In a statement released earlier this month, the Northwest Multiple Listing Service (Northwest MLS) said reports that Western Washington real estate is entering a bear market are “highly exaggerated.”
“Many may not remember August is usually a slow month because we were in a full-on sprint the last two years no matter which month it was. This may just be an adjustment back to normal,” said Jason Wall, a member of the Northwest MLS board of directors.
In Lewis County, the number of active listings continues to rise, increasing by 7.3% in the past month and nearly doubling from August 2021 levels, rising 99.46% from 185 last August to 369 last month. That surpasses the neighboring counties of Grays Harbor (69.02%), Cowlitz (95.87%) and Pacific (72%). Thurston County’s 109.24% and Cowlitz County’s 133.98% increases in housing inventory compared to a year ago surpassed Lewis County’s increase. The continued uptick in Lewis County’s housing supply has made it one of only six counties in Washington state with more than three months of housing inventory; the other five are Adams, Ferry, Okanogan, Pacific and San Juan counties.
Lawrence Yun, chief economist at the National Association of Realtors, believes “we may be at or close to the bottom in contract signings” for the current housing cycle. He noted housing affordability plummeted to its lowest level since 1989, in part due to rising mortgage rates and prices, but he expects annual price appreciation to moderate “to the typical rate of 5% by the end of this year and into 2023.”
According to data from Northwest MLS, while the medium home price in Lewis County is up 6.4% from last August, reaching $399,000 last month compared to $375,000 a year ago, home prices were down from July, falling 1.5% from $405,000.
Eren Millam, a Lewis County realtor, isn’t optimistic about an increase in home affordability, however.
“For everyone who’s waiting for the market to crash, they’re just not looking at the stats,” Millam told The Chronicle. “First of all, it’s not going to drop because the inventory is so low. It’s never going back to the way it was and everybody kind of needs to wrap their mind around that. The median home price (in Lewis County) was $137,000 in 2013 and I think everybody got used to that level, but we’ll never see that again.”
One reason for the increase in prices is a decline in housing inventory. While inventory has increased recently, Millam pointed to data showing Lewis County’s housing inventory is only at 36.3% of its peak in September 2010, when there were about 1,000 more housing units on the market than there are now.
Another reason Millam believes prices will continue to rise is the cost of rent, which he said is more than the cost of a mortgage.
Millam provided The Chronicle with data showing how much home prices have increased in the past few years in Lewis County.
“If we crash like we did last time (in 2008), we’d lose 25% of (home price) value. That would bring us back to the second quarter of 2021. If we lost 50% value, it would take us to the first quarter of 2019,” Millam said.
A recession likely won’t reduce home prices either. According to Millam, in the past six recessions, home prices only went down in one of them, the 2008 recession, which was caused by the collapse of a housing price bubble.
When asked what could reduce home prices by 50%, Millam’s answer was pessimistic.
“A world catastrophe where the last thing on your mind is going to be housing,” Millam said. “If the housing market goes down 50% or more, then economies will have collapsed. … When Amazon files for bankruptcy, that’s when the housing market will go down, (and) when the crash does happen, they’re not going to be able to afford a home anyways.”
But while Millam doesn’t see significant declines in prices on the horizon, he thinks the Lewis County housing market has become more stable.
“(The market) has changed from a ‘give up your first born’ sellers market to just a sellers market,” Millam said. “Basically, all the interest rate increases have pushed out all the buyers who were going to get out in winter anyways.”
But while things may calm down, that doesn’t mean prices won’t stop rising. Millam pointed out housing inventory levels typically peak in September and fall until March.
“I expect prices to continue going up. It’s just going to make things less affordable but the people out there looking to buy are still going to be looking to buy,” Millam said. “Last year in 2021, the winter inventory fell 57%, I would expect a similar number to that this winter.”
