As the clock struck midnight on New Year’s Eve, the nation’s attention may not have been completely fixed on a descending Waterford crystal ball in Times Square. Instead, many eyes may have been captivated by something else dropping – interest rates.
The Federal Reserve recently updated its forecast, hinting at a potential decrease of about 75 basis points (0.75%) in its short-term lending rate by the year’s end – promising news for borrowers in 2024.
The past year witnessed a financial rollercoaster, with interest rates fluctuating between 5.99% and 8.03% for conventional 30-year mortgages, according to Mortgage News Daily.
The Fed’s revised lending forecast sparked a celebratory mood among investors, particularly those tracking U.S. Treasurys and mortgage-backed securities. This positive shift is expected to bolster consumer confidence and help alleviate cost pressures in numerous aspects of the economy.
The most significant impact of reduced finance costs is the potential for lowering barriers to homeownership, which has reached unprecedented heights in the past two years. At the same time, many homeowners are sitting comfortably with low mortgage rates.
Fully 60% of mortgaged homeowners have lending rates below 4.0% and nearly 90% enjoy rates below 6.0%. This represents about 75M homeowner households, according to a Harvard housing report, out of a total of 85M households nationwide.
The National Association of Realtors® noted an estimated 41% of owners remain in their homes for a duration equal to or exceeding the median tenure of 13 years thanks to today’s higher rates. Harvard researchers suggest that this reduced household mobility can lead to inefficiencies in the labor market, hindering Americans from relocating to more productive or high-demand areas.
This is why the prospect of a substantial drop in interest rates is a cause for optimism. Lower lending costs not only instill hope in more people – particularly renters – for securing a new home but also that more current owners should return to the market.
As financial barriers ease, the dream of moving to a more desirable location becomes more attainable. It’s a positive shift that could soon reshape the landscape of the housing market, offering hope and opportunities for those eager to embark on a new homeownership journey.
NEW LAWS AFFECT HOME BUYERS
Washington lawmakers last year set out to make our corner of the country one of the most consumer-friendly real estate environments anywhere. They voted to allow up to six dwellings in areas close to transit and up to four in other areas that previously only permitted one home per parcel.
Olympia also established a law, effective Jan. 1, that requires buyers wishing to work with a licensed real estate broker to sign a services contract. The pact clarifies certain terms, including whether they will have an exclusive contract with the broker or non-exclusive, and how brokers will be compensated for their services. (I went into greater detail on this topic in a recent blog post.)
In addition, lawmakers approved a breakthrough down payment assistance program for those who suffered from discriminatory covenants. Those covenants were often seen in bylaws from gated communities or written into property deeds that, in many cases, only allowed white residents. The new program will be funded by an increase in county recording fees. (A blog post will be published on Jan. 16 that includes more about qualifying for the assistance.)
AIR OF OPTIMISM
Glimmers of hope for the heart of Seattle are becoming more frequent, more pronounced. The downtown area has been through a rough spell since doors to offices, schools and shops closed in March 2020 and slowly returned to a form of normalcy over the past two years.
I see those bright spots with the reopening of the former Cinerama, my all-time favorite movie theater, and the large crowds that watched New Year’s Eve fireworks at the Space Needle followed by a rousing experience at the National Hockey League’s Winter Classic in T-Mobile Park. (Even Seattle sunsets – like the one featured near the famed Edgewater Hotel atop this newsletter – are looking better this early 2024!)
It is also assuring to see democracy at work, with the swearing-in of five new members of Seattle City Council (with another soon to be named) – shifting the political mindset to one that’s more centrist and populist. It will be fun to see how Sara Nelson, unanimously elected new council president, directs policy with Mayor Bruce Harrell.
“I believe that if we change the way we operate, starting with coming in to work in person, Seattleites can expect to see a major reset in tone and direction at City Hall,” Nelson wrote this month in a Seattle Times op-ed.
The mayor and past council delivered a strong message with the passage in December of the city budget. Yes, 2024 will be focusing even more resources on investing in affordable housing (32% additional dollars than last year), $100M+ directed to services and shelter for the homeless, and even funding to plant about 1300 trees across our city.
There is hope and optimism within me, my real estate colleagues and the city at-large as we invest in the future of this great city and seek renewed prosperity.
BY THE NUMBERS
>> Seattle metro leads the nation with construction cranes – 45 – according to a Q3 summary from the RLB Crane Index. That includes 36 new cranes since the previous report, and it is more than larger U.S. cities, such as Los Angeles (28), Boston (20) and Chicago (9). As of December, downtown Seattle is second in the nation behind Denver for most residential units under construction (7825).
