Market News • Matthew Gardner • April 4, 2022

Blockchain Technology and Cryptocurrencies in Real Estate

by Lynly Callaway

This video is the latest in our Monday with Matthew series with Windermere Chief Economist Matthew Gardner. Each month, he analyzes the most up-to-date U.S. housing data to keep you well-informed about what’s going on in the real estate market.

Hello there, I’m Windermere Real Estate’s chief economist, Matthew Gardner, and welcome to the latest episode of Mondays with Matthew. This month we’re going to take a look at Blockchain technology and cryptocurrencies themselves and how both may impact home buyers and sellers in the future.

But before we dive into the potential impacts of cryptocurrency on the residential housing market, I must preface this by saying that the very word “crypto” is one that certainly divides people. Some see it as revolutionary, a tangible asset that will take over one day as the de-facto global currency, while others believe it to be unsustainable and ultimately valueless. And there are even some who firmly believe that it’s nothing more than a Ponzi scheme.

Now, everyone is certainly entitled to their opinion, and I will refrain from offering my own view on the currencies themselves, but, although still in its infancy, it continues to evolve and is garnering significant interest from individuals and large corporations alike.

Why are corporations interested, you ask? Well, a recent report from Crypto.com¹ put the number of people around the globe who own some form of cryptocurrency at more than 295 million and they are forecasting this number to explode this year and hit the 1 billion mark! And the value of all these currencies today? As of March 14, the combined value of all cryptocurrencies was 1.74 trillion dollars² with the largest, Bitcoin, valued at almost 740 billion dollars. So, it should not be a surprise to see many mainstream companies across multiple industry sectors start to introduce ways to accept crypto as payment for goods and services.

Companies moving into this space include AMC movie Theaters³ who recently announced their plan to accept coins by the end of this year. Fintech companies like Paypal and Square are also betting on crypto by allowing users to buy currency on their platforms. And, unsurprising to most, Tesla is also interested, but have yet to confirm whether they will accept coins as payment for their vehicles or not.

With cryptocurrencies now gaining traction in mainstream businesses, the housing sector has started to take an interest too with the emergence of companies like Propy, whose goal is to totally automate the home sales process by introducing Blockchain based technology to allow transactions to occur entirely online using smart contracts. Other companies are figuring out how to use blockchain technology to grow the “fractional-ownership” segment of the housing market.

But when it comes to simply buying a house—well that is an entirely different situation. Of course, a home buyer could easily cash out the Crypto they have and use those funds for a down payment, or even to buy a house outright. But we don’t see more of this today as they understand selling their currency is a taxable event and, more than likely, taxes owed will hit their balance sheets pretty hard. And knowing that this is a real issue in the market, it should come as no surprise that a company has come up with a plan to overcome what is seen as one of the biggest obstacles to using digital currency for home buying.

Blockchain Technology and Cryptocurrencies in Real Estate

A slide introducing the cryptocurrency-based real estate company Milo and how their transactions work.

And they are Milo, who claim to offer the world’s first “crypto-mortgage”. Essentially, they will allow borrowers to use Bitcoin—but only Bitcoin as of right now—as collateral for a 30-year mortgage.

How this works is pretty simple. All buyers have to do is to “pledge” their coins on a one-for-one basis. Simply put, someone looking for a $500,000 mortgage would have to put up $500,000 worth of Bitcoin. This way, they don’t actually have to sell their coins, so there are no tax implications. And instead of going through a FICO credit check and showing proof of income to evaluate a borrower’s creditworthiness, Milo evaluates them based on their crypto wealth as well as the value of the property they are hoping to buy.

And in exchange for locking up their crypto, borrowers get a 30-year mortgage for their home purchase can also make their mortgage payments via traditional currency or Bitcoin. But there are differences between this and a traditional mortgage. First off is the interest rate. It currently ranges anywhere from 5 to 8% depending on the loan-to-value ratio. This is higher than the rate they could get today.

And the interest rate is not fixed, but variable, and based on the prevailing price of Bitcoin. The rate can go up or down depending on the value of the Bitcoin they have pledged, and this mortgage rate will be adjusted every year. Interestingly, if the price of Bitcoin goes up, borrowers can actually take back some of their crypto once a year. If the price of Bitcoin goes down, they may be asked to provide more crypto as collateral.

And finally, when the buyer sells, on closing Milo is paid back in U.S. dollars, and then the seller gets the Bitcoins they used for collateral back, along with the profit made on the sale.

I think that this is certainly an interesting play in the ownership housing sector and, although still in its infancy, looks to meet the needs of crypto owners who don’t want to face the tax obligation that would occur if they were to sell their coins to buy a home. Now, I must make clear that Windermere is certainly not endorsing Milo. In fact, I personally have concerns about the program given how volatile cryptocurrencies are.

You see, it is possible that users may be caught out by the value of their Bitcoin dropping significantly and, if this occurs at or around their anniversary date, it could significantly raise the interest rate—and therefore the monthly payment—on that loan, and if the price drops too far, then they may have to go through what is, in essence, a margin call, where they will have to submit more funds to the lender to bring them back to a point where equity in the home combined with the value of the Bitcoin covers the loan itself.

And I would add that if for some reason the buyer has to sell the home within the first three years⁴ of purchase there are pre-payment penalties that will be incurred. All in all, it is an interesting model, but it is still in its infancy. As always, time will tell how well it gets adopted.

The bottom line for me is that the likelihood of Cryptocurrency revolutionizing the way we buy homes from a finance perspective is still several years away, but after that, who knows! Something that does have the capacity to be adopted into the mainstream far quicker is the blockchain technology itself. I personally see title insurance as a segment that could benefit significantly and may well adopt this tech sooner than others.

With title insurance companies responsible for verifying and ensuring that a buyer or lender (depending on the type of title insurance) gets either clean ownership or a lien position in the land in question, Blockchain could change many aspects of how these processes are carried out. Here are some of the benefits:

The Potential Benefits of Blockchain Technology in Real Estate

A slide showing the benefits of Blockchain technology in real estate transactions, namely added security.

