SEATTLE — Homebuyers have faced a hot housing market for years, but things may finally be cooling off, and buyers could see more leverage in the market.
Homebuyers waiving all contingencies, bidding wars driving up prices, homes selling for well over asking price – western Washington has seen it all over the last two years, as the region continues to grapple with a hot housing market fueled by a lack of inventory and a surplus of buyers eager to jump on low interest rates.
But now those interest rates are rising, and the tables are turning.
“It’s awesome news for homebuyers who have been waiting for this break,” said Adriano Tori, founder and CEO of Seattle-based Rexmont Real Estate. “That time has come where we’re going to see more of the leverage fall onto the buyers.”
Interest rates have jumped more than 2% since the start of the year – the biggest quarterly increase in 28 years.
As of May 3, the rate on a 30-year fixed mortgage hit 5.42%. A 15-year fixed mortgage rate came in lower, at 4.65%.
Tori said the rising rates should pave the way for a correction in property values by encouraging current homeowners to sell, which will increase inventory.
That urgency to sell is being amplified by a recent increase in people who are leaving the area.
According to a recent Redfin report, the number of would-be homebuyers leaving Seattle has gone up sixfold since before the pandemic – a trend Redfin attributes to an increased ability to work remotely and soaring home prices.
Redfin data from March 2022 show Seattle home prices were up 18.3% compared to last year, and the average home sold for a median price of $889,000.
To the south, Tacoma saw a similar trend when looking at that same time period, with the average home price seeing a 17.9% increase and a median selling price of $485,000.
The pattern continued to the north with Everett seeing a 21.9% increase in home prices and a median selling price of $640,000.
“Those sellers are wanting to expedite their timing, mainly because of the concern of what that may do to them in terms of getting a lower price compared to what their expectations were even a month ago,” said Tori.
The area has already seen a big spike in inventory. According to Zillow, Seattle saw a 37.5% increase since February.
Tori said the rising interest rates will also work to stabilize the market by pricing out some would-be homebuyers, ultimately eliminating competition and further driving down demand.
“That’s going to lead into us seeing more inventory, more houses, and even more negotiation power,” Tori said. “We’re going to see those contracts staying within the asking price.”
A new Zillow report explains that this shift should not be confused with a crash, but, rather, it represents a “swing back toward a more balanced housing market.”
In that same report, the company contends that, while price growth will start to slow, it is unlikely that prices will fall.
Zillow also predicts a thriving housing market for months to come due to pent-up demand from homebuyers. According to Zillow’s home value forecast, 14.9% growth is expected through March of 2023.
Current projections from Norad Real Estate show a similar prediction for the inventory growth, which is expected to continue to expand through March of 2023.
And while inventory levels are likely to continue to see growth, interest rates are projected to see more growth, too.
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