Changes in Seattle housing market offers buyers more options

It is no secret that real estate is expensive in Seattle. 

In Washington, the average home price is $627,000 but in King County, the average home price reached $1,078,000 at the beginning of this year. 

But despite this big obstacle, right now might be a good time to buy a house, as Seattle residents haven’t had as many housing options as they have right now.

“Literally houses are staying on market a lot longer. House prices are dropping anywhere from $50,000-100,000. I’ve seen houses drop $300,000,” said real estate broker Ali Samael.

There has been a shift in the housing market in recent months, something that hasn’t happened for quite a while in the Seattle area. According to Realtor Brooke Davis, there are three main changes:

1. There are more homes for sale. June of 2022 had over 100% more homes on the market than June 2022, so if you are looking to buy right now, you will have more options to choose from.
2. Pending sales are down, meaning that houses are staying in the market for a little longer. If you are buying, you won’t see as many bidding wars. According to Davis, homes used to go on the market and go pending immediately but in June pending sales went down about 30% compared to last year.
3. On the other hand, interest rates are up, which means that buyers have “lost considerable purchasing power,” according to NBC News.

“If you like to have choices it’s a great time to buy a house,” said Davis to New Day NW. 

Although home prices are still up over 2021, other factors make it a good time to be a buyer.

“I feel like there is a lot more inventory out there so they’re you know there’s more availability,” said Jennifer Lulu, who was looking for homes in West Seattle with her son Brandon.

This is a good thing, realtors say, since we’re seeing the housing market going back to normal. 

So what should you keep in mind if you are trying to buy?

“Do your research, have an agent who can do their research, who is familiar with this type of market and really knows how to keep an eye on what’s happening right now,” said Davis.

Davis also mentioned that interest rates have also come down a bit since their peak in 2022.

But what about if you are trying to sell your house?

“To sell your home right now you need to do the same things that you’ve always done but just pay attention to detail,” said Davis. “Prepping your house is so important, just like always, buyers want to see a house that’s cleaned, that you’ve taken care of, deferred maintenance, that you’ve painted, if the walls need to be painted, if the floors are scratched up look into refinishing the floors. Just take care of all those details before putting your home on the market.”

The best barometer for pricing a home is to look at the most recent sales, due to changes in the market. 

When will the market shift again? Davis said it is not clear, but she did say there’s always demand in Seattle. 

Melisa Cabello Cuahutle, King 5 News

Western Washington housing market cooling

New numbers show home price growth slowed for the first time in months, as high-interest rates and even higher home prices eliminate would-be homebuyers.

After a chaotic year of bidding wars, buyers waiving all contingencies and homes selling for well over the asking price, the housing market may finally be cooling off.

New data from the S&P CoreLogic Case-Shiller Index shows home price growth slowed down for the first time since 2021 in the month of April nationwide, including in western Washington.

In the month of May, a new report from the Northwest Multiple Listing Service (NWMLS) also showed a big boost in active listings and a slowdown in sales.

The changing tides come as mortgage rates soar to their highest level in 14 years, pricing out many would-be homebuyers.

“The housing market is slowing down. It used to be very competitive when interest rates were close to 3%. Now mortgage rates are close to 6%, and it got 50% more expensive to borrow to buy a home right now than it was just a couple of months ago,” said Daryl Fairweather, chief economist at Redfin, a real estate brokerage firm.

“A lot of buyers are just bowing out of the market,” she continued.

In turn, those high-interest rates are taking a toll on buyers’ purchasing power.

According to Redfin, in December 2021, a buyer with a $2,500 monthly housing budget would have been able to purchase a home that cost just over $517,000.

In June 2022, that same budget would only get you a house priced just shy of $400,000.

On average, that means buyers lost roughly $120,000 in purchasing power because of the rate hikes.

In addition, while buyers can afford less, home prices are still high.

“On a $2,500 budget in Seattle, last year you would have been able to afford about 12% of homes, and now it’s only five, six percent of homes,” Fairweather said. “There are just so few homes that are affordable to somebody making $100,000 or less.”

