The 'Couv'

The 'Couv'

Tuesday, January 23, 2024

Is Washington Losing its Retiree Advantage?

Over the last few years Washington State has been trying to push sweeping tax changes through the legislature including an attempt at creating a capital gains tax at the local state level. That is currently being challenged in court. Washington State remains free of an income tax and that is a substantial draw to the state for retirees. 

Washington continues to be one of the most expensive real estate markets in the US and that can act as a deterrent for retirees moving here from other areas. However Washington has a very strong and growing economy and that is creating good paying jobs that tend to lure families to the state. Many retirees want to stay close to their families, particularly grand children. This continues to form an anchor for many retirees as younger people are flocking to the state in great numbers.

Washington's moderate center left politics were always a draw for both liberals and somewhat conservative people but during the last few years the state government has made a strong California-like move to the left. For some this may be a good thing and could be a draw, but for others it is a negative. 

States with moderate politics tend to be the most desirable because they welcome a variety of viewpoints and tend not to chase away people. California chases away people as does states opposite California like Mississippi. Washington has enjoyed political moderation for decades. but as I mentioned above, the state now seems to be following California. This despite the horrific problems we see happening in that state these days.

So I believe the merits of Washington State still outweigh the negatives, but trends are moving towards a less desirable stopping point for retirees. This will be a disadvantage to states that have lots of retirees such as Arizona and Florida. In those two states the voting population is older and tend to have legislatures more in tune with the needs of the senior population.

Washington State is one of the few states that is getting younger. Currently we rank 43rd of 51 (DC is included) for residents over the age of 65. A decade ago we were ranked in the middle of the pack. The current median age is 38. That compares to the "oldest" state, Maine with a median age of 45 and the "youngest" state, Utah with a median age of 31. States with the most people over age 65 are Maine with 21.8% followed by Florida with 21.3%. West of the Rockies, the leader is Hawaii with 19.6%. Wow Oregon is ahead of Arizona by a smidgen with 18.6%! 

So that's the trend and things can and do change. I am guessing that Oregon has received a great many retirees from neighboring California because Oregon is definitely not as retiree friendly as Washington State. That's another post.   

Tuesday, November 28, 2023

2023 Is Coming to a Close, Washington Remains Favorable.

Washington still looks good for retirees. Low taxes for seniors and a strong economy keeps Washington State popular among young workers and seniors alike. Although the bulk of retirees still tend to choose warmer more southerly locales, Washington remains popular compared to other northern latitude states. 

I wrote an article earlier this year about grandparents moving to be close to grandkids. Washington is ideal for that scenario as robust job growth continues statewide but particularly the top five urban counties which are King County, Pierce County, Snohomish County, Clark County, and Spokane County. 

Clark County enjoys the advantage over the three Puget Sound counties as having a much more affordable housing, lower taxes, and a close proximity to Portland, OR. Although Spokane has the lowest housing prices of the five, Spokane is more isolated and lacks proximity to a major US city.

Meanwhile Washington State is ranked 13th in population among the fifty states and had the second fastest growth rate of the top 15 states by population. Only #2 Texas grew faster. Washington's robust migration ratio is bringing people by the tens of thousands every year. With both California and Oregon losing population, Washington remains the only West Coast state enjoying growth. For the young and the old, Washington is leading the charge.

SW Washington has something for everyone and that puts us in a very enviable position.

Tuesday, October 24, 2023

Some Bankers think Relief is Coming Next Year

originally posted in Rod's Real Estate News, 9/29/2023

According to US News and World Report the trend for the next few months is a softening in rate pressure. Rates should start to ease a bit providing some relief for weary buyers that have been priced out of mortgages over the last couple years. Locally rates have been running at nearly 8% well above the national average. The chart below shows the national trend and the rates on the chart or prior to any fees or points that banks are in fact charging. Rates that borrowers are actually seeing or will see based on this chart would be 0.5% to 1% higher. Rates also vary based on the lending program, down payment amount, credit profile and other important financial details of the borrower. The good news is they seem to think it is starting to trend favorably for borrowers.

Well let's hope they are right. I do not expect a return to the ridiculously low rates of a few years ago. That was unprecedented. The 50 year average has been around 6.5% and I find that the market responds well to rates under 6%. If we can get rates back into the mid 6s the real estate market will come around. Right now we are in a stalemate as we have neither allot of buyers nor allot of sellers. Pricing is stable but softening and transactions are way down as a result of inactivity. Sellers are holding on to the low rate they have now and buyers can't afford the high rates currently available. 

