Getting Your Edge: How to Downsize Your Home.

Navigating the Real Estate Rollercoaster: Buying Smart Amid Rising Rates

• Dennis Day • Season 3 • Episode 56

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What if navigating the real estate market could be your next strategic move, even amidst rising interest rates? Join hosts Dennis Day and Judy Grant as they unravel the complexities of the real estate landscape from 2020 through 2024, focusing on the remarkable recovery from the downturn in 2023. They explore the intriguing dynamics of home sales, which rose from 4.1 million to 4.6 million despite interest rates climbing into the 7% range. You’ll gain insights into national home price appreciation, with particular attention to regions like Washington State. Discover how the market is dealing with challenges like high prices, elevated interest rates, and limited inventory, and learn the savvy strategy behind "marry the house, date the rate" for making smart buying and refinancing decisions.

Looking forward, the episode anticipates shifts on the horizon in 2025, including more available home inventory and a solid 13% boost in new home construction, which promises opportunities for buyers and potential challenges for sellers. Dennis and Judy also delve into the nuances of the median percentage of original list prices and seasonal trends that impact home sales, offering valuable advice on timing your moves in the market. As a beacon of hope for renters, they highlight the stabilization of rental prices in areas like King County and Seattle. This engaging discussion promises to equip listeners with the knowledge needed to navigate the changing real estate market confidently.

00:00 Introduction and Podcast Rebranding

00:32 2024 Real Estate Market Overview

01:20 Interest Rates and Affordability

05:07 Regional Market Insights

12:41 Buying and Selling Strategies

18:43 2025 Market Projections

24:46 Conclusion and Contact Information

We Would Love to Hear Your Feedback!

Dennis Day:

Peter, good day everyone. This is Dennis Day, with Getting your Edge how to Downsize your Home With my co-host, judy Grant. What's up with our name change?

Judy Gratton:

Hi Dennis and happy new year. We're looking into the search engine optimization, all the technical details regarding our podcast. We found that the name that we had was a little too broad. What we're really focusing on is downsizing. Hopefully, with this name change, we'll be able to help more people.

Dennis Day:

Sounds good. It's 2025. Let's go over what happened in 2020 with the real estate market. Are we ready?

Judy Gratton:

We are ready.

Dennis Day:

Hang on, oh, okay, judy, let's take a look at our slides that have a little information, not too wonky, about what's going on in the real estate market 2024. Okay, let's look broadly at the entire United States. We had a down year in 2023 and 4 million homes a little over 4.1 million. That was pretty low. And 2024, this is entire US sold 4.6. Well, you know, those numbers doesn't seem much, but that is 500,000 more homes. It was a better year.

Judy Gratton:

It was a better year and hopefully 2025 will continue the climb. If you look at that, what you're seeing here is in 2021 and 2022, we still have those emergency interest rates. At one point I knew of someone who actually got something in the twos, but it was basically between three and 4% because we had COVID and as we came out of COVID and trying to slow the inflation, they started to raise the interest rates in 2022, and people put the brakes on buying. They're now up into the sevens, but it's still a pretty darn good interest rate. It kind of cuts your buying power in half and if you are a first-time homebuyer or a median price homebuyer, that can make a huge difference. We're headed in the right direction.

Dennis Day:

The home price is overall you asked rose 4.3%. So, interestingly enough, even though we had these high interest rates, the homes were still selling, just not at as great a price.

Judy Gratton:

Remember this is a general United States overview. In some places it was still a crazy market, which we will see here.

Dennis Day:

This is not a happy slide. This is for the entire USA. Goldman Sachs puts out an affordability index and this tells you how affordable homes are and you can see the up and down. We're down at 70. This is extremely low. The combination of high prices, high interest rates, low inventory has made housing extremely unenforceable for many people in the country.

