January 2023 Seattle Real Estate Market Report
THE SEATTLE HOUSING MARKET AT A GLANCE
3 KEY INDICATORS SEATTLE HOUSING MARKET
- SALES ACTIVITY INTENSITY: 41.7% (STRONG)
- INTEREST RATE: 6.54% (TOLERABLE)
- INVENTORY LEVEL: 2.3 Months (LOW)
This article will be about the current and future state of the Seattle area housing market. Refer to the table of contents to skip to your interest.
We started with the Seattle housing market at a glance and the 3 key indicators, then the Seattle market video discussing the 3 key indicators and how they affect the market.
We deep dive into what story the statistics are telling us. We will hear from the 29th most influential person in real estate, Lennox Scott and what he sees happing in the real estate market. We look at Sales Activity, Market Intensity, Price, Interest Rates, Timing and Job and Population Growth. A complete list of the MLS Infospark stats for Seattle housing market trends.
Lastly, don't forget to check out the newest Seattle homes for sale.
BEFORE WE LOOK AT 2023 LET'S RECAP 2022
The median price for last year’s completed transactions was $615,000, a gain of 8.85% from the 2021 figure of $565,000. In 2012, the median price was $245,000. For single family homes, last year’s prices rose more than 8.1% from 2021. Year-over-year condo prices jumped 11.3%.
Compared to 2021, there were 23,317 fewer sales (down 21.7%). Last year’s sales of homes and condos was the lowest since 2014. (The 2021 total of 107,354 closings was the first time the sales volume topped the 100,000 mark.) Based on dollar volume, the 2022 total was down about 15% from 2021 when sales were valued at just over $75 billion.
Real estate analysts point to insufficient inventory and spikes in interest rates as factors for the decreases.
During 2022, Freddie Mac’s mortgage market survey shows the rate on a 30 year fixed rate mortgage was 3.22 for the week ending 1/6/2022 and steadily increased to a peak of 7.08 in early November, before tapering off to a rate of 6.42 for the week ending 12/29/2022.
Of last year’s 84,037 closed sales, 9,504 (about 11.3%) were classified as new construction. That was 2,699 fewer than 2021’s total (down 22.1%). The median sales price on last year’s newly built homes and condos was $740,084, about 11.3% higher than 2022’s figure of $664,950. (NWMLS)
With fewer buyers looking to purchase homes, there are fewer homes coming onto the market which is leading to the shortage/low level of unsold inventory especially in the more affordable, mid-price+ range of homes.
Heading into the spring market, we will increase one level of hotness of Sales Activity Intensity™ for new listings before the intensity settles down pre-summer when we can expect to see a higher number of new resale listings coming onto the market. Remember, it’s okay to buy and sell within same market timing.
We continue to stay 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 as activity started to pick up in March. We would then go on to set sales records for the next 2-3 years.
We saw the fewest number of new listings (351) since December of 2018 (337). 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 41.47% of new listings. We call that a VERY 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 have decreased a bit and are at 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 should stay in a Strong to Surging market meaning that 35 - 65% of homes sell in the first 30 days through the summer.
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 $3,229 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 6.54% 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 THE FULL REPORT HERE: https://www.themadronagroup.com/king-county-real-estate-market-analysis