Security. More than 25 percent of title reports (alta.org) detail some form of defect to the title itself, but the ability of blockchain to immediately detect erroneous or potentially fraudulent information can significantly help to support the reliability of the records, therefore making the job of title insurance companies much more straightforward.

A slide showing the benefits of Blockchain technology in real estate, smart contracts, for example.

And then there’s smart contracts, which are actually a form of e-closing that is already beginning to be embraced by some in the industry. This technology makes the transfer of ownership almost seamless. Literally, it would take just a few clicks of a mouse. And this is also a massive benefit for the industry as the closing process would also change dramatically and become far more effortless and less time consuming than today’s standard means of closing on a home purchase.

A slide showing the benefits of Blockchain technology in real estate, improved record-keeping included.

And finally, record-keeping. While fraud and tampering are huge concerns for title companies, blockchain could all but eliminate these instances within ownership records. And, as it would convert land records to a distributed ledger, it cannot be altered within the blockchain itself, therefore making it safe in perpetuity. Blockchain, by design, prevents bad information from disrupting the chain and any attempt to tamper with it can be easily detected and therefore avoided. This is a massive upgrade from the county ledger that title insurance companies find themselves working with today.

No one can deny that Blockchain and cryptocurrencies, while still relatively new, do not appear to be just a flash in the pan. As we have discussed today, a number of companies continue to make inroads into the real estate world. Will some fail? Of course. But others will succeed. So, while still in its infancy, we should all have some sort of understanding of its potential to be a disruptor in the housing space in the future.

It’s my own personal belief that the Blockchain tech itself will be the thing that gets adopted by the real estate world faster than the rise of crypto as a way to buy or finance a home but, whatever your thoughts on this topic are, I think that it is highly unlikely that we will see it simply fade away over time.

As always, if you have any questions or comments about this particular topic, please do reach out to me but, in the meantime, stay safe out there and I look forward to visiting with you all again next month. Bye now.

References:

Buyer • March 20, 2022

A Guide to Understanding Escrow

by Lynly Callaway

A close-up of a man and woman signing their escrow paperwork at a table.

The process of buying a home is made up of several stages. After preliminary stages like getting pre-approved, searching for homes, and finding a buyer’s agent, various contracts and buyer-seller agreements will enter the fold as the purchase of a home is finalized. Escrow is a pivotal point in the buying process that will ultimately lead to you, the buyer, receiving the keys to your new home. Here is your guide to understanding escrow and how it works.

A Guide to Understanding Escrow

What is escrow?

Escrow is a vehicle for temporarily holding the funds in a real estate transaction and making sure they distribute properly when the deal goes through. The funds and documents are held by a third party “in escrow” until the terms of the agreement have been filled. Escrow accounts protect the buyer’s “good faith deposit” (also known as “earnest money”) to ensure it goes to the seller as outlined in the real estate contract. These funds show that the buyer is serious about staying true to their offer and does, in fact, intend to pay the seller.

The seller accepting your offer is your cue to begin the escrow process. Your first step is to open an escrow account. Then, you’ll go about securing a mortgage and obtaining insurance for the home. When the deal goes through, the funds in will go towards your down payment and closing costs. Sometimes, the escrow funds are held in the account after the sale of the home has been finalized. This is known as an “escrow holdback.” This situation can often arise if a buyer discovers an issue with the home in their final walkthrough that wasn’t present during an earlier inspection. If the home is in a worse condition than what shows in the contract, then the good faith deposit will go back to the buyer, and they are released from the contract.

A man and woman signing their escrow paperwork at a table.

Image Source: Getty Images – Image Credit: shapecharge

How does escrow work?

Once all the I’s have been dotted and the t’s have been crossed, an escrow officer will issue a deed with you listed as the new property owner. Then, you’ll order a wire transfer for the funds to be allocated. Once closing is complete, the third party holding the escrow funds will distribute them per the terms of the agreement. This distribution of funds make up a part of the total closing costs for buyers, which include, among others, real estate agent commissions, title and insurance fees, and any HOA dues that may apply.

Escrow evolves after the purchase of a home. Once you’ve bought your new house, your lender will open a mortgage escrow account, through which you’ll pay for your property taxes and homeowners insurance. Held by your lender, the money in this account is added to your monthly mortgage payment.

To not get overwhelmed during the escrow process, it’s important to read your documents carefully and ask questions to make sure you understand them. When it comes time to close on the home, read through everything carefully to make sure you haven’t missed anything before the deal goes final.

Design • March 7, 2022

What is Spanish Style Architecture?

by Lynly Callaway

The front exterior of a Spanish colonial style home with green grass and several plants in the flower beds.

The Spanish style of home design and the architecture from which it originates goes by many names but is commonly known as “Spanish Eclectic” or “Spanish Revival.” This distinct style has a long history that has helped to shape the residential aesthetic of certain parts of the United States, predominantly the Southwest. By digging into the history and design elements of this unique look, we can understand a bit more about why these homes are so special.

Spanish Eclectic

The Spanish Eclectic aesthetic is an amalgam of Native American, Mexican, and Spanish missionary styles. The first appearances of this housing style on American soil trace back to the days of the earliest Spanish settlers as they began to build out their dwellings. These homes were built with the materials that have become defined by their appearance: adobe, stucco, and clay. In this way, Spanish Eclectic shares some similarities with the Mediterranean style of architecture. Over time, this style saw periods of revival, during which construction of these homes experienced an uptick. Throughout these revival periods, additional features were added to the homes to accommodate the needs of modern living at the time.

The front exterior of an orange-tinted Spanish colonial style home with plants and trees in the front yard.

Image Source: Getty Images – Image Credit: felixmizioznikov

What is Spanish style architecture?

The Spanish Eclectic style has several distinct characteristics in both its interior and exterior design. The thick stucco walls provide the backdrop for their unique look, but also help to keep the home cool during hot days and insulated at night. These homes typically have low-pitched terracotta roofs, exposed wooden support beams, and arched entryways and corridors, reflecting the features of their missionary origins.