As would-be buyers are priced out, homes are now staying on the market longer.

“Homes aren’t getting as many offers, some aren’t getting offers at all, so they sit on the market and that inventory has a chance to pile up,” Fairweather explained.

Redfin reports a 16.2% increase in Seattle housing inventory from April to May of this year.

NWMLS is based in Kirkland, Washington, and services 26 counties in our region. The nonprofit group reports 13,075 new listings added to its inventory during the month of May — up 9.7% from a year earlier and the highest monthly number since June 2021.

The decline in buyers has led some sellers to adjust their pricing.

“Some (sellers) are dropping their prices. We’re seeing more and more price drops crop up. The market just got too hot all across the country and including Seattle, so now sellers have to be a bit more realistic,” said Fairweather.

Fairweather explained she believes the days of buyers waiving all contingencies are likely in the past, now that there is more inventory and less competition, but that doesn’t mean buyers have the upper hand.

“You still have to pay a lot of money, so it’s not like buyers are really winning in this situation, but I think because there are fewer buyers out there, sellers are having to compromise a bit more,” she said.

Fairweather advises buyers to focus on getting a home that is right for them, and doing the best they can to find what they want based on their budget.

“The good news is when you do find the home, you’re going to have a better chance of winning it because there’s less competition,” she said.

NWMLS is based in Kirkland, Washington, and services 26 counties in our region. The nonprofit group reports 13,075 new listings added to its inventory during the month of May — up 9.7% from a year earlier and the highest monthly number since June 2021.

The decline in buyers has led some sellers to adjust their pricing.

“Some (sellers) are dropping their prices. We’re seeing more and more price drops crop up. The market just got too hot all across the country and including Seattle, so now sellers have to be a bit more realistic,” said Fairweather.

Fairweather explained she believes the days of buyers waiving all contingencies are likely in the past, now that there is more inventory and less competition, but that doesn’t mean buyers have the upper hand.

“You still have to pay a lot of money, so it’s not like buyers are really winning in this situation, but I think because there are fewer buyers out there, sellers are having to compromise a bit more,” she said.

Fairweather advises buyers to focus on getting a home that is right for them, and doing the best they can to find what they want based on their budget.

“The good news is when you do find the home, you’re going to have a better chance of winning it because there’s less competition,” she said.

~Elle Thomas, KIRO 7 News

2024 Housing Market Predictions

Housing prices continue to climb despite sky-high mortgage rates

Experts in a recent Zillow Research survey believe the inventory of housing to return to pre-pandemic levels by the end of 2024.

• Despite soaring mortgage rates pushing down demand for homes, real estate prices are still sky-high.
• Home sales have started to decline however, with some sellers even lowering their asking price, leading some to suspect an impending housing market cool-off.

While there are plenty of signs that housing demand is declining, economists everywhere continue to theorize how long it will take to truly see home prices cool-off. Will the housing market ease in the next few years?

Many home-buying experts seem to think so. In a recent Zillowsurvey, the majority of panelists expect home prices to ease between now and 2024.

The primary issue plaguing the U.S. housing market is fundamentally supply and demand. Homes are simply not being built at a rate fast enough to match their sky-high demand. For context, the stockpile of available homes in the country is currently around two-months worth. In a normal housing environment, the U.S. typically has a five month or higher inventory of homes.

As such, despite the highest mortgage rates in 13 years, and rapidly falling demand for homes, the housing market has remained red hot. Some suspect that further rate hikes, possibly compounded by a recession will be enough to cool down prices. Others feel the housing market is likely to continue growing, but at a much slower rate.

The housing market is, in some sense still recovering from the Covid-19 pandemic. When the pandemic hit, both buyers and sellers were sent into a frenzy, largely due to record-low mortgage rates. Add in a general slow-down in home construction the past few years, has led to the currently shored-up state of the housing market.

When Will the Housing Market Cool-Off?

In the long-term, raising the supply of homes remains one of the only foolproof methods of lowering prices. In that regard, the future may be bright for would-be homebuyers.

According to Zillow Research, the supply of homes may not catch up to historical levels until around 2024. In a survey of housing experts, the majority believe home inventories will reach pre-pandemic levels by the end of 2024.

