Mortgage rates hit a 23-year high last month, worsening the budget crunch for home shoppers hoping to break into Seattle’s expensive housing market.
Facing those high rates, buyers and sellers struck fewer deals and home prices mostly stagnated in September, according to data the Northwest Multiple Listing Service released Thursday. At the same time, a limited supply of homes for sale kept prices from dropping dramatically.
The median single-family home in King County sold last month for $900,000, down 1% from a month earlier and up 3% from a year ago, according to the listing service.
The median home sold for $926,250 in Seattle, up 3% from a year earlier. Prices were also up 4% in Southeast King County, 2% in North King County and 6% on the Eastside. Prices were down 3% in Southwest King County.
Elsewhere in the region, median prices ticked up and down compared to September 2022. Median homes sold for $749,900 in Snohomish County, up 2%; $535,000 in Pierce County, down 1%; and $559,995 in Kitsap County, up 4%. Median means half of homes sold for more and half for less.
Economists and brokers say high interest rates are the biggest factor keeping a lid on the Seattle-area’s once-blazing market. Buyers struggle to afford higher mortgage rates along with home prices that haven’t plummeted far enough to offset those rates; sellers meanwhile are hesitant to move if they’re sitting on a low rate in their current home.
The average rate for a 30-year fixed-rate mortgage hit 7.3% in late September, the highest since late 2000. In September 2022, rates averaged 6.7%.
In the greater Seattle area, the mortgage payment on a typical home at current rates hovers near $3,900 a month, according to Zillow. (Zillow considers the average payment for mid-priced homes and assumes a 20% down payment.)
To afford that payment without spending more than 30% of their household income on housing, a common measure of affordability, homebuyers would need to earn about $155,000 a year.
The result of that financial reality: less activity in the market.
Buyers and sellers struck 12% fewer deals in King County in September than a year earlier. Pending sales dropped even more sharply in Kitsap, Snohomish and Pierce counties.
“The feeling for buyers right now is this: For the interest rate I’m paying, this home better be exactly what I want or the price better be negotiable,” Seattle Redfin agent David Palmer said in a recent report.
But the number of homes for sale is limited. Even in King County, where more new homes hit the market in September than in August, the number of new listings was still down 23% from a year ago.
That limited inventory is “keeping prices elevated even though demand has fallen somewhat,” said Zillow senior economist Orphe Divounguy.
It would take between five and eight weeks to sell all the homes currently listed for sale across the region, according to a listing service measure known as months of inventory. That’s a less frenzied market than during the height of the pandemic, but still tighter for buyers than the four to six months experts consider a balanced market.
Rob Serviss, a RE/MAX agent in Snohomish, said his buyers are still sometimes competing against multiple offers for homes.
“The overall transaction volume is certainly down, but I still think that the balance of supply and demand hasn’t changed all that much. This is still a seller’s market,” Serviss said.
It may not feel that way for all sellers, though.
Sellers dropped prices on more than a quarter of homes listed for sale in the Seattle area in September, slightly higher than the national average, according to Zillow.
To entice buyers, some new home builders are slashing prices or advertising buyer credits and interest rate buydowns, in which they pay to help buyers secure a lower rate.
Townhome developer Erich Armbruster said his firm, Ashworth Homes, hastried rate buydowns, but buyers were more interested in price cuts. The company has lowered prices about 10% from a year ago.
“Our buyers are struggling pretty mightily with increased interest rates and qualification [for loans] and just nerves,” he said.
Homes in one development near Northgate started this spring in the low $700,000 range, but after multiple price cuts are now listed in the low $600,000 range and are about half sold, Armbruster said.
“There’s really not much more to give in terms of pricing,” he said.
With the sluggish market eating into profit margins, Armbruster said he has cut back on buying land for new projects. And he isn’t the only one. Permit applications in Seattle are down 43% from a year ago for detached single-family homes and 15% for apartments and condos — a sign that Seattle’s housing supply could remain sparse in the coming years.
