Seattle home sellers are waiting longer to find willing buyers despite lower prices, marking a dramatic shift from the bidding wars of just six months ago.
Rising interest rates, intended to slow inflation, make life harder for homebuyers, leaving many of them on the sidelines as their purchasing power shrinks. Instead, would-be sellers hold off on listing their homes. The result: Across the Puget Sound area, fewer new listings hit the market in October than a year ago, and more homes are 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% smaller than at the same time in 2019, before the pandemic supercharged the market. Nationwide, applications for home purchase loans are down.
The slowdown started this summer. Through September, the median Seattle home took 17 days to sell, up nine days from the same time a year earlier, according to Red fins. 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 of those factors have put the brakes on runaway price growth in Western Washington.
Compared to the market’s peak in May, October median home prices fell 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 jump is smaller than at the peak of the market. King County single-family home prices are up about 10%, while nearby counties are up between 1% and 5%.
If the trend continues, the price may end up flat year over year or begin to fall from last year’s level.
Zillow senior economist Nicole Bachaud predicts Seattle-area prices will remain flat between now and next fall. That’s partly because big price increases in 2020 and 2021 are “totally unsustainable,” Bachaud said.
“We can’t have 20% growth every year, and the reason is because of freedom,” Bachaud said.. “Incomes have increased, but they have not grown nearly as much as home values. So, there will be no one left to buy a home at a certain point.”
The turnaround has arrived in Whatcom County, where a flood away workers helped raise prices earlier in the pandemic. The median home price of $565,000 last month was the same as last October, although it was 35% higher than in 2019.
As the house lingers again, 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 not sold.
Faced with that dynamic, “we definitely have a lot of sellers who are reluctant to enter,” said Doyle. Not only are they worried their house won’t sell, but they’re hesitant to “give up the cheap money they borrowed for the house” and deal with higher interest rates, he said.
Poulsbo broker Frank Wilson has advice for prospective sellers who want to price their home right. “What your neighbor’s house sold for six months ago has very little bearing on the value of your house 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 the median household income to cover the monthly payment on the average home, the highest share since 1984, according to Black Knight, a mortgage data company. In Seattle, it took 50% of the median income in 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.
“It puts a lot of households in a position where there’s no way they can afford a mortgage. You can’t apply and be qualified,” Bachaud said. “So we’re going to see demand fall back as a result.”