December 2022 Seattle Real Estate Market Update
THE SEATTLE HOUSING MARKET AT A GLANCE
3 KEY INDICATORS
SEATTLE HOUSING MARKET
- SALES ACTIVITY INTENSITY:
- 38.5% (STRONG)
- INTEREST RATE:
- 6.29% (TOLERABLE)
- INVENTORY LEVEL:
- 2.3 Months (LOW)
Every month we gather all the facts, data and statistics about the Seattle Housing Market and share them with you. We will discuss the 3 major factors in determining the strength of the market.
- Monthly Inventory Level
- Percentage of Homes That Go Pending In First 30 Days
- Current Interest Rates
The data tells a story about the current state of our local residential real estate market.
GOOD NEWS, HOME MORTGAGE INTEREST RATES ARE LOWER THAN A MONTH AGO!
As the economy works through lowering inflation, economists forecast lower interest rates on the horizon. Homebuyers are currently purchasing at market price with the possibility to refinance when rates decrease. In the meantime, some buyers are purchasing with a five-year or seven-year adjustable-rate mortgage which lowers the interest rate and monthly payment
What we are not experiencing is a mass job loss, homeowners with no equity and foreclosures and short sales.
In fact the BLS report came back showing that we increased the number of jobs over last year.
What we are experiencing is a year over year 40%+ decrease in the amount of sales. While this is not good news for real estate agents it does not affect you the consumer.
Listings are selling at an above average pace for close to market price. Buyers are able to pick their home and make offers with little to no competition. We call this Real Life – Real Estate™
Meaning that rather than trying to buy just to take advantage of an artificially low interest rate or to sell because of an artificially high selling price people are buying and selling due to real life events.
This is a good thing. It gives us time to slow down and weigh the pros and cons of each real estate decision.
Sellers that are Market Ready Day One are still seeing their homes sell swiftly and for top dollar. On occasion, homes are still seeing multiple bid offers.
Buyers can often tour 6-10 listings at a time that match their search criteria and offer list price or below. Do a home inspection with little or no competition.
The real winner is the person that needs to sell and buy. It is always OK to buy/sell within same market timing. In this market most sellers are sitting on big equity and can take their time to get their home ready for sale. After we sell we have a much higher chance of buying our move up or move down without having to arrange for temporary housing. We are even seeing contingent sales start to get accepted again.
We are still hearing dooms day stories about the crash and while anything is possible I have found that the best way to really understand how the market is responding is to look at the data and match it up with the eye test.
We tend to look heaviest at the 3 key indicators to determine the health of the market.
The percentage of new listings that go pending, or under contract, in the first 3o days. We call this the "Sales Intensity Scale". During the pandemic we literally had to make up a new adjective to label what was happening as we were seeing over 90% of new listings go pending in the first 30 days. We called that an Ultra and Uber Frenzy Market. We are currently sitting at 38.5% of new listings. We call that a STRONG Market. A median or average type market would be around 30%.
BONUS TIP: With some listings it is possible to negotiate for Seller's concessions. Generally these would go towards your closing costs. Now might be a good time to negotiate seller concessions towards buying down your interest rate a percentage.
Inventory levels increased a bit but are still what we consider low inventory. This last year we hit all time record lows for the amount of homes for sale. When there are not many homes to buy and many people looking to buy homes that is simple Supply and Demand. Not enough supply for all that demand.
What we saw happen was 10-20 people bidding on the same house. People buying houses they were allowed to tour for 15 minutes. People waiving all their contingencies and bidding the price of the home up by $50-200K. That was an abnormal market.
With 2.3 months of supply we are again able to tour multiple houses, often times not bidding against anyone or maybe 1 or 2 other offers. We are starting to see home inspections become the norm again.
If you are thinking of buying a home in Seattle right now and are worried that the interest rates have increased it is important to contrast that to what you gain.
Recently Fannie Mae a government-sponsored lender forecasted that the rate on a 30-year fixed mortgage will fall to an average 4.5% in 2023.
"Marry the house (while they are easier to get) and date the rate until they come back down to the 4's".
We have seen virtually all of the "premium pricing" fade away through the winter season. It leaves us feeling like we are loosing value. At this time most economists are predicting that prices level off, but will not loose appreciation. Anywhere from a 0-.5% appreciation gain for 2022 are what we should end at.
We are on a similar trajectory as we were on in 2018 where after an extended period with extremely low inventory and low interest rates, the interest rates increased and the sales intensity decreased. In 2018 this was most noticeable starting in June and going through the winter.
We should stay in a Strong to Surging market meaning that 35 - 65% of homes sell in the first 30 days through the winter.
Seattle rent remains high and according to Zillow, "Rent growth should remain strong in the short term as high home prices keep many would-be first-time buyers in the rental market. Over the next 12 months, rents are expected to grow more than inflation, stocks and home values."
according to Rent.com Seattle's average 2 bedroom rent for an apartment is $3,169 month. Which equates to approximately a $500,000 home (view Seattle homes for sale in the $450K - 550K price range) with 20% down on a 30 year fixed 6.29% interest rate loan.
As we find ourselves in recession-like situations the best hedge for inflation is real estate.
As we have been talking about for a while now Seattle has the 2nd highest percentage of tech workers in the country. "Seattle Overtakes Boston as Third-Richest US City by Household Income" (Bloomberg)
Despite WA being fully open we will continue to offer a full suite of Virtual Real Estate Services.
Read Complete Report With Video Here: https://www.themadronagroup.com/seattle-housing-market-report/