Judy Gratton:

Considering that most people, the wealth building that occurs is in the home they buy because appreciation pushes them up, and it always hopefully it always will. But because we don't make real estate anymore, we can build houses on land, but when the land's gone home, prices will always continue to go up. In 2006 through 8, when the economy crashed, and so the unemployment was huge and prices lost half their value in many people's homes. So there's your first unaffordability, but the rebound jumped incredibly. A lot of people could afford to buy because homes were still relatively undervalued. Then it leveled off again In 2020, we had the emergency interest rates start with COVID. At that point, people could afford to buy more home because the interest rates were lower, and so you saw the affordability become higher, and that continued throughout COVID until we got to where we started raising interest rates again and then down it goes, and it stayed down there. Now because the interest People.

Judy Gratton:

I hear people say I'm waiting for the market to crash and it probably won't. If it does, we're going to have another emergency, which could mean that when it crashes, you may be unemployed. If you are someone who has a lot of money and it crashes, well, yeah, you're probably going to make a killing because home values will drop. That is not something that I recommend. That people wish for. A crashing market it would be nice to see it stabilize at a rate that people were accepting, but I wouldn't recommend saying I'm waiting for the market to crash. Not a good idea.

Dennis Day:

Yeah, I'd love to have 3% interest rates for everybody, but it meant that we were in lockdowns, people, millions of people were dying, and I'm not really ready to go back to that myself. So zoom in a little bit Washington State from 2023 to 2004.

Judy Gratton:

Six increase in 2024 alone. That is referred to as your appreciation. So, from what you paid for your home to what it's currently worth, it went up 6.2%. So, if you know, that's pretty normal in the Northwest to be somewhere between 4% and 7%, so we're still appreciating at a good rate. It was when they were appreciating at 25% I think was that 2020 or 2021, there was a 25% appreciation. That's where people begin to not be able to buy because the homes have raised so incredibly, even at 6%. When you're saying I'm waiting for interest rates to drop to buy, if you can afford to get into the real estate market, buy it, because next year it's going to be 6% more expensive and you're just going to be chasing that until we have an emergency crash. You can always refinance at a lower rate when rates get better. We have a saying marry the house, date the rate, because if you get it now, you're getting it at a better price and you'll be able to get it next year most likely For buyers, this is not that great.

Dennis Day:

You're paying $70,000 more than you were in January 2023. But if you got in before January 2023, your equity rose by about $70,000 or 6.2%. That's good for the homeowner.

Judy Gratton:

Yes, that's excellent for the homeowner. If you bought on a conventional loan with 3% down, they're going to require mortgage insurance and a lot of people don't like paying that mortgage insurance. If your home appreciates by 20% now, your home is worth 20% more and you most likely will be able to get rid of the mortgage insurance, Because once you have 20% equity in the home, the mortgage insurance on conventional loans generally goes away. You have to contact your lender and they'll probably want to do an appraisal, but it can be removed. You have to refinance out of an FHA mortgage to get rid of the mortgage insurance. So once you have 20% equity, you most likely would want to do that.

Dennis Day:

This is an interesting comparison. Here we look at the closed sales. August 21 was kind of the peak of the frenzy time and we were closing at 122,000 homes that month. This is just Washington State. Now we're dropping down here and you can see, well, we're only closing 75. That's a pretty significant drop. It's bottomed out at 71,000 per month in March 2024. Now it's a little bit comparing apples and oranges. How's that?

Judy Gratton:

Well, in a way, this particular slide, I think when we looked at it the first time, I was seeing August of 2024, and that's a different story. We'll talk about that in a minute. But this is not so much apples and oranges. This is showing that the buying power of the public and interest in buying has dropped. The sellers are not selling because they don't know where they're going to go, because there are no homes on the market. So we're in this real catch-22 period of time. It started in 2023 when the interest rates started to rise. That's where you began to see it dropping. Homes have sold, they have appreciated, they've gotten more expensive. So that means that these people that wanted to buy don't anymore because the interest rates are too high. No, the houses are too expensive and there aren't that many on the market. And here we are now down here in January. We're probably at about that point that you see in December 2024.

Dennis Day:

So if we compare August 21 to August 24, you can see how many months.

Judy Gratton:

Yeah, that would be homes.

Dennis Day:

So that's a lot 38% increase in closed homes.

Judy Gratton:

It's a lot for those people like us that make our living selling homes too.

