Seattle Market Recap Q1 2024

Market Updates

With Q1 of 2024 behind us, the two words I'm using to describe the current real estate market are robust and resilient.

Affordability remains the biggest challenge in today's market. Wages, mortgage rates, and home prices determine affordability. Wages aren't increasing as rapidly as inflation, mortgage rates hover around 7%, and home prices continue to rise in Seattle and the surrounding suburbs.

Long story short, it's not getting easier to afford a home purchase.

Median Sales Price March 2024

Seattle: $925,000 / +8% from March 2023
Bothell: $1,175,000 / +13.7% from March 2023
Edmonds: $1,100,000 / +26.3% from March 2023

Realtor.com reported this week that consumer confidence is up in 2024, and many believe it's still a wise time to buy property. The proof is in the pudding. Home prices continue to rebound from 2023 and trend toward 2022 values, which means returning to "top of the market" pricing.

Do I see home values easing anytime soon? No, I don't think it's likely. As we get into 2024, the Fed doesn't seem too keen to lower interest rates anytime soon due to unemployment remaining under 4%, jobs being added to the marketplace, and inflation continuing to rise. The increase in mortgage rates is no longer keeping purchasers at bay.

Interest Rates

It's not only the cost of homes that creates affordability challenges; it's the cost of borrowing money. Interest rates are hovering around 7% on a national average, which impacts monthly affordability for many purchasers. But it doesn't appear to be prohibiting them from making a purchase.

Consumers have acclimated to the new normal of interest rates and are finding ways to afford the increased monthly payment. Many home buyers are turning toward 7-year adjustable rate mortgages with the promise of a refinance in the next few years.

Below is an example of the potential savings on a $925,000 purchase at 20% down with a 5% and 7% interest rate.

But it's unrealistic to think prices will remain flat if interest rates come down. It's more realistic to think prices will increase if rates drop. The next example compares the current median sales price and interest rates vs. a 6% appreciation in home values and a 2% reduction in interest rates.

Take a look at the monthly and annual savings. It's hard to justify buying with interest rates hovering around 7%, but with the power of refinance, many consumers see this as a good time to prioritize a purchase if they can afford to do so.

Waiting to purchase until interest rates settle down may not be the best strategy, as it will likely result in a higher purchase price, an increased down payment amount, and not as significant of savings on the monthly payment as a refinance would provide.

Inventory

Waiting may also reward the more selective buyer with increased inventory. However, Seattle's March inventory was up only 74 units from February and 25 from March 2023. So, is more inventory truly on the way?

Homeowners across the country are sitting on a tremendous amount of equity. According to ATTOM Data, 67.4% of homeowners have paid off their mortgage OR have at least 50% equity.

With so much equity, what's the incentive to sell? Well, there isn't one unless there's a big life event taking place. Our listings this year have resulted from death, divorce, or downsizing—what I call forced motives for selling. Homeowners are staying in their homes longer, which will continue to put pressure on the housing supply.

Unfortunately, new construction isn't keeping up with demand, particularly in Seattle, where most new homes are not designed for the aging population that holds the majority of properties in the area. As a result, I predict that the affordability conversation will continue for years to come, and I don't see a significant increase in available inventory for single-family homes in the near future.

What should you do?

It all boils down to your goals. And that's where my team and I shine - helping you define your goals so we can help you achieve them.

It's impossible to time the market and even more difficult to time your life. Deciding to sell or buy real estate is a calculated move that should never be based solely on what's happening in the market.

Yes, it's wise to take time to consider how you fit into the marketplace, but there is never a perfect time to sell or buy a home. But there certainly are better times of the year to sell (and buy)!

If you're ready to make a move this year, we look forward to helping you determine whether now is the best time.