Seattle Is America’s Fastest Cooling Housing Market, Says Redfin – The Seattle Times | Jewelry Dukan

The Seattle-area housing market has been cooling faster than any other place in the country in recent months, demonstrating that rising interest rates are putting pressure on an expensive market.

This analysis comes from Seattle-based brokerage firm Redfin, which ranked US metro areas based on how quickly their housing markets are slowing.

The 10 fastest-cooling markets include long-priced areas like Seattle and San Diego, as well as cities like Phoenix, which have seen large influxes of new residents during the pandemic.

“These are all places where homebuyers are feeling the sting of rising house prices, higher mortgage rates and inflation very strongly,” Redfin chief economist Daryl Fairweather said in the report.

Redfin’s analysis compared a number of factors in the country’s 100 largest metro areas, including prices, sales, inventory and how many properties fell in price while awaiting a buyer. The brokerage business includes King and Snohomish counties in its Greater Seattle measurement. The Tacoma area, which ranks #10, is included in Pierce County.

After two years of home price rises, bidding wars and all-cash offers, the past few months have marked a remarkable turnaround.

According to separate data from the Northwest Multiple Listing Service, pending sales last month in King County fell about 27% compared to the same period last year. Though King County’s median home price was still up $899,999 from 2021, it fell nearly 10% from May through August.

Drivers of the downturn: rising interest rates, a weakening stock market and general uncertainty about the economy.

As the Federal Reserve tries to control inflation, rising mortgage rates are directly impacting the bottom line for buyers — especially first-time buyers.

A 1% increase in the interest rate can reduce a homebuyer’s purchasing power by 11%, said Curt Tiedeman, a credit counselor at Caliber Home Loans in Issaquah. The average interest rate on a 30-year mortgage last week topped 6 percent for the first time since late 2008, according to Freddie Mac. This rate has increased by almost three percentage points since the beginning of the year.

“So people lose 20, 25, 30% purchasing power,” Tiedeman said.

For a $775,000 home in the Seattle area, the typical mortgage payment would be about $3,300 at a 3% interest rate and $4,400 at a 6% interest rate, according to Redfin.

This drives some buyers out of the market altogether.

“In the market for first-time homebuyers, when they barely qualify for a home in the area they’re looking for, a small change in the interest rate could put someone out of the market altogether,” said Sally Li, a broker at Beacon Hill Realty.

Prices drove a buyer looking for a new home in Everett “ever and farther north” until he finally decided to postpone his search, Li said.

“Although prices stagnated… only the interest rate alone changed its trajectory,” Li said.

Inflation and the stock market are also hurting homebuyers’ budgets, particularly in tech hubs, where many buyers rely on stock options from their employers.

Redfin’s analysis tracks various indicators that compare the housing market to the same time last year.

To show how the market has cooled, the report compares these indicators in August to the same numbers in February, as in many places “the housing market peaked in terms of demand and competition while the number of homes for sale was low a low,” says Redfin. More houses usually come onto the market in the spring.

In Seattle, home prices rose 15% year over year in February. In August, they were up just 7% year-over-year.

The number of homes for sale fell 36% in February, indicating a competitive market for buyers. Inventories rose 78% in August. In February, brokers lowered prices on 11% of listings. In August: 48%. These are all signs that the market is cooling off.

Tacoma showed similar signs of slowing down.

The median home price rose 16% in February and 7.5% in August year-on-year. While 87% of Tacoma-area homes were off the market within two weeks in February, it was just 39% in August.

With fewer buyers competing for each home, homes stay on the market longer. Sellers lower prices and share in closing costs. Buyers can exercise their right to inspect and other eventualities.

It all represents what Tiedeman now calls a “trade-off” for buyers: higher interest rates but more influence on sellers.

With interest rates still rising, even those who may qualify for a loan may not be happy with the price. “Just because you can afford to pay $4,500,” Li said, “doesn’t mean you really have to go there.”

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