Dennis Day:

Again focusing in a little bit on Central Puget Sound, and all right. So we've got four different areas in St Pierce, snohomish and Kitsap County, and that makes up the bulk of Washington's population. Now there's a whole bunch more land in Washington, but this is the counties that most of the people live in.

Dennis Day:

Well, the median sales price right here Want to explain to people what that term means Median, which is something I like better to use than average tells you you know, right in the middle you take them all and you add them up and then divide and you get an average price. That tells you broadly how much approximately, but a median tells you half are above that price and half are below that price. For me it's a more accurate representation. A $25 million Russell Wilson home selling can really skew the average price, but the median price has less of an impact.

Judy Gratton:

Each of the counties varies. When you look at the right-hand bar, the median price went up by 2.6% in King County, which is our largest populated county. That's where Seattle is, and Bellevue and places like that. Pierce County went up by 4.9% and that's down in the Tacoma area, which is another large city. Homish County had the greatest rise in median home values and that was 12.2%. So Homish County, covering Everett, marysville, lake, stevens and a lot of smaller cities, monroe, places like that.

Dennis Day:

Kitsaps County, the west Bremerton, bainbridge Island, compared to what we were seeing in 21, where 20 and 24 percent gains every year Killen especially the new buyers. Great for homeless.

Judy Gratton:

First time homebuyers yeah.

Dennis Day:

So we haven't changed a lot. King County has grown over the past two years somewhat. King County has grown over the past two years somewhat. Snohomish County, like I said, been pretty significant but relatively flat in Pierce and counties.

Judy Gratton:

I wish this went back because, do you see, this is 2023, 2024, right. And so it'd be interesting to see King County prior to COVID, because when COVID happened, people in the Seattle area and the people who lived in the city started moving to the suburbs so they could have a house with a yard for their children to play in, because we're all at home, and suddenly it was really hard to live in a condo and kids weren't allowed to play together in parks and things like that. So King County really took a big hit. A lot of people sold and got out of King County and so some of this may be rebounding, coming back into the larger cities.

Dennis Day:

Median days on the market again not an average half above, half below, and this slide shows the cyclical nature of the real estate market. See how days on the market nearly 40 days up here and it slides down until we're getting in below 10 days.

Judy Gratton:

In mid-summer mid-summer weather-related kids are out of school. People can move more easily in the summer than they can in the winter months.

Dennis Day:

Then we're bouncing back up to 30 days at the start of winter. When we get to April it's back to six, seven days, probably getting multiple offers, perhaps bidding wars, Not as big as the peak of 2021.

Judy Gratton:

Right now, buyers are becoming more accepting of the current rates. They want to get into a home. They have reasons they need to buy, Rather than hoping that the rates are going to drop to 3% again. People are beginning to move Not as many.

Dennis Day:

Median percentage of original list price Do you want to explain that? Yeah, median percent. A homeowner puts the house on the market and the original price is what they ask for the first time when it enters the market.

Judy Gratton:

Would you like to explain what that means?

Dennis Day:

Yeah, the median again is half above, half below. But you put a home up for sale it has an original list price. Then the percentage is of the original list price. Then the percentage is of the original list price, how much you got at sold. If it's below, like it was 97, 98%, meaning the seller is not getting full price for the sale of their home. If it's up here at 100%, that means you list a home. You're likely, if you price it right, to get 100% of what your asking price is. Even had a little spike here where we are above asking price.

Judy Gratton:

And if you notice, that is in Snohomish County where we had the largest increase in number of sales in the same time frame.

Dennis Day:

Right, it also shows when is the best time to buy.

Judy Gratton:

Yes, If you're a buyer and you want to get any kind of deal on a home, your chances are much better as you get closer to December or the beginning of January. Once you start moving out of January, prices begin to climb and you saw that on that one slide that in April is where there were the least number of days for a home to be listed until it goes under contract. That's what we refer to as days on market. For a seller, you would be better to try and put your home on the market sometime between April and September. The appreciation is going to happen in that first portion of April, may and then June, july. It's going to level off. You'll be at the top of the appreciation in most cases and then start going down again as we head into winter. The decision you make, if you can, on when you're going to buy or sell. There are some statistics that show you when the best times are to do those two things.