This trend if it materializes could be good for current buyers. Sellers are getting motivated and that means a negotiating edge for buyers. Buyers may find themselves able to refinance their 8% purchase not in a year or so at a more comfortable rate in the 6s.  

If that chart holds up, things should perk up a bit next spring.

Wednesday, September 27, 2023

Vancouver's Urban Core Still Booming

Vancouver has seen a tremendous growth boom in the city center over the last seven or eight years. The skyline has been filled with an assortment of tower cranes hovering over large mid-rise and high-rise projects for better part of a decade now.

Retirees looking for that city living opportunity can enjoy a walkable neighborhood experience in Downtown Vancouver while living in one of dozens of secure mid-rise and high-rise apartment or condominium developments. The Springs Living is the latest senior living development and it is the largest such project in the area. The 12 story tower is topped out and expected to open sometime next summer on Vancouver's Waterfront.

Below is a video showing off some of the development and condo opportunities in Vancouver's urban core.  Take a look at the amazing progress in our city center.

Tuesday, August 22, 2023

Inflation Making Fixed Income a Challenge

Although the rate of inflation seems to have peaked it still remains a bit high at around 3.2%. Inflation tends to eat away at fixed income spending power especially since many COLA (Cost Of Living Adjustments) are capped at 2-3%. For retirees not having an income tax in Washington State helps quite a bit, but rising gas prices due largely to a sneaky tax the state applied recently cuts into the budget quite a bit. That gas tax will likely appear on the ballot in November for voter approval. If it is rejected gas prices will drop by nearly 50 cents a gallon.

It is important for voters, particularly retired people, to pay close attention to what our state and local politicians are doing. They are often sly like the fox and when they are it usually will hit us in the wallet. Locally the economy remains fairly strong all things considered and there is a great deal of positive activity happening. For retired people that means opportunity for part time work for extra cash. Employers have been struggling to fill positions for the last few years and many seniors are making some side hustle cash to help alleviate the pains of inflation.

In other news: The Springs Living on Block 18 at the Waterfront is topped out and they seem to be on track for a summer 2024 opening. This will be the premier retirement faculty in the region with 12 floors, a private restaurant and views galore. They will offer indecent living all the way to advance memory care. This is an exciting addition to Vancouver's already spectacular Waterfront. Urban Living in the Couv follows the project, here.

Tuesday, July 25, 2023

What Hits Your Wallet Harder, Income Tax or Sales Tax?

Well that's a loaded question up there in the headline. Honestly the best answer for an individual is found by consulting your tax professional. Everybody has a slightly different tax profile depending on a variety of variables in our excessively complex tax-code. Since most of us are stuck paying Federal Income Tax, the question really falls into the realm of state taxes. Locally in Washington State we do not levy an income tax on our residents. We do levy a rather stout at times sales tax on a broad range of taxable products. Our southern neighbor, Oregon does not have a sales tax but they do have a blistering income tax that pounds away at even the poorest of Oregon residents. 

The general rule of thumb is that an income tax is heavily burdensome on high income earners and a sales tax punishes the poor. The reason this is often cited is that poor people tend to avoid income tax as most income taxes have a base deduction that keeps the poor from paying a lot of tax. Someone earning $25,000 a year might only pay a couple hundred dollars in tax because their adjusted gross income could be as low as $5000 if they have a family and other tax subsidies. 

Sales tax seems burdensome to the poor as they have to pay it on all their purchases for which they struggle to earn enough money. Of course some of life's essentials are exempt from sales tax in particular, food products. But it is true that the poor feel the hit of a sales tax more than they do an income tax as again most truly poor residents will end up paying very little in income tax, even in Oregon where they start charging 8.75% at the adjusted gross income of just $9450 a YEAR! Ouch that's brutal.

So in general a retiree with a strong pension or a large 401k distribution will definitely fare better in Washington State than neighboring Oregon. Many SW Washington residents shop in Oregon to avoid sales tax and in so doing are double dipping the system a bit. Bear in mind Washington's sales tax is also a use tax and technically Washingtonians are expected to report purchases out of state and pay the appropriate tax minus any local taxes. This is difficult for the state to enforce however other than items that require registration such as vehicles or firearms. Items shipped into the state from Oregon will also be subject tot he sale tax so yeas, you have to get in the car and drive ;)

If you are retired or soon to be so and are considering the Pacific Northwest, be sure to consult your tax professional for advice on whether the Sales Tax or the Income Tax is the bigger bite out of your wallet.