Home prices won’t level out until 2023, economist forecasts

Economist Matthew Gardner said he expected the price of Whidbey homes to increase by 15.2% in 2022.

The Whidbey Island real estate market shows no signs of slowing after months of sky-high prices for home sales, and local real estate experts say the trend will likely continue all year.

At an economic and housing market forecast event March 10, Windermere Real Estate chief economist Matthew Gardner said he expected the price of single family homes on Whidbey to increase by 15.2% in 2022, with Greenbank and Freeland properties seeing the greatest increase at 16.4%.

“You’re going to have one more year of very, very significant price growth,” Gardner said.

Louis Muniz, a real estate agent with Windermere Real Estate/South Whidbey, seconded Gardner’s prediction.

“No one knows for sure, but indicators at this time seem to point to 2023 as the year things may level out,” Muniz said. “Homes’ values most likely will not go down, but equity may not rise like we have seen in previous years.”

Several real estate experts have pointed to low inventory as a root cause of the prices soaring in recent months. Gardner said there are several contributing factors to low inventory.

For one, with mortgage rates forecast to increase over the next couple of years, homeowners already paying a lower rate have less incentive to sell.

New houses also aren’t being added into the mix, Gardner said, largely because there just aren’t that many places on the island to build. Residential expansion is strictly limited by municipal codes, and according to Gardner, there isn’t the “political will” to change those boundaries.

It’s no surprise that many Whidbey properties are sold within weeks of being listed.

Like other areas on the island, the waterfront is seeing prices take a sharp upward turn in response to supply and demand discrepancies.

Take, for instance, one luxurious cabin located at Seabluff Terrace, just north of Greenbank. ​​The two-bedroom, two-bathroom, resort-style home overlooking the Saratoga Passage sold for $929,000 in 2018, according to a Seattle P.I. article.

Now, that same home is listed at $1.8 million, nearly double its price four years ago.

“The increase of value of Seabluff Terrace was in large (part) a reflection of the market right now but also the fact that this is a one-of-a-kind home that is move-in ready, which is becoming more and more difficult to find these days,” said Muniz, who is the listing agent for the home.

Gardner said that many Washington state waterfront properties are becoming popular destinations for people moving out of California, which drives up their prices.

“Destination locations such as Whidbey Island that are outside urban areas but are easily accessible are in high demand,” Muniz said.

Still, he pointed out, the waterfront doesn’t have a monopoly on high prices. Equity is increasing in all homes, across all price points.

Island real estate prices skyrocketed last summer and have remained in the stratosphere ever since. In Central Whidbey, the median price for home sales in February was $625,000, representing a 23.76% increase from the same month last year, according to data from Northwest Multiple Listing Service.

On South Whidbey, the median price last month was ​​$585,000, compared to $510,000 in February 2021. On North Whidbey, between February 2021 and 2022, the median price jumped from $398,250 to $465,000.

A total of 64 home sales were closed on Whidbey Island in February.

Photo by Michael Stadler
Real estate prices across Whidbey Island have been rising for months, and that trend is likely to continue for the rest of the year.

Photo by Michael Stadler Real estate prices across Whidbey Island have been rising for months, and that trend is likely to continue for the rest of the year.