Additional design details include wrought iron, colorful tile, and small windows. Though they may not be present in every Spanish Eclectic home due to limited space, courtyards are a common feature of this house style. You’ll often see a courtyard in the center of the home for a plaza-like arrangement, on the side of the home, or in the back.

Market News • Market Report • Matthew Gardner • March 7, 2022

The Impact of Rising Mortgage Rates

by Lynly Callaway

The Impact of Rising Mortgage Rates

Hello there. I’m Windermere Real Estate’s Chief Economist Matthew Gardner. Welcome to the latest episode of Monday with Matthew.

Over the past several weeks I’ve gotten a lot of messages from you wanting me to discuss the spike in mortgage rates that followed comments by the Federal Reserve, but also asking me if there will be any impacts to the housing market following Russia’s invasion of the Ukraine. This is clearly a hot topic right now, so today we are going to take a look at how these events have impacted mortgage rates, but also look at how this may have changed my mortgage rate outlook for 2022. So, let’s get to it.

Weekly Mortgage Rates

A graph titled "Weekly Mortgage Rates" showign the US weekly average 30-year fixed mortgage rate. Beginning in January 2020, the rates were roughly 3.7%, falling to an all-time low of 2.67% in January 2021, before rising back to 3.92% in February 2022. Rates rose from 3.11% at the end of 2021 to 3.92% in just eight weeks.

Here is a chart that shows how rates have moved over the past two years or so using Freddie Mac’s average weekly rate for a conforming 30-year mortgage. You’ll see that rates were falling in early 2020, but when COVID-19 was announced as a pandemic they spiked, but almost immediately the Fed announced their support for the economy by implementing a broad array of actions to keep credit flowing and limit the economic damage that the pandemic would likely create. And part of that support included large purchases of U.S. government and mortgage-backed securities. With the Fed as a major buyer of mortgage securities, rates dropped ending 2020 at a level never seen in the more than 50 years that the 30-year mortgage has been with us.

In early 2021, rates started to rise again as the country became more confident that the pandemic was coming under control, but all that changed with the rise the Delta variant of COVID-19 which pushed rates lower through mid-summer. As we again started to believe that COVID was under control and a booster shot became available, you’ll see rates resumed their upward trend in August.

What has everyone worried today is this spike that really took off at the end of last year. A jump of almost a full percentage point in just eight short weeks understandably has a lot of agents, buyers, and sellers, concerned about what impacts this might have on what has been a remarkably buoyant housing market. Now, rates rising so quickly was unusual, but not unprecedented. If you really wanted to be scared, I’d regale you with stories from 1980 when mortgage rates jumped by over 3.5% in less than eight weeks.

Anyway, before we really dig into this topic, some of you may be thinking to yourselves that my numbers have to be wrong because they differ from the rates you have been looking at. This is due to the fact that the Freddie Mac survey methodology is different from other rate surveys but, even though their rates may not match the ones you’ve been seeing from other data providers, the trend is still consistent.

So, let’s chat for a bit about what caused the spike in rates. You know, it’s always good to have a villain in any story and the primary but certainly not sole culprit responsible for the jump in rates is—you guessed it—the Federal Reserve.

As I mentioned earlier, the Fed was the biggest buyer of pools of home loans (otherwise known as mortgage-backed securities) as we moved through the pandemic, but last December they announced an end to what had been an era of easy money by winding down these purchases in order to lay the groundwork for shrinking their 2.7 trillion—yes I said “trillion”—dollar stockpile of MBS paper they had built up. This decision to move from “quantitative easing” to “quantitative tightening” so rapidly had an almost immediate impact on mortgage rates simply because the market was going to lose its biggest buyer of mortgage bonds.

Immediately on the heels of their announcement, bond sellers raised the interest rate on their bond offerings to try and find buyers other than the Fed, so lenders raised the rates on mortgages housed within these bond offerings. Finally, mortgage brokers moved quickly to raise the rates that they were quoting to the public. The result of all this was that rates leapt. Although we know that the primary party responsible for rates rising was the Fed, there were other players too, and here I am talking about inflation—and as you are no doubt aware—it too started to spike at the beginning of this year and now stands at a level not seen since 1982. And if you’re wondering why inflation is important. Well, high inflation is a disincentive to bond buyers because if the rate of return, or interest on mortgage bonds, is lower than inflation, investors lose interest pretty quickly.

So, we can blame the Fed, we can blame inflation, but what about Russia? Well, their invasion of the Ukraine on February 24 has certainly influenced mortgage rates, but maybe not in the way you might expect. In general, when there’s any sort of global or national geopolitical event, investors tend to gravitate to safety, and this invariably means a shift out of equities and into bonds.

So you would be correct is thinking that at face value Russia was actually responsible for the tiny drop in rates we saw following the invasion, and also the more significant drop we saw last week when the market saw the biggest two-day drop in rates in over a decade. But before you start to think that rates are headed back to where they were a year ago, I’ve got some bad news for you. That is almost guaranteed not to happen.

Given what we know today, the terrible conflict in Eastern Europe is highly unlikely to push rates back down to where they were at the start of this year, but they will—at least for now—act as a headwind to rates continuing to head higher at the pace we have seen over recent weeks. That will continue until the conflict is hopefully peaceably concluded. And although the Ukraine situation is unlikely to have any significant impact up or down on mortgage rates, there are some indirect impacts which could negatively hit the housing market. Now I’m talking about oil.

Russia is the third largest energy producer in the world and an already tight global oil supply could get even tighter following newly announced financial sanctions on Russia. A barrel of oil has jumped by almost $20 to $109 a barrel since the start of the occupation and, if the occupation is sustained, and Russia is faced with even greater sanctions, I wouldn’t be surprised to see the price of gas rise by between 20 and 40 cents a gallon. And it’s this, in concert with already high inflation, which will directly hit consumers wallets and this itself could certainly impact mortgage borrowing. So we can blame the Fed, we can blame inflation and we can blame Russia for the jump in rates, but are the rates you are seeing today really something to lose sleep over? I actually don’t think so. At least not yet.