Dennis Day:

Some people can't choose when they buy or sell. So if you're a buyer, december might be. If you're looking for a lower price might be a good time to buy. We also saw in an earlier slide, however, there's less homes for sale, so your inventory is not as great.

Judy Gratton:

I always tell sellers if they have to sell in the winter months. There's not going to be as many buyers out there, but they're really serious buyers because they're moving in the winter months and the rain and school and all of that Right.

Dennis Day:

Let's recap they grew in Washington State 2024 also, but 6.2, so a little above the national average. 500,000 more homes were sold in 24 than 23. 23 was a down year for sales. It's picked up 500,000 homes. That's over the whole course of the United States. It seems like a huge number and it's not insignificant, but it doesn't compare to what we were doing at 2020 levels, where we're selling 120,000 homes in a month. The inventory is still well below 2022 levels.

Judy Gratton:

I guess we're too big and we're hoping that that inventory will begin to go up. There's a lot goes into that, you know zoning changes, permits and ease for builders to be able to get those permits to build. I know in our area I see a lot of those notices from the city saying that they are going to something build and it's normally apartments or homes, because we have more people now than we had 10 years ago.

Dennis Day:

But really, if you reasonably price your home, it's going to sell at about 100%. That's not bad. Took a little longer.

Judy Gratton:

Continuous days on market is from the time it is listed on the multiple listing service until you're under contract, not until you close. That's how many days you can expect people to be pulling in and out of your house.

Dennis Day:

Summertime. You're looking at 10 days December. It probably will still sell.

Judy Gratton:

We sold the house in four days. It just depends on where it is and what the market will bear.

Dennis Day:

And what area you're in depends on where it is and what the market will bear and what area you're in.

Judy Gratton:

I mean the area, the price point. The more expensive the home generally, the longer it will sit on the market. When you start getting up into your luxury homes they generally do sit a little bit longer because there aren't as many people out there buying that. But your middle class, but your middle class suburban homes, that's what most people go into and so that's going to go a little bit faster than luxury. I would say entry-level homes are probably going to go faster than all-standing. Condos are kind of iffy because that's not what people generally start out looking for. Some people do, but most people are looking for a freestanding home. The greater number of people.

Dennis Day:

All right. What do we expect in 2025?

Judy Gratton:

Very important.

Dennis Day:

I've added my notes down here.

Judy Gratton:

This is where I'm getting the information.

Dennis Day:

I did some research on this and I want to give credit to the organizations. Inventory for homes will grow, but so will home prices, Not at the 20% clip. They were talking about more at the 3.5 to 6% Washington.

Judy Gratton:

And that's normal. That's normal appreciation, at least for the state of Washington, and so we're in a normal area there. And if more homes come on the market, if we start seeing more new construction for buyers, that's good for sellers. Now you have more competition, so you have to weigh all this information to figure out if this is the right time for you to sell and where you're going to go.

Dennis Day:

They're projecting that they're going to increase the amount of new home construction by 13%. That's pretty significant. It could add up to over a million homes nationally. Doesn't solve the housing crisis of needing more homes, but it's an improvement over previous years. For the renters, rental prices in the King County and Seattle area has just been going up astronomically and they really are saying that they're flattening out and they should remain pretty good. Seattle area has a significant number of apartments and condominiums and homes going that will flood the market later this year, so it should help with prices a little bit. It's tough on renters because they're paying a lot even though they're not getting that equity growth of a homeowner.

Judy Gratton:

Another big part of this that we didn't discuss but we actually had a congressman on to talk about it last year is the fact that hedge funds have invested heavily in real estate and they're buying properties and then becoming landlords. They bought 26% of all the real estate in 2023 in the country, so that's another reason that there's a shortage of homes in your area, wherever you are, because they're owned by hedge funds. They're making money off of it by renting them out, so it makes it very difficult for people who want to be homeowners in middle-income areas to buy when you're competing against hedge funds that normally pay cash.