>> Seattle/Tacoma comes in as the fifth-least affordable among the nation’s 100 largest metros, according to a Business Journals analysis of data from the Bureau of Economic Analysis’ Regional Price Parity Index. Metros with a score above 100 in the index are more expensive than the national average. Seattle metro scored 114.5, rating poorly for housing costs. Portland, Ore., was the 18th least affordable. The San Francisco Bay Area was rated least affordable (119.8) and McAllen, Texas, came in as most affordable (87.7).
>> Medina – the enclave west of Bellevue along Lake Washington and home to Bill Gates and other billionaires – is the priciest ZIP code in Washington. The median price of a home in 98039 is $4.39M, the ninth-highest ZIP in all of America. Another local community, Mercer Island (98040), came in at No. 68 in the country with a median home price of $2.12M. The priciest ZIP in the U.S. is 94027 in Atherton, Calif., with a median home price of $8.3M, according to research firm PropertyShark.
>> Redmond, Wash., is America’s fastest-growing wealthy suburb, says a report from moveBuddha. Despite an average single-family home value of about $1.36M, the HQ to Microsoft has seen its population grow 18% between 2017 and 2022. Shoreline came in at No. 14 nationally with 5.5% population growth over those five years and a home value today of $783.3K. California has 14 of the top 25 fastest-growing wealthy suburbs, led by Irvine at No. 2 in the nation.
>> Our metropolitan area has the ninth-highest cost of living in the U.S., according to analysis of Q3 data from Axios, which gave this region an index of 145.7. Manhattan, N.Y., was at the top with a 227.8 reading, followed by Honolulu (179.2). A value of 100 would be “average.” Housing and health care drove the Seattle area’s high cost of living.
JANUARY HOUSING UPDATE
December’s housing activity in King County was marked by shriveling supply amid fewer listings hitting the market in what is traditionally a low point of the real estate year. Prices mostly fell from the previous month but were higher year-on-year (YoY).
The 802 new listings last month were a low not seen since records were archived online from 1990. The second-closest monthly total for all home types (single-family, townhome, condo combined) was 887 in December 2022. No other month has fallen below 1000 new listings in more than three decades of online record keeping.
In other words, the housing market was in deep hibernation and the conditions should only improve from here. But by how much? There is little doubt the inventory shortage will continue through 2024 – as mortgage rates remain too high for many consumers – and that means great pressure to push prices higher.
Read a detailed assessment of our housing market in my most recent blog post: Despite Falling Rates, King County Housing Market Flops to End Forgettable Year
This month’s review of median prices (below) focuses on single-family homes across King County. Each city experienced a YoY decline in a range between 3.5% and 7.2%.
CONDO NEWS
Seattle’s most talked about condominium project today is taking place on the south edge of Belltown, right across the street from the former Bed Bath and Beyond. That’s where builders and skilled workers are fitting out the 48-story First Light ultra-luxe condo at 3rd Avenue and Virginia Street.
The amenities are one of the project’s hallmarks. They include an Olympic length, cantilevered lap pool and two spa tubs that now rest atop the building.
Homes are being fitted with stone tile, flooring and cabinets. Contractors have reached floor 33. The sales team tells me the doors will open on this stunning high-end community later this year.
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Graystone has extended a special promotion. Through this month, buyers can earn up to $30K in credits applicable for interest-rate buydowns, parking and more. Plus, homeowners’ dues are waived all year for new purchases. The 31-story, 271-unit, First Hill condo opened quietly in November to a few of the building’s first buyers.
(The newest condo in Seattle received some unwanted publicity this month after the surprise actions of two parachute-wearing base jumpers.)
LUXURY LIVING
To no one’s surprise, few high-end homes came on the market in late 2023/early 2024 – typically the quietest time for luxury real estate each year. Here are three of note:
We start the new year in the Innis Arden section of Shoreline, where a newly built property has hit the market. It’s a 5-bedroom, 4.25-bathroom, 5600 sq. ft., 1-story home (with basement) on 1.5 acres. This expansive offering includes smart-home technology, a chef’s kitchen and contemporary folding-glass walls that seamlessly connect the home with outdoor space. The main floor sits well above neighboring homes, giving the spacious veranda an ideal spot to enjoy stunning water views nearby. Plus, the fully finished basement includes a similar outdoor space that features a near-football-field-sized lawn. List price: $6.499M ($1161/sq. ft.).