Even with mortgage rates where they are today, I look at them and think to myself that they are still exceptionally low by historic standards and that there really is no need for panic. But let me explain my thinking to you. To do this, we will take a look at the impact of rising mortgage rates, not as it relates to buyers’ ability to finance a home purchase, but on how it impacts their monthly payments.

Hypothetical Home Purchase

A graphic title "Hypothetical Home Purchase." It shows that a home sold at the same price of $370,100 in June 2021 versus February 2022, financed at 2.96% and 4.06% respectively, generates a PITI payment of $1,682 and $1,864 respectively, meaning that buyers will pay just $182 more per month to buy the same home.

For this example, we’ll use the peak sale price for a single-family home in America, which was just over $370,000 back in June of last year. And to finance this purchase, a buyer was lucky enough to lock in the lowest mortgage rate for that month at 2.96%. Assuming that they put 20% down, and are paying the U.S. average homeowners insurance premium and average property taxes a buyer closing on that home in June of last year would have a monthly payment of $1,682.

Now, what if a buyer had bought the exact same house but in February of this year? Well, the average rate for the third week of February was 4.06%—a big jump from last June—and higher mortgage rates would have increased their payment to $1,864. What does this all mean? Well, a jump of over a full percentage point means that the monthly payment is more, but only a relatively modest $182. So, even though rates have risen by almost a full percentage point, the increase in payments was, I think you’ll agree, relatively nominal.

But what if rates had risen to 5%? Well, that would be a very different picture with payments increasing by a far more significant $348. Of course, this is a very simplistic way of looking at it as I have not included any other debt payments that a buyer may have, but I hope that it does demonstrate that, even though mortgage rates are certainly significantly higher than they were last summer, because we started from such a low basis, monthly payments have seen a relatively modest increase. The bottom line is that rates were never going to hold at the record lows we have seen, and we need to just accept the fact that they will continue trending higher as we move through the year but are yet at a level that suggests impending doom for the housing arena. So, where do I think that rates will be by the end of this year? Well, here is my very latest forecast for the rest of this year.

Mortgage Rates Forecast

A bar graph titled "Mortgage Rates Forecast" showing the average 30-year mortgage rate history. In Q1 of 2020, the rate is at 3.51%, dipping to 2.76% in Q4 2020 before rising back up to 3.08% in Q4 2021. Matthew Gardner forecasts a rate of 3.71% in Q1 2022, 3.84% in Q2 2022, 3.92% in Q3 2022, and 4.07% in Q4 2022.

Given all we know in respect to the Fed and the current situation in Ukraine, my model suggests a significant jump in the first quarter, but then the pace of increase slows significantly and we will end this year at a rate that is almost half a percentage point above the forecast I offered at the start of the year.

Forecasts From Various Analysts

A bar graph titled "Forecasts from Various Analysts" showing Q4 2022 forecasts for conventional 30-year fixed rate mortgages. Fannie Mae forecasts 3.7%, Freddie Mac forecasts 3.74%, NAR forecasts 3.9%, Redfin forecasts 3.9%, Kiplinger and Wells Fargo both forecast 4%, Mortgage Bankers Association forecasts 4.3%, and Matthew Gardner forecasts 4.07%.

Of course, this is the opinion of just one economist, so I thought it would be useful for you to see what others are thinking. And amazingly enough, most of us—at least for now—are still in a pretty tight range regarding our expectations for the average rate in the 4^th quarter of 2022 with Fannie Mae at the low end of the spectrum and the Mortgage Bankers Association at the high end.

I honestly believe that, all things being equal, the impact of higher mortgage rates is unlikely to significantly impact the U.S. market this year and, even with rates rising, the market will remain tight in terms of supply and will continue to favor home sellers. That said, once we break above 4.5%, I would expect to see the increased cost of financing having a greater impact on not just on demand but on price growth, too.

And if you are wondering why I am so sure about this, it’s simply because we saw the exact same situation in 2018 when rates rose to 4.9% and we saw a palpable pull back in sales; which dropped from an annual rate of 5.4 million to 5 million units and the pace of price growth dropped from 5.9% to 3.3%. Now, I don’t see rates getting close to 5% for quite some time and therefore still expect demand to remain robust—off the all-time highs we have seen—but still solid given demographically-driven demand as well as increasing demand from buyers trying to find a new home before rates much further.

Of course, the impact of rates rising will not be felt equally across all markets. Many areas, and especially in coastal States, have seen home values skyrocket to levels that are well above the national average. Although incomes are generally higher in these markets, buyers in more expensive areas will feel more pain from higher financing costs.

And there you have it. I hope that today’s chat has not only given you some additional tools to use in your day-to-day business but has also given you enough information to hopefully ease some of the worry that many of you are feeling right now. As always, if you have any questions or comments about this particular topic, please do reach out to me but, in the meantime, stay safe out there and I look forward to visiting with you all again next month.

Living • February 14, 2022

5 Ways to Create a Sustainable Kitchen

by Lynly Callaway

A close-up of a woman’s hands preparing a meal with chopped vegetables in the kitchen.

In many ways, the kitchen is the heart of a home. All the time spent making delicious food, sharing recipes, and enjoying meals with loved ones gives it a central role in home life. A consequence of the time spent in the kitchen is the creation of waste. But by adopting more sustainable practices in the kitchen, you can reduce waste and make your home more eco-friendly. Here are five ways you can create a sustainable kitchen.

5 Ways to Create a Sustainable Kitchen

1. Cut Down on Food Waste

It’s no secret that a certain portion of food always seems to go to waste, but how can you avoid throwing away perfectly edible food items? It starts with being intentional about your grocery shopping. This helps to prevent overbuying and will give you a better chance of cutting down your food waste. Food preservation is key, as well. Invest in high-quality, reusable containers to prevent food from rotting, wilting, or expiring before you intend to cook it.

