Winter isn’t over, but Seattle’s housing market may be coming out of hibernation and seeing signs of warmth.
Sellers are listing new homes for sale. Home shoppers are encountering more competing offers. Mortgage rates are ticking down.
“Buyers are starting to reenter the market,” said Compass agent Malia Hass, who works on the Eastside. “They sat on the sidelines long enough, and at this point they’re ready to make moves.”
Indeed, more buyers made offers in January. The number of pending sales in King County shot up 50% from December to January, according to data released Monday from the Northwest Multiple Listing Service.
In some pockets of the Seattle area, sellers have once again had the luxury of picking from multiple offers.
Darlene Heseltine, a Redfin agent in Tacoma, submitted offers last week on three Pierce County homes. Even though the homes had been on the market for more than two months and the prices dropped, buyers still had to compete as each property drew multiple offers.
To buy a three-bedroom home in Steilacoom, Heseltine’s buyers agreed to pay 7.5% above the asking price and waive two key contingencies.
“I don’t think we’ll end up back where we were, when we would see 25 offers and people were offering 20% to 25% above asking [price],” Heseltine said, “but we are in competitive situations again.”
Homeowner Ally Jackson hopes the competition won’t get too hot, as she and her husband plan to move from Mill Creek to the Bothell area soon. The couple held off on trying to buy a new house in recent years as desperate buyers offered hundreds of thousands of dollars above list prices.
“That would not be something we would have been able to compete with,” said Jackson, an interior designer.
Then, she noticed homes near Woodinville and Bothell were sitting on the market for more than a month. So, the family started going to open houses and prepared to list their current home for sale. They hope to buy a new house, contingent on selling their current home, virtually unheard of in recent years.
“I’m still getting a little bit nervous trying to buy a house now because of how much I’m hearing there are multiple offers for the houses that are listed,” Jackson said. “Our best chance is finding a house that’s been listed for a while.”
Is mortgage rate relief on the horizon?
One factor drawing buyers back: Mortgage rates are beginning to ease.
Interest rates rose quickly last year, sending monthly payments skyrocketing — “an erosion of affordability in a way we haven’t seen in quite a long time,” said Edward Seiler, an economist at the Mortgage Bankers Association.
After hitting 7% in November, average rates for a 30-year mortgage ticked down to 6% in the first week of February, according to Freddie Mac. Mortgage rates climbed last year as the Fed raised interest rates to try to stem inflation. But while those rate hikes influence mortgage rates, the central bank doesn’t directly set interest rates on mortgages, so the two rates don’t always move in the same direction. Even as the Fed raised rates last week, mortgage rates fell slightly.
Loan officer Danny Meier, with Academy Mortgage in Snohomish, said he saw a 68% spike in mortgage applications from December’s extremely low levels to January. That was higher than a normal January, when he would expect to see a 20% or 30% increase.
The Mortgage Bankers Association expects rates to drop to around 5% by the end of the year.
“We are forecasting relief on the horizon for new homebuyers,” Seiler said.
Academy Mortgage’s Meier described recent market conditions as a “weird battle” playing out between buyers and sellers.
Sellers have been “stubborn,” Meier said. “They want their May 2022-type price, which was the peak … They don’t want to budge.”
At the same time, buyers are “all bargain shoppers,” he said. “They want the lowest rate. They want the lowest cost on the house. They want to do an inspection.” The result: some deals fall through as buyers get cold feet.
That dynamic “is slowly starting to shift,” Meier said.
Prices flat or dipping
Despite signs of more competition and sales, still-high mortgage payments kept homes out of reach for many, more homes stayed on the market and prices were flat or falling in January compared to the same time a year ago.
The median single-family home in King County sold for $781,098, up less than 1% from a year earlier, according to the listing service data released Monday. The median King County condo sold for $450,000, down 1% year-over-year.
The median single-family home in Pierce County sold for $517,442, down about 1%. The median Snohomish County home sold for $699,000, down 2%. The median Kitsap County home sold for $489,725, down nearly 4%.
Compare that to January 2022, when prices in Pierce, Snohomish and Kitsap counties were all up more than 19% from the year prior.
Even as rates start to level off, mortgage payments will remain high unless home prices drop more significantly.
The monthly payment for the typical home in the Seattle metro area was about $3,650 in December, up 46% year over year, according to the latest available Zillow data. That’s more than twice the median rent for a two-bedroom apartment.
Some home shoppers are getting comfortable with today’s interest rates — “not happy, but OK,” Hass said.
Other first-time buyers are nervous, she said, and wondering “if things start going up again, how am I going to be able to compete?”
With some buyers still holding off, it would take about two months to sell the current inventory of homes in King County, according to the listing service. That is up from less than two weeks last January.
Buyers welcome the extra time.
When Denise Koehn and her husband tried to buy a condo in Fircrest, Pierce County, nearly two years ago, they quickly lost out to an all-cash offer for $100,000 over the list price. “You couldn’t get anything,” Koehn said.
So, the retired couple held off on moving from Michigan to Washington to be near their son, daughter-in-law and two granddaughters in Tacoma. They thought maybe they would move next year.
Then, late last year, they caught a break. A three-bedroom Lakewood condo listed in November caught their eye and lingered on the market for more than a month. With an offer on Christmas Eve, they secured the home for $10,000 below its $450,000 list price and got the seller to cover closing costs.
“We felt like we got a pretty good deal,” Koehn said.
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