Inventory is persistently low and interest rates are steadily climbing. We will cover the changes we have seen in the last month – and what it means for buyers and sellers in King County and the surrounding areas.
In the month of April, we began to feel some underlying shifts in the market. These feelings are slowly becoming visible as we head into the final week of May. There is no doubt that the Western Washington real estate market – King, Pierce, and Snohomish counties in particular – is in a transition phase.
With interest rates on the rise, those in search of a home have lost some buying power. I expect properties on the lower end of the market (let’s say anything under $550k and below) to sit longer than they have in the post-pandemic economy. Another acting force on these homes is the amount of money builders are having to fork over to get materials, as well as a backlog of projects for subcontractors and the like. Some buyers with strict budgets have been priced out of lower-priced listings; and builders, flippers, or investors are commonly handcuffed by the price of goods to renovate as well as access to available manpower.
As for the rest of the market, the number of showings, offers and competition in general has taken a dip. Working hand in hand with this trend is a slight increase in inventory. You may put two and two together and infer that an increase in supply and a slowing of demand will drop sales prices. You would be correct if we were operating in a semi-normal market, but that is far from the case. Currently, King/Pierce/Snohomish counties are operating with an inventory of only 2-3 weeks. That means it would take about 2 1/2 weeks for all active listings to be sold. To put this shortfall into perspective, a healthy market suggests that 4-5 MONTHS of inventory be provided. So although less buyers are scheduling tours and coming through open houses (one local brokerage has tracked an 85% dip in showings for their listings in the past month) the lack of inventory will perpetuate a competitive market for buyers and a friendly one for sellers.
Now, let’s look at some market data from March, April, and May (according to the NWMLS):
- The median sales price in Seattle dropped from $875k to $850k (April to May)
- Median % of list price in King County fell from 109% to 108% (March to April). I would expect this trend to continue once all end-of-May stats are compiled.
- SFR listings increased, while condo listings were on the decline.
- Inventory is following seasonal patterns with an increase to 0.7 months supply in April, up from 0.2 in January.
Main Takeaways:
- We are seeing less buyer traffic and multiple offer situations – although these are certainly still common.
- There have been more listing adjustments and price drops than I have seen in months past as agents and sellers adjust to the changing market.
- It is still a market that heavily favors sellers.
- The rate of appreciation for homeowners is most likely going to decelerate. This is because of the increased mortgage rates and the uptick in inventory.
- Currently, the demand for a property, it’s final selling price, and other analytics involved with the market vary greatly from neighborhood to neighborhood.
- There is general speculation that the market will revert back slightly to a pre-pandemic state, although the rate of this shift is debated.
I hope this information has sparked some questions about the market and where you – as a homeowner or prospective buyer – stand. In this shifting market, it’s important to handle each property on a case-to-case basis, so please reach out to me regarding your current situation.
Until next week…thanks for reading,
Your friend and Realtor® Bryce Morgan