2. Choose Energy-Efficient Appliances

Kitchen appliances generate a significant amount of power. By using an energy-efficient refrigerator, freezer, and/or dishwasher, you can reduce the overall energy consumption of your household. When deciding on which appliance to purchase, the most sustainable choice you can make is the one you plan on sticking with for a long time. When deciding on a gas versus an electric range, know the pros and cons of each option before making a final decision.

A young man and a woman take care of their kitchen herbs and houseplants.

Image Source: Getty Images – Image Credit: Pekic

3. Reusable Materials

Getting more uses out of the items in your kitchen will help make your household more environmentally conscious. Reusable kitchen towels are an eco-friendly replacement for paper towels when you’re cooking, wiping down your counters, or doing dishes. Using reusable grocery bags is an effective way to transport groceries sustainably. It will also help keep your kitchen organized by avoiding a plastic or paper bag pile-up under your sink. This line of reusable thinking in the kitchen can even extend to design. If you’re looking to give your kitchen a makeover while keeping sustainability in mind, consider incorporating reclaimed wood, sustainably-sourced countertops, or natural materials like bamboo.

4. Use Natural or Organic Cleaning Products

Creating a sustainable kitchen isn’t just about reducing food waste and choosing reusable materials. By using organic and/or natural cleaning products, you can ensure that your cleaning practices are sustainable as well. Using natural cleaners, like baking soda and vinegar, can also create less waste when you repurpose jars and bottles to create your preferred solution. Buy ingredients in bulk, then re-purpose old spray bottles and use towels instead of paper products to clean. Certain conventional cleaning products with synthetic chemicals can negatively impact the air quality in your home, which can have harmful effects on your health, especially if you have respiratory sensitivities.

5. Be Mindful About Water Usage

Neglecting to monitor your water usage is a slippery slope. Not only will using too much water increase the overall waste output of your home, but it will also increase your water bill. Be mindful about using only the required amount of water for cooking, do your best to avoid leaving the faucet running, and if there is a drip, fix it as quickly as you can. Using too much water can also strain your home’s water systems, putting your pipes at risk of bursting. Tempering your water usage can help to prevent water damage and the high costs that come with it.

Going zero waste doesn’t have to be expensive. Try first to extend the life of the things you already have like plastic bottles and textiles.

Market News • Matthew Gardner • Regional Market Report • February 10, 2022

Q4 2021 Western Washington Real Estate Market Update

by Lynly Callaway

Q4 2021 Western Washington Real Estate Market Trends

The following analysis of the Western Washington real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere Real Estate agent.

REGIONAL ECONOMIC OVERVIEW

Just when we thought COVID was starting to pull back, the Omicron variant made its presence known. It is still too early to suggest that this has affected the region’s economic recovery—we won’t likely know for certain until we get more job data. I remain hopeful that this latest spike in infections will not have too much of an impact, but only time will tell. To date, the region has recovered all but 51,000 of the 297,000 jobs that were lost due to the pandemic. Some of the region’s smaller counties, including Grays Harbor, Cowlitz, Thurston, San Juan, and Clallam, have seen a full job recovery. The most recent data (November) shows the regional unemployment rate at a very respectable 3.3%, which is below the pre-pandemic low of 3.7%. The lowest unemployment rates were in King and San Juan Counties, where 2.9% of the labor force was out of work. The highest rate was in Grays Harbor County, which registered 5.1%. I still expect to see a full job recovery by this summer. However, there is a growing labor shortage holding the area back. Hopefully, this will change, but some industry sectors—especially hospitality—continue to find it hard to attract workers.

WESTERN WASHINGTON HOME SALES

❱ In the final quarter of the year, 22,161 homes sold, representing a drop of 5.2% compared to the same period in 2020 and down 18.8% from the third quarter.

❱ The reason there were lower year-over-year sales is simply because the number of homes for sale was down more than 30%. The drop between third and fourth quarters is likely due to seasonality changes in the market.

❱ Although home sales were lower in most markets, there was a significant uptick in Grays Harbor and Thurston counties. The number of homes sold dropped across the board compared to the third quarter.

❱ The ratio of pending sales (demand) to active listings (supply) showed sales outpacing listings by a factor of 5.2. The market is supply starved and unfortunately, it’s unlikely enough homes will be listed this spring to satisfy demand.

A bar graph showing the annual change in home sales for various counties in Western Washington during the fourth quarter of 2021.

WESTERN WASHINGTON HOME PRICES

A map showing the real estate market percentage changes in various counties in Western Washington during the fourth quarter of 2021.

❱ Home prices rose 15.1% compared to a year ago, with an average sale price of $711,008. This was 2.1% lower than in the third quarter of 2021.

❱ When compared to the same period a year ago, price growth was strongest in San Juan and Jefferson counties. All but two markets saw prices rise more than 10% from a year ago.

❱ Relative to the third quarter, every county except Island (-8.6%), Mason (-5.2%), Lewis (-2.9%), King (-2.1%), Cowlitz (-1.7%), and Kitsap (-0.9%) saw sale prices rise.

❱ Mortgage rates rose more than .2% between the third and fourth quarters, which may have impacted prices. Affordability constraints continue to grow, which is also likely to have played a part in slowing gains.

A bar graph showing the annual change in home sale prices for various counties in Western Washington during the fourth quarter of 2021.

DAYS ON MARKET

❱ It took an average of 23 days for homes to sell in the final quarter of 2021. This was 8 fewer days than in the same quarter of 2020, but 6 more days than in the third quarter of last year.

❱ Snohomish, Thurston, King, and Kitsap counties were the tightest markets in Western Washington, with homes taking an average of between 13 and 16 days to sell. The greatest drop in market time compared to a year ago was in San Juan County, where it took 33 fewer days for a seller to find a buyer.

❱ All counties contained in this report saw the average time on market drop from the same period a year ago. Every county except Whatcom saw market time rise compared to the third quarter.

