December 2023

"Kate, how's the market?" - December 2023 King County Market Update for You

December is here! A Merry Christmas and Happy Holidays to you and your family. I hope you enjoyed your Thanksgiving feast and are getting ready to see family again and enjoy the festivities.

Here is your monthly summary of the market.  I realize there is a lot of news that would make anyone confused about the current market conditions.  Let me help you out as we look backwards to understand what’s ahead.  As always, I am available to review your own personal market conditions. 

Many of these insights are taken from the Northwest Multiple Listing Service’s (NWMLS) Monthly Market Snapshot which gives insights for all of Western Washington. I will focus on the Seattle Suburbs area but if you want the full report I have a link following this paragraph. We also looked at published statements from the National Association of Realtor’s Dr. Lawrence Yun, their chief economist, and Jessica Lautz, their deputy chief economist, and USA Today’s Mortgage Rate Forecast for 2024 to find quotes from Real Estate industry leaders on where the market it headed in 2024. That link also follows this paragraph. Here we go!

Reduced inventory motivates increased home prices - Northwest Multiple Listing Service (nwmls.com)

Mortgage Rate Forecast for 2024 (usatoday.com)

This year’s seasonal slowdown has been quite dramatic. While most people aren’t thinking about the real estate market during the holidays, this year’s stats around active listings and prices are worse than last year’s. For the entire NWMLS regions, November 2023 saw a decrease of 16% for number of closed sales compared to 2022 and an increase in the median sold price of 4.6%.

Pertaining specifically to King County, the median sales price was $799,925. This ranks second in the highest priced counties in the NWMLS region beaten only by San Juan at $975,000. The total months of inventory in King County has stabilized around 1.7 for the past several months. This means that if no new houses went up for sale, at current demand levels, all houses would sell in 1.7 months. A healthy market is generally considered to be between 4 and 6 months. Last year saw higher levels of inventory in King County in November, but 2023 still shows more inventory than 2019, 2020, and 2021 at this time. The number of active listings is 1,889 down from last year’s 2,694, an approximately 30% decrease.

So, why is this happening? While seasonal slowdowns are expected, the current interest rate environment exacerbates the decreases in market activity we saw above. There has been a slight decrease in mortgage rates from October’s 7.8% to 7.2% as of December 1^st. Mason Virant, associate director of the Washington Center for Real Estate Research at The University of Washington, blames the rates directly for the decrease in activity. “With the 30-year fixed mortgage rate currently just over 7.2%, the purchasing power of prospective buyers remains stunted relative to a few short years ago. Moreover, current owners with low-rate mortgages continue to be reluctant to sell. This has led to a continued decline in year-over-year transaction volume and the inventory levels in the market.”

Let’s see what leading industry figures expect from mortgage rate activity in 2024. Robert Deitz, the chief economist at the National Association of Home Builders thinks that “slowing economic growth and grudgingly lower inflation readings will place downward pressure on long-term interest rates after peaking in late 2023. These conditions should allow the Fed to begin reducing nominal interest rates by mid-2024 while keeping inflation-adjusted rates as restrictive.” Freddie Mac also makes note of the inflation rate saying that as inflation remains above the Federal Reserve’s goal of 2%, they won’t be cutting the federal funds rate making mortgage rates likely stay above 6% at least through 2024. Aside from a decrease in the inflation rate, a tepid economy might also lead to the Fed lowing interest rates.

The National Association of Realtors also published quotes from Dr. Lawrence Yun, the chief economist at NAR, and Jessica Lautz, the Deputy Chief economist. Lawrence reminds us that interests are only part of the equation that determines when and for how much people buy their home. Compared to pre-pandemic levels “there are 4.7 million more Americans working now”. “Mortgage rate movements may determine entry timing, but jobs are the source of long-term housing demand, which keeps growing.” From my perspective, this is where Puget Sound is doing well. I am frequently seeing people from across the nation come to the greater Seattle area for our high tech jobs. Jessica points out that even since December 1^st, mortgage rates have already dropped to 7.03%. Keep in mind that 68% of home buyers have either 50% or more home equity, so interest rates may be of no effect to them. Even this little bit “makes a considerable difference for a home buyer purchasing a $400,000 home.” As mortgage rates continue to decline as predicted heading into 2024, more and more buyers that are otherwise jumping at the bit to buy will be priced in. If you want to read Lawrence and Jessica’s full statements they have been included below.

Many believe the worst of the high mortgage rates are behind us with the maximum having been around 8%. Almost all financial institutions believe that rates will decrease throughout 2024 especially if there is a recession ahead. As we have reported in previous months, we expect to see a “slinky-step” down as mortgage rates fall. Here’s the key, let’s talk about how this personally affects your real estate plans.