Seattle home sellers are waiting longer to find a willing buyer despite lower prices, signaling a dramatic shift from the bidding wars of just six months ago.
Rising interest rates, meant to slow inflation, are making life harder for homebuyers, leaving many of them on the sidelines as their buying power shrinks. In turn, would-be sellers are holding off on listing their homes. The result: Across the Puget Sound region, fewer new listings hit the market in October than a year ago, and more homes were still lingering on the market at the end of the month, according to data released Monday by the Northwest Multiple Listing Service.
Look no further than Snohomish County, where there were three times as many homes still for sale at the end of October than at the same time last year.
King County saw 38% fewer pending single-family home sales in October than last year, and 34% fewer than at the same time in 2019, before the pandemic supercharged the market. Nationwide, applications for loans to buy homes are dropping.
The slowdown began this summer. By September, the median Seattle house took 17 days to sell, up nine days from the same time a year earlier, according to Redfin. In Bellevue, homes spent about 24 days on the market, 18 days longer than last year, and in Tacoma, homes spent 23 days on the market, 16 longer than last year.
Slower price growth
All those factors have put the brakes on runaway price growth across Western Washington.
Compared to the market’s peak in May, October median home prices were down 10% each in King and Snohomish counties, 8% in Pierce County and 7% in Kitsap County, according to Northwest Multiple Listing Service data.
The median single-family home sold for $903,000 in King County, $730,000 in Snohomish County, $535,000 in Pierce County and $513,250 in Kitsap County.
Prices are still up compared to a year ago, but the price jumps are smaller than they were during the market peak. King County single-family home prices are up about 10%, while other nearby counties are up between 1% and 5%.
If the trends continue, prices could end up flat year over year or start to drop from last year’s levels.
Zillow senior economist Nicole Bachaud predicts Seattle-area prices will stay flat between now and next fall. That’s in part because the huge price hikes in 2020 and 2021 were “completely unsustainable,” Bachaud said.
“We can’t have 20% growth every year, and the reason why is because of affordability,” Bachaud said. “Incomes have grown, but they have not grown nearly as much as home values did. So, there’s not going to be anybody left to buy homes at a certain point.”
That turnaround has already arrived in Whatcom County, where a flood of remote workers helped drive up prices earlier in the pandemic. The median home price of $565,000 last month was the same last October, although it was 35% higher from 2019.
As homes linger longer, listing agents are looking to make their offerings more attractive. Sellers are lowering their prices and offering to cover closing costs, said Windermere agent Michael Doyle. Even with incentives, some houses are sitting unsold.
Facing that dynamic, “we definitely have a lot of sellers who are reluctant to get in,” Doyle said. Not only do they worry their home might not sell, but they’re hesitant to “give up the cheap money that they borrowed for that house” and deal with higher interest rates, he said.
Poulsbo broker Frank Wilson had advice for potential sellers looking to price their home right. “What your neighbor’s house sold for six months ago has very little bearing on your home’s value today,” Wilson, a John L. Scott broker, said in a statement.
As sellers get more eager, buyers are gaining leverage, but they continue to take hits to their budgets.
Nationally, it now takes about 39% of median household income to cover the monthly payment on an average home, the highest share since 1984, according to Black Knight, a mortgage data company. In Seattle, it took 50% of median income as of September.
The monthly payment for a typical home in the Seattle metro area is now more than $4,000 a month, 71.5% higher than a year ago, according to Zillow.
“That’s putting a lot of households in a position where there’s no way they can afford a mortgage. You cannot apply and get qualified,” Bachaud said. “So we’re going to see demand pulling way back as a result.”