❱ Longer days on market might suggest that things are starting to slow, but I don’t actually think this is the case. I believe buyers are being a little more selective before making offers, and many may be waiting in the hope that supply levels will improve in the spring.

A bar graph showing the average days on market for homes in various counties in Western Washington during the fourth quarter of 2021.

CONCLUSIONS

A speedometer graph indicating a seller's market in Western Washington during the fourth quarter of 2021.

This speedometer reflects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.

The housing market remains in a state of imbalance, but, as I look at the data, I believe the frenetic pace of sales and price appreciation may start to soften in 2022.

This will likely be due to financing costs and affordability acting as headwinds to price growth. Mortgage rates have started to rise again, and I have forecasted them to reach 3.7% by fourth quarter. This alone will slow price growth as affordability in many areas declines.

One thing that remains unknown that could have a significant impact on the market is long-term work-from-home policies. Many businesses have not yet determined their plans for remote working, but once they do, potential home buyers who have been waiting to see how frequently they have to commute to work could immediately start their search. In addition to boosting sales, this could add inventory to the market as well.

All things considered, I am moving the needle just a notch toward buyers. However, as you can see, we are still in a market that heavily favors home sellers.

ABOUT MATTHEW GARDNER

Matthew Gardner - Chief Economist for Windermere Real Estate

As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.

In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.

Windermere Community • January 31, 2022

Windermere Real Estate Celebrates 50th Anniversary

by Lynly Callaway

A graphic showing WIndermere Real Estate's 50th anniversary.

In honor of our 50th anniversary, Windermere set a goal to reach $50 million in giving and officially announced our third generation of leadership during our 2022 Kick-Off event.

Seattle – On Wednesday, January 26, we hosted a virtual event for our agents, franchise owners, and staff, to kick off 2022 and celebrate our 50^th anniversary. More than 4,400 people attended the virtual event to hear from several speakers, including company founder, John Jacobi, Windermere Chief Economist, Matthew Gardner, and keynote speakers Matthew Ferrara and Candace Doby. Second-generation leaders, OB Jacobi, Jill Jacobi Wood, and Geoff Wood kicked off the event by reflecting on Windermere’s 50-year history and the pride that comes from still being a family-run organization. They also introduced Lucy Wood, daughter of Jill and Geoff, and the third generation to take on a leadership role within our company.

Founded in 1972 by John Jacobi, Windermere started with seven agents in a single office in Seattle, WA. Over the next two decades, Jacobi would grow Windermere into Seattle’s largest real estate brokerage and eventually the largest in the Pacific Northwest. But according to son, OB, his dad never had aspirations of becoming a large company. “My dad’s goal was to build a real estate office where the agents were respected on the same level as other business professionals, so he made it a priority to hire people who were above all else, professional,” said OB Jacobi, adding, “It was because of the quality of the people who joined Windermere that the company began to grow and thrive.”

Fifty years later, Windermere is the largest regional real estate company in the Western U.S. with over 6,500 agents and 300+ offices in 10 states. Last year we exceeded $43 billion in sales.

During the January 26 event, the second-generation leaders talked about how their dad set out to change the real estate industry. According to son, OB Jacobi, his dad didn’t believe in awards and felt the highest achievement an agent could earn is repeat and referral business from their clients. He also thought it was the responsibility of real estate agents to make their communities a better place to live, and in 1989, through the creation of the Windermere Foundation, pioneered a giving model that is now used by real estate companies around the country.

“My dad and his team came up with an idea that would make it really easy for agents to give back,” said Jill Jacobi Wood. “It was simple but sort of ingenious; every time an agent sold a home, a small donation from their commission would automatically be made to the Windermere Foundation. All that the agents had to do was sign up to donate and we handled the rest.”

Jacobi Wood added that the goal was to create a system that would allow Windermere to make a big difference without being a financial burden on any one person. In its first year (1989), the Windermere Foundation raised $90,000 for low-income and homeless families. In 2021, our network collectively raised over $2.5 million for a total of $46 million in donations. In honor of our 50^th anniversary, the Windermere network has been given a new challenge: to reach $50 million in donations by the end of 2022.

Windermere CEO, Geoff Wood, closed the 50^th anniversary event by saying, “Great companies don’t stagnate or stay the same. They are constantly evolving and looking for ways to improve, grow, and give back. Over the past 50 years we have done just that; here’s to 50 more.”

Market News • Matthew Gardner • January 27, 2022

Matthew Gardner’s Top 10 Predictions for 2022

by Lynly Callaway

This video shows Windermere Chief Economist Matthew Gardner’s Top 10 Predictions for 2022. Each month, he analyzes the most up-to-date U.S. housing data to keep you well-informed about what’s going on in the real estate market.

Matthew Gardner’s Top 10 Predictions for 2022

1. Prices will continue to rise

There are some who believe that U.S. home prices will drop in the coming year given last year’s extremely rapid pace of growth, but I disagree. I don’t expect prices to fall; however, the pace of appreciation will slow significantly, rising by around 6% in 2022 as compared to 16% in 2021 (nationally). As such, agents need to be prepared to explain this new reality to their clients who have become very accustomed to prices spiraling upward. Those days are likely behind us—and it’s not a bad thing!

2. Spring will be busier than expected

The work-from-home paradigm is here to stay for the foreseeable future, and this could lead to increased buyer demand. Many companies have postponed announcing their long-term work-from-home policies due to the shifting COVID-19 variants, but I believe they will soon off er more clarity to their employees. Once this happens, it will likely lead to a new pool of home buyers who want to move to more affordable markets that are further away from their workplaces. I also expect to see more buyers who are driven by the need for a home that is better equipped for long-term remote working.

3. The rise of the suburbs

For a large number of people whose employers will allow them to work from home on an ongoing basis, remote working will not be an all-or-nothing proposition. It will be a blend of working from home and the office. I believe this will lead some buyers to look for homes in areas that are relatively proximate to their office, such as the suburbs or other ex-urban markets, but away from high-density neighborhoods.