In the survey, experts were asked what year they expect to see inventory return to at least a monthly average of 1.5 million units. The most optimistic 4% answered 2022, and a further 37% answered 2023. The most frequent answer, from 38% of respondents, was 2024, meaning a cumulative 79% of respondents expect such a restoration of inventory sometime between now and the end of 2024.

It’s difficult to predict the future, especially amidst the rampant uncertainty present today. With that said, it’s clear that help is on the way for first-time home buyers, sooner or later.

By Shrey Dua, InvestorPlace

Cooling housing market – 25% of home listings cut asking price

Home sellers are slashing prices as the housing sector cools, according to a research from a real-estate data firm.

More than 25% of homes on the market right now have cut their price, Altos Research found, which is in stark contrast to how prices have been climbing over the last two years. 

“Rising rates and the shift in the economy has slowed down the super-eager buyers,” Mike Simonsen, co-founder and CEO of Altos Research, a real estate analytics firm, told MarketWatch. “And what we’re feeling is the speed of the shift.”

Put bluntly: “We’re shifting from a real buying frenzy to much more normal conditions,” he added.

Adding to the cooling off: On Wednesday, the U.S. Federal Reserve raised the benchmark interest rate by 0.75 percentage point, the biggest increase since 1994 as it tries to tame rising inflation from a 40-year high.

The U.S. housing market boom amid the pandemic was felt across the country. In a high-demand area like San Jose, California, the typical home was valued at $1.5 million, as of May 31, according to Zillow. That’s up 23.7% from the previous year. In May 2020, the typical home in the Bay Area was valued at $1.09 million.

Under normal conditions, about a third of homes listed on the market for sale take a price cut before they’re sold, Simonsen explained, and when the market is hot, that drops down to 25%. This spring, however, only 14% of homes on the market took a price cut. And that’s a reflection of high demand and low inventory.

“Sellers in the last two years can overprice their home and still get offers — that condition of the frenzy is gone, so it’s a much more normal market,” Simonsen said.

With buyers slowly backing off, that percentage is now climbing, a trend also supported by research from Redfin, a real-estate brokerage. Some 21% of sellers dropped their list price during the four weeks ending June 5, which was the second-highest share on record, going back to 2015, Redin said.

Sellers will need to lower their asking price by summer’s end. “By July, expect to be back to our normal conditions nationally,” Simonsen added. “We’ve been hotter than normal for over two full years since the start of the pandemic. By August, sellers who aren’t prepared will be surprised.”

Good news for first-time home buyers

The median sales price of a house sold in the U.S. was still at a record high of $428,700 in the first quarter of 2022, up from $313,000 in the first quarter of 2019 before the COVID-19 pandemic, according to data from the St. Louis Fed. Simonsen said the magnitude of price cuts could vary, from $5,000 upwards, depending on the value of the house.

For first-time house buyers, who have seen prices gradually rise out of their reach over the last two years, there could be some relief. “If people want to buy a home, they would get outbid by maybe somebody with all-cash, or an investor,” Simonsen said. “But now, selection is increasing, competition is decreasing, and they finally have some opportunities to buy.” 

But don’t expect prices to hit rock-bottom just yet. “There is nothing in the data yet that shows an indication of home prices crashing,” Simonsen said. But “there is an indication of probably zero home price appreciation in 2023.”

~Aarthi Swaminathan, Market Watch

Housing Market leveling off

The recent housing market is more balanced, as a new report shows a significant increase in active listings, a slowdown in sales and prices that are still rising, according to the latest report from the Northwest Multiple Listing Service.

The days of “multiple offers and waived inspections, at least in Pierce County, are behind us,” said Mike Larson, a member of the NWMLS board of directors.

Larson added that buyers are getting a little relief, but not much, as the market eases back into the pre-COVID-19 market.

Over 13,000 new listings were added to the NWMLS inventory during May, an increase of 9.7% year-over-year. It’s also the highest monthly number since June of 2021.

