Fed Stays Put on Rates.

The Feds met at the end of July and decided again to stand with the current rate. This annoyed the President, but I am feel like they did the right thing. That runs counter to my own financial prospects as a slight dip in rates could put energy into the real estate market that would directly benefit me personally. But the federal government continues to spend money like drunken sailors and it hasn't;t mattered whether it was the R's or the D's neither can seem to really cut spending. All we get are clever accounting tricks rather than real cuts. 

When the government prints money it tends to artificially inflate the economy in a somewhat unnatural way. The economy is not as hot as the President says it is, but it is not slow enough to justify rate cuts at this time. That is a bit of the ironic part of the desire for lower rates while claiming the economy is hot. You don't get lower rates in a hot economy in a normal universe. 

The rolling 54 year average for mortgage rates sits at 7.71% according to Freddie Mac, the leading tracker of mortgage rates. We are well below that average right now at about 6.8% Even if we do a rolling 30 year year average to get the 1980s high rates out of the equation we still are close to average right now. It has been a difficult transition for younger home buyers that never saw rates this high during their adult lives. But it is a bit more psychological than economical at this point. 

The economy is good right now, not great, not terrible just OK, and perhaps the Fed is on the right track. Having a slight downward adjustment would have been nice as a gesture to get housing back on track, but I do not expect the Fed to make any substantial adjustments. When the current chairman's term is up next year, I would not be surprised to see him replaced. That new chairperson might decide to bend to the President's will and cut rates a bit. That would likely happen mid-2026. If the economy starts to stagnate before that, the current Chair, Jerome Powell might adjust rates toward on his own terms.

Buyers looking to buy in this market will find willing sellers. The best "deals" are on larger two story homes that are mostly owned by aging boomers looking to downsize and get rid of the stairs. Younger buyers can get a lot of house, like a 2500 SF 4 or 5 bedroom home 20-30 years old at $600-$700k. The price per foot on these now unpopular styles of homes is only $240-$260 per foot. Compare that to the typical 1250 SF ranch house that fetches $450k and a whopping $360 per foot. Saavy young people can rent rooms out in the large house to offset the mortgage. Yes you have to qualify in the first place, but you can go in halfsies with someone if need be. There is risk in these arrangements but it could get you in the housing door where you might not otherwise be able to be. 

Peek you head up over the box lid and look around, there are some opportunities out there for clever buyers.

 

Is Washington Still a Good Spot to Retire?

Over the last decade Washington has become more like California than ever before. California has lost much of its attraction for retires with punishing taxes and horrifically high housing costs. Now I am going to mention politics in this post but not to make a judgement one way or the other on party politics, but rather to perhaps shed some light on the way Washington has moved recently, for better or worse depending on your personal perspective. I think Washington is moving in the wrong direction but not because Democrats control the state, but because a different kind of Democrat has taken over.

Although Washington has long since been a strong "blue" state having not elected a Republican Governor since 1980 while in contrast California has had three Republican Governors since 1980. California however has always had a much more extreme government with their legislature over the last 20 years having a veto proof 70%-80% Democrat assembly and senate.

Washington has had a mostly Democrat legislature since the 1980s and all Democrat control over the last 20 years. However, Washington until just recently has always had a fairly close balance with Democrats holding a range between 52% and 55% of the seats. Today 60% of the seats are held by Democrats.  

Over the last 40 years Washington politics have been much better in my opinion than California with the Democrat majorities and Governors focusing on real issues that affect all citizens regardless of party affiliation. The state has veered away from attacking the rights of specific groups and in contrast elevated civil rights for all whether they were 1st Amendment or 2nd Amendment rights, Washington upheld them. It has only been in the last 8-10 years that I have noticed a serious shift into what I am calling California politics. Suppression of ideas, ignoring the Supreme Court, writing laws that the members of the legislature know full well are not constitutional and passing them anyway. This of course being a direct violation of the oath of office they took. California has been doing this for decades, but only recently have I seen this here in Washington. 

