Spring 2014 Real Estate Update

April 10th, 2014

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Spring 2014 Market Perspective

Home sales declined in January with the combined effects of severe winter weather and the decline in affordability due to higher mortgage rates and prices than those seen in the previous year.

Sales have also been hindered at the beginning of this year by new mortgage and flood insurance regulations that recently took effect.  The flood insurance regulations are currently set to be reviewed and buyers and sellers in flood-prone areas may want to become informed on how these regulations and potential changes are affecting their market.

Home prices declined from December to January as inventory levels loosened slightly and home sales slowed.  However, prices are still well above those seen at this time last year. With  prices still showing an upward year-over-year trend and inventory levels still tight, sellers remain well positioned in most markets.


Important News:  Pierce County has announced its final schedule of Shoreline Management Program (SMP) meetings before presenting the final recommendations for the update to the Pierce County Council. Those meetings will be the last chance for the public to help direct how the intertidal habitat of Pierce County will be developed.  If you would like to influence the outcome before a proposal is adopted mid-April, consider attending one of the following meetings:

  • April 3rd    5:30pm  Peninsula High School Auditorium
  • April 7th    1:30pm  City – County Bldg., Rm 1045, 930 Tacoma Ave,  Tacoma


Buying a Home is Now 38% Cheaper than Renting             Excerpts from Forbes.com

Rent vs. BuyHomeownership remains cheaper than renting nationally and in all of the 100 largest metro areas according to Trulia TRLA +3.03%’s latest Winter Rent vs. Buy Report. Rising mortgage rates and home prices have narrowed the gap over the past year, though rates have recently dropped and price gains are slowing. Now, at a 30-year fixed rate of 4.5%, buying is 38% cheaper than renting nationally, versus being 44% cheaper one year ago.

The rent-versus-buy percentage differs in each local market. But even for a specific market, the cost of buying versus renting depends on how much home prices rise (or fall) after you buy. Our model assumes conservative home price appreciation.

Even though prices increased sharply in many markets over the past year, low mortgage rates have kept homeownership from becoming more expensive than renting. Also, in some markets, like San Francisco and Seattle, rents have risen sharply; rising rents hurt affordability relative to incomes, but rising rents make buying look cheaper in comparison.

Some markets might tip in favor of renting this year as prices continue to rise faster than rents and if – as most economists expect – mortgage rates rise, due both to the strengthening economy and Fed tapering. Nationally, rates would have to rise to 10.6% for renting to be cheaper than buying – and rates haven’t been that high since 1989.

6 Reasons Baby Boomers Should Consider Downsizing     Excerpts from Forbes.com

  •  Smaller House = Smaller Mortgage—Especially if you have built up a sizeable home equity, you may be able to cash out and purchase a new, smaller, less expensive home.
  • Less Monthly Expense—Utilities, taxes and insurance, as well as upkeep and maintenance, may be less on a smaller home.
  • Climate Change—Downsizing also offers an opportunity to relocate to a more comfortable climate .
  • More Affordable Location—Average home prices are much less in many retirement markets, like West Palm Beach, FL, than in large, industry-friendly metro areas.
  • Lifestyle Upgrade—If you are relocating, you can  move closer to the amenities and activities you enjoy.
  • Less Stuff = More Life—Remember, your stuff owns you and can tie you down.

Let’s Look at the Numbers

Interest Rates

Interest rates have remained relatively flat from last month.  The upward pressure on rates generated by the Federal Reserve’s winding down of the quantitative easing has been counterbalanced by downward pressure on Treasury yields being generated by turmoil in emerging markets.

Loan Type

Gig Harbor/Tacoma Average

National Average

30yr fixed

4.17% 4.18%
15-yr fixed 3.15% 3.16%
5/1 ARM 2.71%


Home Prices

The median home price fell 4.5% from December to January, due to a slight increase in inventory and a fall in the pace of sales.  Median prices are not seasonally adjusted, so some decline at this time of year is considered normal.  Prices remain almost 11% above those seen at this time last year, and many sellers continue to benefit from equity gains accrued in last year’s substantial price recovery.


Inventory levels recovered in January after taking a bit of a dip in December. The total number of homes that were available for sale increased 2% from December to January to 1.9 million homes. This represents 4.9 months of inventory at the current sales pace. As we move further into the year, we should continue to see inventory loosen, giving buyers more choices.

What Should You do in this market?

Whether you are a Seller, a Buyer or an Investor, there are lots of good opportunities in today’s market.  I’m always available to consult with you to help you assess and achieve your real estate goals.

Barbara Magnuson     253-307-4504








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Contact Barb Magnuson

Magnuson Residential & Commercial Properties
Keller Williams Realty - West Sound
11515 Burnham Drive NW, Gig Harbor, WA 98332
(253) 307-4505
(253) 857-8700


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