Anthony Carollo | December 16, 2022

Ghosts of Past, Present, and Future:
Real Estate Market 2022 – 2023

Every year, as our Vista leadership team begins to look at next year’s budget, I start conversations with local broker/owners and other local experts (lenders, industry association execs) about our inland northwest real estate market, what they see coming, and how they envision our economy advancing or retreating. Below are some of my notes from these meetings. Most of our conversations were focused on the broader Spokane/CdA demographic region. Due to WA insurance regulations, I can’t name specific brokers or lenders, but each one I spoke with is in leadership at their firm or is the owner.

One of the first subjects on the table at each conversation was mortgage rates. While interest rates are bigger than just our market, we can certainly say that our market, like every other area, rises and falls based on what rates are doing.

Most brokers and lenders I spoke with believe that rates are going to come down into the 5% range by Spring. One broker quoted Barry Habib who recently said “we think there’s a high probability that mortgage rates come back below five percent within the next six months.”

Across the board, all brokers were pretty confident that the number of homes sold next year will be lower than 2022. Some felt like we’d be closer to 2018 numbers, others used the year 2019 as their benchmark. Two owners I’ve spoken with feel that total sales in 2023 would be fairly equal to 2022 in closed units, but stretched out over the 12 months of 2023. (By my count, that would put us in pre-2017 territory. Please feel free to double check my work!)

The brokers all felt like prices would soften next year, but overall values would remain elevated or firm. No one I spoke with felt like home values would tank. One sales manager commented that we simply are not seeing the failure of large lenders that we saw then. (15 of the top 20 mortgage lenders that existed in 2006 were not around by 2012. See https://www.theatlantic.com/business/archive/2012/10/busted-75-of-the-biggest-home-lenders-in-2006-no-longer-exist/263924/) Another broker felt that sales prices will be down by around 15% next year before they level out.

Virtually all of the brokers I had conversations with felt that the number of licensed agents will drop by anywhere from 15-25% when their licenses are up for renewal.

Trends we’re seeing:

One trend we’re seeing in our office in 2022 is more bounced earnest money checks than we’ve seen in years past. One of our escrow managers commented that it seems that today’s buyers are often not accustomed to writing checks or keeping a checking account. It doesn’t occur to them that they need to have cash in the account to cover the check they wrote. The check bounces for non-sufficient funds, so we have call them and the agents, they deposit money in the account and write us a new check. Vista uses an app called Earnnest which uses a bank-to-bank transfer, so that the buyer never needs to write an actual earnest money check.

Another broker commented that it’s harder to build culture when agents aren’t in the office. He said he used to see maybe 30-40% of his agents in sales meetings. Now, after COVID, he sees half that. Creativity in building culture is more important than ever before.

With the interest rates where they are today, we’re also seeing a return to more and more seller financing transactions than we’ve had in the recent past. When we purchased Stevens County Title last year, it was with the thought in mind that demand for seller financing and contract servicing would increase. We had no idea that mortgage rates would jump like that have in the last 6 months, but we’re happy to serve new clients!

NWMLS Realtors: familiarize yourself with Form 22C, which is the is the seller financing addendum. Your Vista Title LPO would prepare the proper seller financing documents as part of the closing process.

Another trend we’re seeing among title agents and real estate agents is an effort to diversify our markets and opportunities. More WA agents are getting their Idaho licenses, and more ID agents are getting their WA license. We are now a title agent for multiple underwriters with the idea that they provide us opportunities to insure transactions we didn’t have before, and they also offer us some insurance options when it comes to pricing and underwriting. Again, Stevens County was appealing to us for the diversification of a different community from Spokane, and for the opportunity to service loans with new clients that we didn’t have contact with previously.

The United States is still anywhere from 2 million to 6 million housing units short. An organization called Up For Growth recently conducted a study that reports a shortage of 3.8 million units.

Let’s work our businesses like a business. Create goals and a business plan for how to reach them.

Real estate is still a great long term investment. Home ownership and providing home ownership opportunities are an important part of American society. There is a lot to be positive about.

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