4. New construction jumps

I anticipate the cost of building homes to come down a bit this year as inflation finally starts to taper, and this should provide additional stimulus for homebuilders to start construction of more units. Material costs spiked in 2021 with lumber prices alone adding about $36,000 to the price of a new home. This year, I’m hopeful that the supply chain bottlenecks will be fixed, which should cause prices to moderate and result in a drop in building material costs.

5. Zoning issues will be addressed

I’m optimistic that discussions around zoning policies will continue to pick up steam this year. This is because many U.S. legislators now understand that one of the main ways to deal with housing affordability is to increase the supply of land for residential construction. Despite concerns that increased density will lower home values, I believe existing homeowners will actually see their homes rise in value faster because of these policies.

6. Climate change will impact where buyers live

Now that natural disasters are increasing in frequency and climate risk data is starting to become more readily available, get ready for home buyers to require information from their agents about these risks and their associated costs. Specifically, buyers will want to know about an area’s flood and fire risks and how they might impact their insurance costs and/or their mortgage rate.

7. Urban markets will bounce back

While increased working from home can, and will, raise housing demand in areas farther away from city centers, it may not necessarily mean less demand for living in cities. In fact, some urban neighborhoods that were once only convenient to a subset of commuters may now be considered highly desirable and accessible to a larger set of potential home buyers. At the same time, this could be a problem for some distressed urban neighborhoods where proximity to employment centers may have been their best asset.

8. A resurgence in foreign investors

Foreign buyers have been sitting on the sidelines since the pandemic began, but they started to look again when the travel ban was lifted in November 2021. Recently, the rise of the Omicron variant has halted their buying activity, but if our borders remain open, I fully expect foreign buyer demand to rise significantly in 2022. Keep in mind, foreign buyers were still buying homes sight unseen even when they were unable to enter the country, and this will likely still be the case if borders are closed again.

9. First-time buyers will be an even bigger factor in 2022

Once remote working policies are clearer, we should see increased demand by first-time buyers who currently rent. In 2022, 4.8 million millennials will turn 30, which is the median age of first-time buyers in the U.S. An additional 9.4 million will turn 28 or 29 in the coming year. I believe this group is likely to contemplate buying sooner than expected if they can continue working from home in some capacity. Doing so would allow them to buy in outlying markets where homes are more affordable.

10. Forbearance will come to an end

Forbearance was a well-thought-out program to keep people in their homes during the height of the pandemic. Some predicted this would lead to a wave of foreclosures that would hurt the housing market, but this has not been the case. In fact, there are now fewer than 900,000 U.S. homeowners in forbearance, down from its May 2020 peak of almost 4.8 million, and this number will continue to shrink. That said, there will likely be a moderate increase in foreclosure activity in 2022, but most homeowners in this situation will sell in order to meet their financial obligations rather than have their home repossessed.

Seller • January 23, 2022

Should I Remodel or Sell My Home As Is?

by Lynly Callaway

A young man and woman look at paint swatches against a wall of their home as they remodel.

Homeowners who are preparing to sell are often faced with a dilemma about whether to remodel or sell their home in its current state. Each approach has its respective advantages and disadvantages. If you decide to remodel your home, it will likely sell for more; but the increased selling price will come at the cost of financing the remodeling projects. If you decide to sell without remodeling, you won’t spend as much money putting your home on the market, but the concern is whether you’re leaving money on the table.

Should I Remodel or Sell My Home As Is?

To answer this question, it’s important to understand the factors that could influence your decision and to work closely with your agent throughout the process.

Cost Analysis: Home Remodel vs. Selling Your Home As Is

Home Remodel

When you remodel your home before selling, you’re basically making a commitment to spend money to make money. So, it’s important to consider the kind of ROI you can expect from different remodeling projects and how much money you’re willing to spend. Start by discussing these questions with your agent. They can provide you with information on what kinds of remodels other sellers in your area are making and the returns they’re seeing as a result of those upgrades. This will help you determine the price of your home once your remodel is complete.

Then, there’s the question of whether you can complete you remodeling projects DIY or if you’ll need to hire a contractor. If hiring a contractor seems expensive, know that those costs come with the assurance that they will perform quality work and that they have the skill required to complete highly technical projects.

According to the Remodeling 2021 Cost vs. Value Report (www.costvsvalue.com¹), on average, homeowners paid roughly $24,000 for a midrange bathroom remodel and about $26,000 for a minor kitchen remodel nationwide, with a 60.1% and 72.2% ROI respectively. This data shows that, for these projects, you can recoup a chunk of your costs, but they may not be the most cost-effective for you. A more budget-friendly approach to upgrading these spaces may look like repainting your kitchen cabinets, swapping out your old kitchen backsplash for a new one, refinishing your bathroom tub, or installing a new showerhead. Other high-ROI remodeling projects may allow you to get more bang for your buck, such as a garage door replacement or installing stone veneer. To appeal to sustainable-minded buyers, consider these 5 Green Upgrades that Increase Your Home Value.

A man and woman look at blueprint plans with a contractor inside a room that’s being remodeled.

Image Source: Getty Images – Image Source: stevecoleimages

Selling Your Home As Is

Deciding not to remodel your home will come with its own pros and cons. By selling as is, you may sell your home for less, but you also won’t incur the cost and headache of dealing with a remodel. And since you’ve decided to sell, you won’t be able to enjoy the fruits of the remodel, anyway. If you sell your home without remodeling, you may forego the ability to pay down the costs of buying a new home with the extra money you would have made from making those upgrades.

Market Conditions: Home Remodel vs. Selling Your Home As Is

Local market conditions may influence your decision of whether to remodel before selling your home. If you live in a seller’s market, there will be high competition amongst buyers due to a lack of inventory. You may want to capitalize on the status of the market by selling before investing time in a remodel since prices are being driven up, anyway. If you take this approach, you’ll want to strategize with your agent, since your home may lack certain features that buyers can find in comparable listings. In a seller’s market, it is still important to make necessary repairs and to stage your home.

