versus the whole of 2021, guess what? In King County, they are almost 9% over. They are over 12% in Snohomish County and about 9% in Pierce County.”

Gardner stated that most economists expect a recession, making the housing market even more vulnerable in 2023. However, a recession opens up less competition and lower prices for potential buyers, leading economists to inconclusive results whether or not purchasing a home during turbulent economic times is a sound strategy.

“The question now is, when is it going to start?” Gardner asks. “One school of thought thinks it will start probably in the second quarter. I think it could be a bit later, maybe the third quarter of this year.”

Gardner compared the economic climate to the U.S. entering a recession in the 1990s, lasting for eight months until March 1991. The Labor Department estimated the economy lost more than 1.6 million jobs as a result of the recession.

“Certainly, [this recession will be] nothing like 2007 and, thankfully for us here in Seattle, nothing like 2000 either,” Gardner said.

On April 14, 2000, the Nasdaq fell 355 points — the worst one-day point loss in history, halting a previous decade’s worth of growth in the tech sector in Seattle. Companies, including AT&T, Broadband, and Nextel, significantly downsized their staff as a result.

Just this week, Amazon is currently laying off more than 18,000 employees, 70% more than initially expected, according to The Washington Post.

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Listen to Seattle’s Morning News with Dave Ross and Colleen O’Brien weekday mornings from 5 – 9 a.m. on KIRO Newsradio, 97.3 FM. Subscribe to the podcast here.