As a true Independent voter I don't care much which party runs our state so long as they run it well and provide equal rights for all citizens even citizens in the opposition party. Washington is not likely to elect a Republican majority or Governor anytime soon, but I wish they would elect Washington Democrats instead of California Democrats.

All of that said: is Washington losing its retirement sheen? Well a little, the state has gotten very aggressive on taxation and I believe they will keep trying to pass an income tax. We still have no state income tax in Washington and for most retirees that is a huge benefit and gives us an edge over both California and Oregon. Should these new California style Democrats that have taken over our politics continue to win elections, Washington State will almost certainly see the failure that we see in California and that would be a true shame.

The solution is simple if you already live here and you are a Democrat, contact your local DNC office or your local member of the legislature and tell them you don't want California politics in Washington. It is not making the state better in any meaningful way. This state can continue to be a "blue" state and still not take the awful path that California did. It's really up to the local Democrats to make the shift back to the Washington we all loved and adored. It's not too late.

Washington State Gets A lot of Oregon and California Retirees.

Washington State is the only West Coast State without a state income tax. This continues to be a shiny, wiggly, lure in the waters of retiring boomers. Anyone retiring with an expected income in excess of $100,000 seems to be fleeing the states of California and Oregon with their aggressive if not even oppressive income tax scheme. Oregon of course is the only one of the three without a sales tax. Lower income people benefit more from a lack of sales tax than they do a lack of income tax. Once you start getting up towards $70,000 however, the table turn and in some case quite quickly.

This certainly explains the success of the Springs Living high-rise on Vancouver's Waterfront. I wrote about that here. Locally in Southwest Washington, especially Clark County, we are experiencing strong growth and a fair sized bit is in the senior citizen community. Clark also is picking up swarms of working adults moving in on a robust job market, slightly more affordable housing, and the proud badge of "We are not Portland." 

Population growth can have a negative effect on real estate prices. We have seen a sharp increase in home values over the last several years but like the market nationwide we have slowed a bit. We still look like a bargain to those moving in from the Puget Sound region and from The SF Bay Area. However we have managed to become more expensive than most of California's counties. Oregonians outside of the Portland Metro Area may face sticker shock as well. 

Recent news has indicated that Vancouver is considering a complete annexation of the entire Vancouver Urban Growth Boundary. This will provide opportunity for higher density development in a larger area that can help mitigate home expenses. It may also allow for even more development of properties like the Springs Living including a more suburban feeling layout for those not interested in the urban high-rise experience.

Seniors looking to stay close to an urban area for medical services will find it hard to beat Vancouver. The city already has two large hospitals one run by Legacy Health the other by Peace Heath that happens to be based in Vancouver. The medical services in Vancouver are excellent and even those looking to be outside of a big city can find lovely and charming real state in places like Ridgefield and Battle Ground that remain a short distance to big city services in Vancouver and Portland.

With massive amounts of new residents swarming in from Portland, Seattle, and to a lesser extent, California, Clark County should remain strong as ever.

Washington Economy Remains Strong

Washington State ranks 3rd among all states in Gross Domestic Product per capita. Only New York and Massachusetts rank higher. Yes California you lag behind us and a few others as well. Generally a high GDP is not a factor for retirees unless those retirees wish to be close to grand children. Parents often find themselves chasing income opportunities and those tend to happen in areas with a robust economy. 

With Washington State producing such a large economic output, your kids may be relocating here soon. Not only does Washington have the best economy on the West Coast it has pretty good conditions for retirees with good income. No state income tax means retirees keep more of their fixed income. 

Although no one is suggesting Washington State is a sun belt state, it does have very mild weather considering its northerly latitude. The western side of the state only sees modest snowfall, very modest in most years and the opportunities for outdoor activities is hard to beat anywhere in the US.

Washington State suffers from high housing cost as does most of the West Coast. This is the single most deterring factor especially for those coming from the central states where real estate is rather affordable. If you can overcome that, its as good as any place to retire and again your grand kids might already be here.