U.S. mortgage rates for 30-year new purchase loans peaked at 8.45% in October 2023, spelling gloom for the housing market.
The Seattle area was among the hardest hit, with sales steadily declining until the end of 2023. According to Seattle Times, the market almost flatlined by December, with sales down 10% from the previous year.
Admittedly, the Seattle area housing market has been dragging for the past year and a half. This slowdown is attributed to rising interest rates.
The good news is that economic indicators are showing positive signs, bringing a wave of optimism for 2024. But before that, let’s analyze the Seattle area’s housing market in 2023.
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King County
King County saw a massive drop of 30% in new listings in November compared to October. Active listings also dropped by 16% and pending listings by 19%.
The last time King County witnessed such dismal figures was back in 1996, and the market could maintain its sluggish tempo going forward unless the federal government intervenes.
Home sales in King County also took a nosedive, falling by 18% from October to November with 1,474 sales.
The last time numbers were this low was in November 2010, when only 1,331 homes were sold. The trend followed through to December despite a reduction in the median price compared to the same period last year.
Southeast King County, which had the second highest closed sales in King County last year in December, saw a 15.3% reduction in closed sales, from 268 to 227 in December 2023.
The Southwest didn’t do much better, with a 13.5% drop from 256 closed sales to 135. North and Eastside King County managed to scrape through, increasing closed sales by 8.8% and 51.4%, respectively.
Source: https://www.freepik.com/free-vec 1
Pierce County
Home prices in Pierce County, bordering King County to the South, rose 7.0% from last year, with a median price of $535,000. Plus, homes in the county only took 39 days to sell in 2023, compared to 46 days last year.
However, the number of homes sold during the last two months of 2023 painted a bleak picture. Only 602 homes were sold in November and 534 in December, reflecting an 11.3% drop.
However, with the reduction in mortgage rates in 2024, market analysts could see more homes selling and a possible market resurgence.
Overall, the Seattle-area housing market slumped in 2023, mostly due to the high interest rates. Rising interest rates decrease the buying power of homebuyers.
So, increasing the number of home listings will do nothing to revive the market. The result is a decrease in closed and pending sales across the board, particularly in Kitsap and Pierce County.
First-time homebuyers have also grown averse to the market because they simply can’t afford the mortgages. Other buyers prefer to play it safe and hold on to their current mortgages with lower interest rates.
In fact, according to listing services, single-family homes in King County sit for about six to seven weeks to sell.
This is discouraging for buyers, leaving the market in a stalemate. This is in stark contrast to the same period last year when such homes sold in no more than 30 days from the listing date.
The luxury market was not spared from the downturn, but it didn’t take too much of a hit. Luxury homes cost more than $1.1 million because of their location, building materials, features, and amenities.
Typically, buyers of luxury homes pay cash or huge down payments. As such, high mortgage rates are less likely to affect them. This explains why the luxury housing market remained fairly steady compared to the rest of the housing market.
Home sellers have had to think outside the box to entice buyers. Some companies have reduced prices by up to 20% for the next couple of buyers within a specified period.
Such incentives have given the market a jolt, but only a few realtors can afford to offer such incentives. Plus, they can only dish out offers for so long before their profits are in the red.
What Does the Future Hold for the Seattle-Area Housing Market?
The Seattle area market was shaky as 2023 came to an end. The future remains uncertain; all home sellers and buyers can do is cross their fingers and hope for the best. Mortgage rates are forecast to drop in 2024, hopefully waking the Seattle-area housing market from slumber.