In a buyer’s market, there are more homes on the market than active buyers. If you live in a buyer’s market, you may be more inclined to remodel your home before selling to help it stand out amongst the competition.

Timing: Home Remodel vs. Selling Your Home As Is

Don’t forget that there is a third option: to wait. For all the number crunching and market analysis, it simply may not be the right time to sell your home. Knowing that you’ll sell your home at some point in the future—but not right now—will allow you to plan your remodeling projects with more time on your hands which could make it more financially feasible to complete them.

Windermere Community • January 10, 2022

Windermere Foundation 2021 Year in Review

by Lynly Callaway

A group of people wearing sanitary masks stand together in a food bank warehouse holding a donation check.

For the Windermere Foundation, 2021 was a year of milestones. Windermere owners, staff, and agents stepped up to support their communities in a variety of ways. Their collective efforts helped to raise over $2.5 million in 2021 for low-income and homeless families, bringing the Foundation’s grand total to over $45 million in donations since 1989.

Windermere Foundation 2021 Year in Review

Early 2021

The year got off to a quick start. Windermere offices showed an outpouring of support in their communities, raising nearly $500,000 by the end of March. The Windermere Lane County office in Eugene, Oregon was highly active, raising money for a host of local organizations dedicated to supporting local children who are in crisis due to neglect, abuse, poverty, or homelessness. The office also collected donations for Florence Food Share and Food for Lane County, two local non-profits working to solve hunger issues in the community. All in all, the Lane County office’s donations totaled over $10,000.

Community Service Day

In June, Windermere celebrated its 37^th annual Community Service Day, a tradition since 1984 in which our agents, staff, and franchise owners spend the day volunteering in their communities to complete neighborhood improvement projects. The Windermere Pinole and Diablo Realty offices joined together to support the Food Bank of Contra Costa & Solano by working in their warehouse to help bag produce. The offices were able to gather $2,850 in donations, which empowered The Food Bank to deliver 5,700 meals to the local community. The Park City office also made an impact with a local food health organization, EATS Park City, by donating $5,000 to help EATS in their mission to promote nutrition advocacy in the area.

These are just a couple examples of the impact last year’s Community Service Day had throughout the Windermere footprint. By the end of June, the Foundation surpassed $1 million in donations for 2021.

A group of people wearing sanitary masks stand together in a food bank warehouse holding a donation check.

Pictured: Scott Tuffnell, Denise Ramirez, Mike Rowland, Renee Rowland, Diane Cockrell, Mona Logasa, Dave Nardi, Ellen Osmundson, Jim Georgantes, Tina Rowland, Jacob Cardinale, Nicolars Ramirez, Luis Ramirez-Agudelo, George Gross, John Kula, Carol Nasser, Neil Zarchin (Food Drive Administrator – Food Bank of Contra Costa and Solano) – Image Source: Windermere Rowland Realty – California

Late 2021

Windermere agents, staff, and owners continued to give back to their communities through the summer and fall, eventually passing $1.5 million raised in 2021 by September’s end. Here are a few highlights from the final months of the year.

UW Certificate Scholarship Program

The UW Certificate Scholarship program is part of Windermere’s commitment to better serve and support students of color, especially Black and Hispanic students, who have been impacted by systemic racial inequities. Since it was introduced in 2019, the scholarship program has given a total of $41,000 to scholars to date.

Gina, a 2021 scholar, was able to complete the UW Certificate in Data Visualization with her scholarship from Windermere. Originally from Colombia, Gina moved to the U.S. ten years ago. She eventually found work as a nanny but was laid off in the early days of the COVID-19 pandemic. Gina knew she needed to find a stable career to help support her family and wanted to put her data visualization skills to work. Gina was hired as an Attendance Specialist with her local school district. “Now, you may wonder how an Attendance Specialist can contribute if she has data visualization skills,” she said. “I was a little skeptical at first, but as I started learning more about data, I started connecting the dots. I started collecting data on the reason why the students were not making it to classes and tracking down the kids that needed extra attention.” Gina began making weekly analyses and data visualizations for her team and was soon helping the district connect with students they hadn’t been able to reach for six months. “I can’t thank you enough for this great opportunity,” she said of the UW Certificate Scholarship. “I have helped my community, grown as a professional, and feel empowered as a mom and as a brown woman.”

The Windermere Foundation plans to expand the UW Certificate Scholarship program in the future to help more Black, Indigenous, or People of Color (BIPOC) adult learners.

A selfie of a young man and woman and their two kids outside.

2021 UW Certificate Scholar Gina (top left) with her family. Image Source: Gina / Jo Gubas—University of Washington

Windermere Sand Point / Lake Oswego West / Fort Collins /

The following Windermere offices didn’t let up in their community efforts during the final weeks of 2021. Windermere Sand Point looked no further than their local elementary school, Sand Point Elementary, when deciding how they could make an impact during the holiday season. The Sand Point office donated $3,000 to the school, which will help to provide low-income students and their families with clothing, shoes, food assistance, and payment aid for after school activities.

The Windermere Lake Oswego West office makes it a point to support Transition Projects annually in any way they can. Transition Projects engages with the local homeless population to support them on their journey out of homelessness while delivering lifesaving and life-changing assistance. In early December, the Lake Oswego West office donated $3,500 to Transition Projects.

Windermere Fort Collins has close ties to ChildSafe Colorado, a local organization that provides therapy for victims of childhood abuse. One of their agents had a personal experience with ChildSafe and couldn’t thank them enough for all they did for their family. The office has rallied to support the organization, as they are unable to provide their services without donations. The Northern Colorado office hosted a tailgate party fundraiser, collecting donations from agents and the public. All in all, they were able to donate $4,000 to ChildSafe in November.

A woman in the foreground holds a basket of donated items and a man in a football jersey behind her carries some items.

Pictured L to R: Suzanne Ekeler, Eric Thompson – Image Source: Natalie Parsons, Windermere Fort Collins

To learn more about the Windermere Foundation, visit windermerefoundation.com.