Snohomish and Douglas counties more than doubled their active listings from a year ago, with nearly a 135% increase for each county.

“The significant increase in the number of homes for sale has some speculating that the market is about to implode, but that is very unlikely,” said Matthew Gardner, chief economist at Windermere Real Estate. “What’s more likely to occur is that the additional supply will lead us toward a more balanced market, which after years of such lopsided conditions, is much needed.”

Gardner also believes that rising mortgage rates are not yet negatively impacting the housing market.

“The additional supply of homes for sale is giving buyers more choices, which is something they haven’t had in several years,” Gardner said.

Buyers should expect to pay more for homes and condos, although those increases may be leveling.

~Cox Media

Almost 45% of homeowners are “equity rich”

Soaring home prices continue to serve existing homeowners, with nearly 45% of all property owners now considered equity rich, a year-over-year jump that boosted 13% more homeowners into the prime position.

A homeowner is considered equity rich when they have at least 50% equity in their home, a feat more easily accomplished when skyrocketing home price appreciation widens the gap between what someone owes on their mortgage and the value of their house.

About 44.9% of mortgaged residential properties in the first quarter of 2022 had at least 50% equity in their property, according to ATTOM. The portion of mortgaged homes that were equity rich rose from 41.9% in the fourth quarter of 2021 and from 31.9% during the same period in 2021. 

“Homeowners continue to benefit from rising home prices,” Rick Sharga, executive vice president of market intelligence for ATTOM, said in a statement. “Record levels of home equity provide financial security for millions of families, and minimize the chance of another housing market crash like the one we saw in 2008. But these higher home prices and rising interest rates make it extremely challenging for first time buyers to enter the market.”

In the first quarter of 2022, just 3.2% of mortgaged homes, or one in 31, were considered seriously underwater – meaning the owner owed at least 25% more than the property’s estimated market value. While that figure is largely unchanged from the 3.1% of seriously underwater homes in the prior quarter, it was a marked improvement from 2021’s 4.7%, or one in 21 properties. 

The decade-long housing marketing boom, which continued from late 2021 into early 2022, largely has been attributed to the rise in home equity. But across the country, the median home price rose 2% during that period – to another record of $320,500, according to ATTOM. Market analysts say a glut of home buyers chasing a historically tight supply of properties also brought up prices even higher.

ATTOM expects the latest home equity trend to slow in the remaining months of this year. 

“It’s likely that equity will continue to grow through the rest of 2022, although home price increases should moderate as the year goes on,” Sharga said. “Rising interest rates, the highest inflation in 40 years, and the ongoing supply chain disruptions due to the war in Ukraine are likely to weaken demand and slow down home price appreciation.”

Nationwide, 45 states saw equity rich levels rise from the fourth quarter of 2021. However, at the same time, the percentage of mortgaged homes that were seriously underwater increased in 28 states. 

Idaho had the highest level of equity-rich properties with 68.8%, while Vermont (68%), Utah (63.6%) and Washington (60.9%) followed. Meanwhile, Mississippi ranked first for having the country’s biggest portion of mortgages seriously underwater at 17%. It was trailed by Louisiana (11.3%) and Wyoming (10%).

~ Connie Kim, Housing Wire

Is a more “normal” market on the horizon?

For the fifth consecutive month, pending home sales declined in March from February, down 1.2%, signaling a potential return to “much calmer” conditions, according to the National Association of Realtors.

Only the northeast region saw an increase in pending sales in March from February, according to an NAR news release based off data from its pending home sales index. But compared to the prior year, “pending sales fell for the 10th consecutive month, by 8.2%, with pending sales down across all regions.”

Lawrence Yun, chief economist for the NAR, said the dip in contract signings suggests “multiple offers will soon dissipate and be replaced by much calmer and normalized market conditions.”

He also expects higher mortgage rates to remain a key factor affecting home sales.

Yun forecasts the 30-year fixed mortgage rate will reach 5.3% by the fourth quarter, resulting in a 2022 mortgage rate average of 4.9%. The average mortgage rate should jump to 5.4% by 2023, Yun said.

