
By John Dirgo Deweese
Designated Broker
Realty ONE Group All Stars
First of all, I need to warn people. I am not Pollyanna, although I am old enough to know what that means. I am not one of those people who will always put a bright shining smiley face on everything because sometimes things don’t deserve it. I am honest and I will tell you the truth.
The truth in real estate, in this area, is that prices have declined but not by a huge amount. The number of sales is down (and was down throughout the normally busy summer months). There is nothing to indicate that it is going to change very soon, even though the overall economics of the real estate market remain favorable. People need places to live and rents have gone up so much that a mortgage and rent are often very similar. That should be a stabilizing influence on home prices and maybe even lead to long-term price increases. The key part of that phrase is “long term”.
Nationally, over the last 25 years, the average annual increase in home prices was 5%. But that simple statistic hides a lot of fluctuation.
As someone that has been a licensed real estate broker for 20 of those 25 years, I’ve seen this happening:

Let’s look at the last five years on a national basis. Be sure to notice that the mean line across the middle is not at zero – its at 10%. That’s the average for the last 10 years. At the worst, it only dropped back to the historical average of 5%.

Let’s look at Washington State for comparison: OK, so things aren’t much better here. I mean, they are better if you were trying to sell a home, but not if you’re trying to buy one. Prices were going up quickly. In fact, the lowest increase was 2018 at around 4%. The years of 2021 and 2022 averaged price increases of 20% each year. Let’s be honest, that’s NUTS.

Now let’s look at actual prices here in Grays Harbor over the last 5 years.
(note: this is a smoothed 3-month rolling average)
The most important point is that it has gone from median sales price of $182,000 in January 2018 to a median sales price of $350,000 in September of 2023. In other words, it nearly doubled in 5.5 years:

Let’s get a little more specific and look at Aberdeen and Ocean Shores for the same time periods.
Aberdeen went from $105,000 to $288,000 in five years.

Ocean Shores went from $205,000 in January of 2018 to $394,000 in September of 2023.
But notice what happened at the beginning of 2022 and is still continuing now. Flatness. Sure, there was a weird statistical fluke in Janary 2023 where the median price dropped by $35,000 for one month and then bounced right back. But generally, it has been flat.

Let’s look at 2023 in Grays Harbor and several of its cities. We’re using year-to-date figures through August because at the time of this writing (October 2nd), the September figures could still change.

So, what does this tell us? The number of new listings coming on to the market in 2023 are far below the same period in 2022. For example, for Grays Harbor in the period of January through August of 2022, there were 1,429 houses put on the market to sell. That number is over 300 less in 2023. Simply put, even if people are looking to buy, there is less for them to look at and choose from. In Ocean Shores, that figure has gone down from 460 to 338, which is more than 26% less homes for people to tour, look at, fall in love with and buy.
The number of pending and closed (sold) listings is down by similar percentages. That makes sense (when there are fewer homes on the market, the number of sales should be lower). The number of days that homes are sitting on the market is significantly higher. With less to choose from, buyers are being pickier and not rushing like they were. Prices, overall, are down, but not by a lot. In some areas, they have continued to increase, but again, not a lot.
What has caused this change? Interest rates are probably the largest driver even though by historical standards, they are not high. The average mortgage rate over the last 50 years has been roughly 7.5%. That’s about where we are today. So these interest rates are not an anomaly – they are the norm. The 2-4% interest rates we saw a couple of years ago were (and are) the anomaly, and they will not return.
So, what is going to happen? In general, the housing market is stable (see above: “flatness”) and it doesn’t appear that the government is going to take any drastic measures in any direction. Some people have complained they should start dropping the rates immediately, but I don’t think that’s necessarily the right thing to do.
It’s important to remember that the government does not set mortgage rates. There are these fundamental economic principles called “supply and demand” and “free market” that the banks use to help them decide what rates they will charge. The ‘fed funds rate’ (which is one that everyone talks about) is only one of many factors that the banks use.
That rate will come down some, but it’s not going back to zero anytime soon. At least, I hope it won’t because it would mean we are in a serious recession and that would be generally horrible all the way around (I remember 2008, the Great Recession that led to those low interest rates). If any of you is waiting to either buy, sell, or do both because you think that interest rates will be back at 3% in a year or two, my advice to you would be to give up that idea now. I do not expect to ever see mortgage rates that low again.
Buyers are starting to get used to the higher interest rates on mortgages, and I think they will eventually come back into the market. I think sellers will start to realize that waiting for prices to increase dramatically before they sell is a fool’s game and it will not happen. Those who were considering selling only because they thought they could get a high price will either adjust their expectations or decide to continue to live where they are. People that want to buy may adjust their price target for their new home to account for interest rates. They will still buy a home; they may just buy something less expensive. We’ve already seen that – people who were looking in the $450-500,000 range a year ago are looking in the $375-425,000 range now. They can still buy a beautiful home that they will love, but it may only have a 2-car garage instead of the 3-car garage.
The real estate market is fine – even if it’s not the intense go-go market we saw before. People will still buy homes for their families. Some people will move up to bigger homes and some people will downsize. We will return to a market where buyers and sellers each give up a little to get what they need. We will negotiate and compromise and shop around and, in the end, it will all work out.
