NOVEMBER HOUSING UPDATE

The housing market in and around King County was moving along swimmingly at the start of 2022, with homes selling briskly and buyers taking advantage of interest rates in the 3s. You know what happened next: The combined rise in inflation (Have you seen the price of turkeys?!) and jump in mortgage rates of 4 percentage points has created a housing market belly flop.

The market is still moving forward but at a pace more glacial than brisk. Among all home types in King, new listings have fallen 26% in the past month and existing homes for sale at the start of November were down 8.1% from Oct. 1. Pending sales and closings were also below October figures. While a slowdown is expected in autumn months, this rate of decline is not.

Real estate folks typically compare year-on-year (YoY) figures but 2020 and ’21 were statistical anomalies. Historically low interest rates brought buyers and investors out of the woodwork for any homes for sale. Sure, the increases in inventory are impressive – up 123% for all homes in the county from 2021 to today and up a whopping 359% on the Eastside – but that should not surprise anyone. 

We are in a new phase of the housing market cycle and the stats are an unwelcome paradox for buyers and sellers alike.

Active listings for single-family homes are up 159% in King YoY, up 86% in Seattle and 425% on the Eastside. But the number of new listings in the county is down 18% in the same period. They’re also down 19% in Seattle and 4.0% on the Eastside compared to last October. The number of Pending sales (homes under contract) in Seattle fell to 526 in October, the lowest mark for this month since 2011 (485). (Active inventory reflects unsold listings from all months as well as Pending sales, while the new listings figure is only for the most recent month.)

Properties are sitting longer on the market – an average of 28 days for all homes in King, 10 additional days than this time last year. Homes in the county are selling at 96% of their original list price, down from 104% a year ago. Eastside homes sell for an average of 95% of their original price, down 12 percentage points from October 2021. There was a drop of 5 points in Seattle (to 97%) from a year ago in final vs. original list prices.

Affordability is weighing heavily on buyers, including four in five consumers who now describe conditions for purchasing homes as “bad,” according to this month’s University of Michigan consumer sentiment survey.

Despite challenging times, median prices for all homes sold in the county rose 1.5% from September to October, to $811,000, and are up 8.1% YoY. Prices are 4.7% higher in Seattle since September to $850,000 and up 7.6% from last year. Eastside median prices were flat from the previous month at $1.2M and up 6.6% YoY.

Median prices in Southeast King (Auburn, Enumclaw) soared 50% YoY to $820,000 based on 21 sales. The Eastside was a puzzler, with median prices up 38% in West Bellevue ($2.625M) but down 18% in Redmond/Carnation ($1.012M)

Single-family-home prices added 3.2% in King since September and are 9.6% higher since October 2021. Seattle prices gained a surprising 5.6% in the past month to $950,000 and are up 12% YoY, even while prices are down 5.2% YoY in North Seattle ($782,250). Eastside prices were essentially unchanged at $1.35M from September to October and are down 1.1% for the past 12 months.

Looking at single-family prices compared to 2019, King County has experienced a 37% increase (from $660,000 to $903,000). Seattle prices have jumped 23% from $775,000 and Eastside homes have risen a whopping 50% from $900,000. (I hope you were sitting down when you read that last sentence! Again, these are price comparisons from only three years ago.)

“Seasonally, home prices tend to cool through the end of the calendar year,” Danielle Hale, chief economist of Realtor.com, said. “And I expect this year to follow that normal seasonal pattern.”

Give us some cooler prices – stat!

“We know that buyers in today’s housing markets are facing significantly higher costs – with the monthly mortgage payment for the median listing-price home up nearly $1,000 per month,” said Hale. “Many buyers cannot navigate the housing market in the face of these higher costs.”

The 30-year, fixed-rate mortgage recently broke the 7% level for the first time since April 2002, leading to greater stagnation in the housing market. As inflation endures, consumers are seeing higher costs at every turn, causing further declines in consumer confidence and hitting an all-time low by one measure. 

To be sure, buyers are now in the driver’s seat. We see more accepted offers below the asking price, with home-inspection and other contingencies included, and in some cases, sellers are offering financial assistance at the closing table.

The 2.1 months of available inventory for all home types and single-family homes in King County is the highest since January 2019, meaning buyers have great selection today. The Eastside has 2.0 months’ inventory while Seattle is at 2.5 months for all home types, including 6.1 months in downtown/Belltown.

Condo homes in the county are selling at a median $494,975, up 2.5% since September and up 4.2% for the past year. Seattle condo prices are up 4.7% in the last month, to $522,500, but down 0.5% YoY. Eastside condos are selling for a median $607,500; that’s 4.7% higher from September and up 10% from a year ago.

One of the region’s foremost real estate economists predicts a recession is months away. Matthew Gardner, chief economist at Windermere Real Estate, told a Puget Sound Business Journal conference last month that the recession will likely start in December or January and will be short-lived and relatively mild.

“King County employment will drop but it won’t be negative,” said Gardner, who expects employment growth to slow through the end of 2023, when he expects inflation to flatten out.

Gardner, however, said the region should “be very afraid” about housing affordability. The land share of home value in King County is an astounding 72%, according to Gardner’s analysis of property tax records. It’s the high cost of land that makes the price of homes unaffordable.

The National Bureau of Economic Research is generally recognized as the authority that defines the starting and ending dates of U.S. recessions. NBER defines a recession as “a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real Gross Domestic Product, real income, employment, industrial production and wholesale-retail sales.”

In addition to King County’s 1.5% median price month-to-month increase on all home types, to $811,000, Snohomish ($700,000) and Pierce ($525,000) saw prices unchanged since September while Kitsap experienced a 4.8% decline ($510,000). Single-family home prices in King jumped 3.2% in a month ($903,000). All other counties witnessed price drops from September – a hefty 5.0% decline for Kitsap ($513,250) and down 1.0% each for Snohomish ($730,000) and Pierce ($535,000). Year-to-year, single-family median prices remained higher but far lower than from 2021 levels – up 9.6% in King, 5.0% in Snohomish, 2.9% in Pierce and only 1.0% in Kitsap.