“As it stands, the sudden large gains in mortgage rates have reduced the pool of eligible homebuyers, and that has consequently lowered buying activity,” Yun said. “The aspiration to purchase a home remains, but the financial capacity has become a major limiting factor.”

Yun additionally expects inflation will average 8.2% for the year, “although it will start to moderate to 5.5% in the second half of this year.” As of March the higher mortgage rates and sustained price appreciation has resulted in a year-over-year increase of 31% in mortgage payments – although major Sun Belt metros such as Tampa, Phoenix and Las Vegas have seen increases closer to 50% year-over-year.

Despite that, Yun said: “Overall existing-home sales this year look to be down 9% from the heated pace of last year. Home prices are in no danger of decline on a nationwide basis, but the price gains will steadily decelerate such that the median home price in 2022 will likely be up 8% from last year.”

Renters will face similar increases, which Yun says could prompt some renters to explore ownership – although the increasing mortgage rates may price them out.

“Fast-rising rents will encourage renters to consider buying a home, though higher mortgage rates will present challenges,” Yun said. “Strong rent growth nonetheless will lead to a boom in multifamily housing starts, with more than 20% growth this year.”

Even as home inventory remains low, Yun also expects single-family homebuilders to take a cautionary approach, resulting only in a modest “boost to construction of less than 5%.”

~ Kate Douglas, HWMedia

Home shortage likely to outlast other scarcities

The scarcity of properties that plagued the housing market long before Covid-19 struck the U.S. likely will outlast other pandemic shortages, according to Goldman Sachs economists.

While the supply-chain disruptions impacting the availability of appliances, used cars and computer chips will ease as the pandemic ebbs, real estate won’t be so lucky, the report said.

“Of all the shortages afflicting the US economy, the housing shortage might last the longest,” the economists, led by Goldman Sachs Chief Economist Jan Hatzius, said in the report earlier this month. “While the supply of homes for sale has increased modestly since the spring, it remains well below pre-pandemic levels and the outlook offers no quick fixes for the shortage.”

The headwinds facing homebuilders trying to expand inventory with new houses include shortages of lots, labor and building materials, the report said.

Years of under-building in the wake of the 2008 financial crisis has left the market with a dearth of about 5.2 million single-family homes, according to a report last month from realtor.com.

The lack of new houses has increased competition in the existing-home market. Housing economists use a gauge called “months supply” to measure inventory. It’s an estimate of how long it would take to sell all the properties listed if nothing else came on the market. In a balanced market, it’s typically close to 6 months.

The latest data, for September, showed the months supply at 2.6, the lowest level ever recorded for the month, according to data released last week by the National Association of Realtors.

Some relief is on the way, according to NAR’s housing forecast. Ground-breakings for single-family homes, known as housing starts, likely will total 1.15 million this year, surpassing the 1 million mark for the first time since 2007.

It would be a gain of 15% from 2020, according to Commerce Department data. But, it won’t be enough to satisfy the demand for properties boosted by a Federal Reserve bond-buying program that has kept mortgage rates near 3% since last year.

“Homebuilders continue to face headwinds that were present before the pandemic – especially a lack of construction workers and a lack of available plots to build on – and the pandemic has exacerbated those problems with further delays from supply chain disruptions, lumber shortages, and now economy-wide labor shortages,” the Goldman Sachs report said.

~Kathleen Howley, Forbes

Is Seattle’s real estate market cooling?

After a chaotic summer that saw extremely low housing inventory, bidding wars and record-breaking jumps in median sale prices, Seattle’s tight real estate market could be showing signs of cooling off for the fall season.

A new market report form the Northwest Multiple Listing Service (NWMLS) found that competition for homes in Seattle eased slightly in July, with brokers adding more listings and less homes going under contract. The agency saw slightly fewer pending sales in July than in June and May.

Some of that slowdown might be seasonal, while other experts took into account that the state lifted all COVID-19 restrictions on June 30, and more people could be traveling after spending so much time at home.