Climbing the price ladder, we visit the Seattle neighborhood of Leschi. That’s where there is a stunning 5-bed, 3.75-bath, 6430 sq. ft., 2-story (with basement) and 60 ft. of lakefront. The home was reimagined by famed architect Tom Kundig and his signature PNW design – timber beams, slate tile, rich-wood chef’s kitchen. Massive rooms, outdoor pool, Lake Washington dock. Wow! List: $10M ($1555/sq. ft.).
This 5-bed, 6-bath, 9291 sq. ft., 2-story (with basement) is an architectural wonder in Medina. Light and bright, the modern mansion includes walls of windows with views of the Bellevue skyline in the distance and Overlook Golf & Country Club across the road. A theater room, gym, wine cellar and sky lounge round out the fun corners of this tastefully appointed home. Plus, it’s all powered by solar arrays on the roof. Be the first to live in it! List: $23M ($2476/sq. ft.).
What else is happening in and around your Seattle?
Big Time Acrobatics, Jan. 17-20
Cirque du Soleil comes to Climate Pledge Arena (334 1st Ave. N.) for five performances this week. The show – Corteo – features acrobats, musicians, singers and actors. Tickets.
Soup, Soup and More Soup, Jan. 25-28
More than a dozen restaurants are expected to partake in Fremont Soupocalypse. Everything from gumbo to ramen and chili to chowder is likely to be served hot and ready to enjoy across this friendly haven in Seattle. Collect eight soup stamps at participating restaurants to win a prize from Mischief on Canal!
Basketball at Its Funniest, Jan. 27
The Harlem Globetrotters are synonymous with dazzling basketball entertainment. They bring their world-renowned exhibition team to Climate Pledge Arena for a showcase of basketball wizardry, trick shots and funny bits. Tickets. Alternate performances are scheduled for Kent on Jan. 26 and Everett on Jan. 28.
Celebrating the Lunar New Year, Jan. 27-28
Hoping to celebrate the Year of the Dragon? Our region has options! The Asian Spring Festival Celebration will feature an afternoon of games, gifts, food and Chinese customs at the Overlake Christian Church (9900 Willows Rd. NE, Redmond). Jan. 27, 12-9pm. Tickets. Celebrate Asia honors our region’s Asian-American community through a look at musical traditions at Benaroya Hall (200 University St., Seattle). Jan. 28, 4pm. Tickets. The official Lunar New Year begins on Feb. 10.
Outdoors Show, Jan. 31-Feb. 4
Exhibitors of outdoor gear and their fans congregate every year at this time for the Washington Sportsmen’s Show. (What, are sportswomen not welcome?) It all takes place at the Washington State Fair Events Center (110 9th Ave. SW, Puyallup). Tickets. Wed.-Fri., 12-8pm; Sat., 10am-8pm; Sun., 10am-4pm.
Remodeling Showcase, Feb. 2-4
Get ideas for your dream home from speakers, vendors and remodeling experts at the Northwest Remodeling Expo. Check it out at the Seattle Convention Center (705 Pike St.). Tickets. Fri., 12-6pm; Sat., 10am-6pm; Sun., 11am-5pm.
Boats Afloat, Feb. 2-10
The Boat Show … The Boat Show … The Big Seattle Boat Show! Yes, it’s that special time of year when many hundreds of boats and watercraft are on display at both the Lumen Field Event Center (800 Occidental Ave. S.) and Bell Harbor Marina (Pier 66, 2203 Alaskan Wy.). Plus, there will be a special panel presentation related to The Boys in the Boat, a tribute to the Olympic men’s rowing champions of 1936 from the University of Washington. Tickets. Open daily at both locations from 10am.
Cultural Classic, Feb. 2-11
The classic ballet Swan Lake returns to Seattle. The story reveals a cursed princess who transforms into a swan by day and can only regain her human form at night. There is love, betrayal and more. See it performed by the Pacific Northwest Ballet at McCaw Hall (321 Mercer St.). Tickets. Various times.
Great Food on the Gridiron, Feb. 3-18
Always wanted to walk on the famed turf of Lumen Field (800 Occidental Ave. S.)? Here’s your chance! Field to Table features a four-course gourmet meal prepared by local chefs in a covered – but outdoor – setting on the field. Two seatings nightly. What a unique idea!
Events are subject to change. Please check with venues to confirm times and health-safety recommendations.
In case you missed it….
My Living the Dream blog enjoyed a brief holiday in December but not before delivering on its sixth annual predictions blog post. Check it out – the most-read article on the blog each year: Expectations for 2024 in Seattle/King County Real Estate.
For those with less time to read my 4000-word opus, I offer a 3 1/2-minute video summary.
And, as mentioned earlier in this newsletter, I reviewed some of the key law changes for 2024 related to residential real estate in Washington.
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