Sorry Buyers, I don’t See a Decline.
For the past year I’ve heard countless clients tell me that they are waiting for the market to drop before they invest in Walla Walla real estate. One even had a specific timeline whereby the believed the drop would come in 2022 and that the local market would drop 15-25%. On the real estate news site Inman, there has been a running four-part series about the impending doom in real estate. While I can’t make any guarantees about our real estate market (and you should be skeptical of anyone who say they can) I want to talk plainly about trends.
Perhaps the most important thing to remember about real estate is that it is hyper localized. Milton-Freewater is a different than Walla Walla or certainly Dayton, and there are even nuances with College Place. Even within these cities just because your friend a few blocks away sold for $50,000 over asking does not necessarily tell us anything about the value of your home. Location and externalities mater. When you read national media talking about real estate, it is but an echo of our local market: what’s true in Houston, Phoenix, or Florida has little bearing on Seattle, and even less on Walla Walla.
Interest rates and capital gains have started working into regular conversation. Yes, by this time next year it’s a reasonable bet that interest rates will be higher, with 4% being a popular guess. As the chart above indicates, there are generations of homebuyers who would have begged to have a 4% rate. While some buyers may be frightened away, it’s really difficult to imagine the current imbalance between buyers and sellers being remedied by an uptick in interest rates alone. Regarding capital gains, the reality is few of us will ever be impacted - the Wall Street Journal reported yesterday (05/05/2021) that it may be as little as 3% of taxpayers affected by a potential increase in the capital gains rate. I saw an excellent quote from a tax accountant about a week ago that shared the message “do what you need to do buying and selling, and let the accountants figure out how to minimize your tax burden.” This is a great way to look at it - there’s a reason why you need or want to buy or sell, so don’t let the tax situation stress you out.
Many buyers are becoming frustrated by limited home choices and rising prices. It’s not uncommon to hear the phrase “I don’t want to compete or get into a bidding war.” Again, many buyers talk in terms of being fearful of buying at the top of the market, but there are several signs that point to this being a new reality rather than a temporary condition:
We simply have more buyers coming from places like Seattle and Napa than we have homes available. This will continue as retiring baby boomers seek a lower cost of living than our coastal cities provide and so long as fire, drought, and similar environment conditions around the country push people away from affected areas.
Even during times like the 2007-2009 “Great Recession,” the Walla Walla real estate market has stayed robust. We don’t have a historical track record of boom/bust cycles like other locales.
While Umatilla, Walla Walla, and Columbia counties have plenty of land, zoning is beginning to become a limiting factor in new housing development.
As articles like this one: https://www.seattletimes.com/seattle-news/data/downtown-seattle-dying-not-so-fast-demand-for-office-roars-back-to-pre-pandemic-levels/ indicate, we will see people begin to return to office life. That said, COVID has given many people an opportunity to reassess how and where they would like to live as well as accelerated the trends toward remote work, and places like Walla Walla benefit. I can personally speak to this as I moved to Walla Walla in 2010 as a tech worker able to live anywhere.
This is a great place to live! No location is perfect, but with mild weather, access to recreation, access to health care, quality schools, park space, and a whole slew of other benefits, the small town life in Walla Walla is idyllic. People from all across the country are being drawn here, first for the wine and then when they realize it’s a good place for quality of life.
With all that in mind, buyers need to work closely with their agents on what it’s going to take to compete in a market that shows no signs of slowing. Savvy agents have tricks of the trade to help put your offer in the best possible position, so talk to your agent about what they can do for you. For sellers, it’s also important to not get greedy. While there are well-qualified buyers in the market, we’re also seeing that many are only willing to pay top dollar where they see legitimate value, IE: they are acting entirely rationally and not overreacting to a perception of the market. Sellers who hope to gouge buyers will still find themselves sitting and potentially having to come down to a realistic market price.