“Although the local market is intense, buyers can find some relief because there aren’t as many offers to compete with compared to earlier this year,” said J. Lennox Scott, chairman and CEO of John L. Scott Real Estate in a news release Thursday. “August historically is the last month of the year with elevated levels of new listings before they slowly taper down in the fall and decline more substantially over the winter.”

However, inventory still remains historically low and prices are still climbing, meaning any breathing room for homebuyers might be short lived. Across all 26 Washington counties surveyed by the NWMLS, there is only 0.73 months of inventory. And only 12 counties report having more than one month of supply.

“Despite the extreme shortage of inventory and robust sales activity, there seems to be a bit of a leveling off from the market frenzy,” said Gary O’Leyar, broker owner at Berkshire Hathaway HomeServices Signature Properties. “In my opinion this is due to a typical mid-summer season market combined with some buyer fatigue.”

Prices also continued to climb. In June, median sale prices for homes in the region soared 30% compared to the previous year, marking a new record high. In King County, the median home sale price hit $775,000 in May, up 23% from the same time last year.

However, that growth is not just in the Seattle metro area. Many brokers said that suburban counties along the Interstate 5 corridor have seen sharp price increases, mirroring the fact that homes in the heart of Seattle are appreciating at a slower rate than homes located away from downtown.

“Prices in Lewis County are up 54.2% from the July 2019 level, Snohomish County is up 40.6%, and Island County is up 44.3%,” said James Young, director of the Washington Center for Real Estate Research at the University of Washington. “The search for value in the suburbs with sharp price increases suggest households are making their housing preferences known. They want to own rather than rent.”

One area of the market continues to rebound from the pandemic: condominium sales. New listings outpaced pending sales in July, and prices rose more modestly at 12.6%. In King County, where the majority of condos are sold, the median priced condo sold for $460,000.

Brokers are advising residents to make the most of the seasonal lull in the market while also warning potential sellers about overpricing.

“My advice to buyers would be to take advantage of this time before Labor Day and the fall market,” said O’Leyar. “[For sellers,] don’t get overly hyped with anecdotal information about the real estate market. Overpricing a listing in this market is still a big mistake.”

~Callie Craighead, Seattle P-I

Like spring, Seattle’s real estate season is just getting started

A month out from “peak real estate season” in Seattle, and the local market is still not among the hottest in the country.

That is, likely, more than alright for a number of home-buyers, who might’ve been burnt out from last year’s market which seemed to go nowhere but up in median price. But it’s also a bit surprising — and not confined to Seattle, according to a new monthly report from CoreLogic.

According to CoreLogic’s numbers, Washington’s growth in February 2019 for single-family home prices year-over-year was just 4.6%, only marginally more than the national average, 4%. Both those numbers represent something of a cooldown, according to Dr. Frank Nothaft, chief economist for CoreLogic.

“During the first two months of the year, home-price growth continued to decelerate,” Nothaft said in their most recent report. “This is the opposite of what we saw the last two years when price growth accelerated early.”

That doesn’t mean that housing is suddenly cheap, either locally or nationwide; CoreLogic’s report also looked at the top 50 markets based on housing stock. They found 40% were overvalued, 18% were undervalued, and 42% were at value in February 2019.

And according to Nothaft, the peak season is primed for prices to go up even further.

“With the Federal Reserve’s announcement to keep short-term interest rates where they are for the rest of the year, we expect mortgage rates to remain low and be a boost for the spring buying season,” he said in the report. “A strong buying season could lead to a pickup in home-price growth later this year.”

And while Seattle had some other things on its mind in February that might’ve contributed to a cool down, local analysts agree that it’s shaping up to be a good season too.

After all, even with the Snowmageddon, home prices in King, Snohomish and Pierce counties rose significantly, ending the month-over-month declines that started last May. And as CoreLogic notes in their report, Seattle’s market was considered “at value” in February.

“Similar to previous months, prices are moving upwards the most consistently in exurban areas along the Interstate 5 corridor,” James Young, director of the Washington Center for Real Estate Research at the University of Washington, said in the latest Northwest Multiple Listing Service report.

“Look for prices outside the major urban areas to continue rising as the weather improves and the main selling season arrives.”

~Zosha Millman, Seattle P-I