Dennis Day:

On the bright side. I did see from Realtorcom that home builders are going to build smaller, more affordable homes. What they've been building, at least in this area, has been 3,000 square foot on a postage stamp lot makes them the most money, but they're finding that people now are requesting smaller homes, maybe a little more yard and more affordable. You couldn't consider going into a new home in our central Puget Sound area a brand new home for less than a million dollars. They're just not there, unless you're buying a town. 2025 will bring mortgage rates will drop incrementally. We had two price drops in fall of 2024 and the rates went up.

Judy Gratton:

They're not solely connected to what the Fed does with rates. They're also connected to the bond market, the US bonds. So people invest in bonds when the stock market looks shaky, and when they're investing in bonds, the interest rates will drop. When the stock market is great, they don't invest in bonds and the interest rate might even go up. That's what loans are tied to Especially first time.

Dennis Day:

Don't expect a huge drop and you will not see 3% interest rates unless we have huge disaster Catastrophe.

Judy Gratton:

Emergency interest rate. I don't see how it would happen but, like I said, a lot of people don't believe six and seven is good. I've seen higher interest rates, even in the last 10 years.

Dennis Day:

The affordability index is going to remain the same low. High interest rates, high prices, low inventory the perfect storm for making homes less and less affordable. Don't expect any big changes, unless we have something hugely significant happen.

Judy Gratton:

There's a lot of uncertainty about what's going on globally and nationally. The Fed has said they will only lower the rate twice, but that hasn't really affected our market because it's tied to what the stock market does and what the bond market does. So there's a lot of uncertainty, but people have to move. Frequently people have to move and we're beginning to see that maybe people who had to move are kind of going. I can't wait any longer, I have to, and so that's where we still have buyers. We also have a large international market that comes in and buys, at least in our area. As a middle-class first-time homebuyer, you have a lot of competition. I wish that was not the case, but for sellers it's absolutely wonderful, although they do have to decide where they're going to go next, and that's where the rub has been.

Dennis Day:

Do you think this is the year that baby boomers decide I can't stand this house? I've been waiting because I got a 3% mortgage. I don't want to move. Prices are high, Interest rates are high. Is this the year that they'll start that process of downsizing?

Judy Gratton:

I don't know. That's really what we are all about trying to help you make that informed decision. When is the right time for you to go? The right time is when you can. The really hard time is when you can't and you have to. If you're thinking about it, you need to really weigh the pros and cons of, then talk to an experienced agent who can show you what's out there, help you find something that's going to work for you Preferably us if you're in Washington.

Dennis Day:

All right, that's it for our recap of 20, some projections of 2025. If you have any questions about today's topics or any other real estate questions, contact us through our website at edteamcom. Any last thoughts, judy?

Judy Gratton:

I think 2025 is going to be a great year for all of us.

Dennis Day:

That people get off the fence and start moving. If you are a baby boomer or a homeowner who's been in their home for 20, 30 years, find out what your equity is. You might be able to sell that home and use the equity to buy your next.

Judy Gratton:

One of the things I would like to point out. These statistics that we've shown you are telling you the current market we're always looking backwards to see where we've adjusted to up down and it determines. Every time someone's home sells near yours, it changes the value of your home. So it's very important for you, as a homeowner, to stay informed with what's going on around your home. How's your values changing? What is your equity? How much money do you have in the house? What could you conceivably do with that money? How much money do you have in the house? What could you conceivably do with that money? All of those are questions that we can help you answer.

Judy Gratton:

We have a program that could set you up to automatically receive a monthly market analysis, so you know pretty close what your home would sell for at any given moment. It does show you how much equity you have. If there's a loan, you know how much of it you pay down. There's a lot of information that we'd be happy to share with you. Please drop us a note. You can reach us at edgegroupteamcom and we would be happy to send that out. There's no charge, no obligation.

Dennis Day:

And we can give you a market analysis and let you know a snapshot right now.

Judy Gratton:

Oh, very accurate.

Dennis Day:

All right, that's it for Getting your Edge.

Judy Gratton:

We'll see you in a couple of weeks on our next podcast.

Dennis Day:

Thank you, hope this information was helpful. See you next time. Thanks for watching. Bye.

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Judy Gratton

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