Seattle Homeowner's Guide: Is The Real Estate Market Slowing Down?
As a home seller, you might be concerned that the real estate market is slowing down, worrying that home values and prices are set to take a tumble. Home buyers in Seattle, WA, however, are still seeing many of the same challenges, including too many buyers for each available house, even as interest rates rise and make qualifying for a mortgage more challenging. So what is the reality of the market right now? Here are two of the big factors that are contributing to what seems to be a slowing down of the housing market that hasn’t truly become a “buyer’s market” after it all.
Mortgage rates ease demand
One of the major reasons why house prices climbed so intensely for the first two years of the pandemic was the idea of bidding wars. A house would go on the market and six or ten different people would bid on it, generally driving the price far higher than asking. Each house that is sold in this way creates comparative sales for future listings, driving prices higher and higher.
As mortgage interest rates have climbed throughout 2022, prospective home buyers who were just barely in the running for homes in their desired area became priced out. Just a 1% increase in interest creates tens of thousands of dollars of additional cost over the life of a mortgage loan for a typical United States home. As a result, fewer buyers were in the running, which increased the chance that an at-asking or just above asking offer could be accepted. Lower demand, therefore, began making people wonder if these higher prices of 2020 and 2021 would become a bubble and create a housing crash.
Inventory remains low, keeping many prices steady
A big reason why no big bubble has burst is that housing is a necessary good, and many people will keep shopping for a home even if they have to check a more affordable area, get a smaller home, or pay a bigger monthly payment. Another reason is that there simply isn’t as much housing in many desirable areas like Seattle as there are willing buyers: whether investors who want to make rental properties or homebuyers for primary residences, this city has a lot of appeal. With only a few options on the market at a time, many houses have continued to climb in value, though usually more slowly, simply because there is always someone desperate enough to pay the current prices.
Whether the interest rates will eventually become high enough to prompt an actual reduction in home values across the board, it’s unclear. During the height of the seller’s market, even homes in less desirable locations were gaining value, and many of these less-in-demand homes are now going for lower prices or staying on the market for longer. We’ll have to wait and see how higher interest rates impact prices in areas that continue to be incredibly popular and where there simply isn’t enough inventory to go around. Even there, the market is likely to cool at least a little more.