Seattle Real Estate Market Watch – 10/20/2022

Hey y’all, Zach McDonald, your real estate agent with Real Property Associates, and this is my Seattle Market Watch for October 20th, 2022.

As we jump into this video, quick reminder, we’re looking at data and stats from the past week. Residential data from King en Snohomish County. So those are both in the Seattle area kind of surrounding the city and then up to the north. Both are considered part of the, you know, Seattle metro area. As we’re diving into this report, I’m gonna talk a little bit about just some of the quick stats here. And this is not gonna be numbers specifically, not the fun, sexy numbers. If you want to see the monthly data, we talk about that on a monthly basis in our Seattle market updates, and we publish those kind of early mid month, the following month. This is just a quick snapshot of what’s going on in the market for the week. We’ll talk about interest rates a little bit, which we’ll focus on a little bit, and then I’ll share a few thoughts about new construction that I think will be interesting as we finish up the video.

Let’s zero in on the market snapshot piece here, and we’ll start with the new listings for the week 710 new listings we had if we jumped back down to the, towards the bottom listings pending 734, so more pending listings than the new listings there. and then listings sold, 648 listings sold. and then if we jump up again towards the top here, list price reduced 803. So we’re still seeing a lot of price reductions in the market. We’ve been seeing price reductions consistently in large numbers as we’ve been doing these market watches, and we’re few months into these now maybe three plus months at this point where we’ve been doing weekly market watches. And the intent with these is really just to look at the numbers on a weekly basis and kind of see what’s happening as it’s happening. I think the rates are really what people have been wanting to focus on and look at because the biggest shift that I’ve seen here over the past few months is the demand is what’s been changing the most.

So we had the hottest real estate market we’ve ever seen ever in Seattle, and Seattle was one of the hottest in the whole country. And recently it has been in the news for being one of the biggest to drop or the biggest drops in the country here as the market’s been shifting across the country. And when we look at what was happening in Seattle, multiple offers house to selling 10, 15, 20% over asking price, which we’ve never seen. House is selling that far above asking price before. The biggest difference between where we’re at then and now is the demand. And there are things we can point to and reasons why the demand’s less the stock market’s down, right? So people have less money, their, their wealth is down. Some people have their wealth tied up in the stock market, so they don’t necessarily wanna sell.

We see that mortgage rates are higher, so they can’t afford as big of a payment or they don’t want to afford as big of a payment. mortgage rates, I would say are arguably one of the biggest factors here contributing to the pullback in demand. But then the other piece is that people are afraid and not sure what’s happening. Inflation is causing real fears and inflation is something that we need to be paying attention to. And there have been a lot of there’s been a lot of focus on inflation right now and, and the conversations in the news are very much centered around that and interest rates. And I think right now we’re trying to get the economy to slow down. And some would argue it is, some would say we’re not there yet. I’ll leave that to the experts, but I think that right now what we’re seeing in what’s affecting the housing market are these rates and mortgage news daily.

their rate today is their largest one here on the chart. and their, their chart doesn’t even go back, at least the snapshot version far enough to show rates being this high but 7.37% for a 30 year fixed rate. And if we look at Freddie Max survey, theirs is a weak snapshot in looking at the past. And that’s gonna be a 6.9399999999999995% rate with 0.9% in fees. And the fees or points that you pay to get this rate is essentially a percentage of the loan amount. So let’s just say we had a $500,000 mortgage, a percent of that’s going to be, well, $5,000. So at this point, in order to get that rate, you’re also paying $5,000 extra in closing costs to get that rate. But looking at the rates here, we’re up from last year at the same time, around 3% to up over or close to in on their survey, 7%, which according to their math, is up 3.85% year over year, massive. So rates have gone up more than they were even at, at the same time last year. And I think they’re a blurb. We’re gonna jump to their blurb and I don’t always read this, but I think we’ll read it today because it kind of ties into what I wanted to talk about here as we wrap up. And that is new construction. So the 30 year fixed rate mortgage continues to remain just shy of 7% and is adversely impacting the housing market in the form of declining demand according to Freddie Mac. Additionally, home builder confidence has dropped to half what it was just six months ago. And construction, particularly single family residential construction, continues to slow down. And this pairs really well with a recent article that I read from the National Association of Home Builders, where they’re talking about confidence and their confidence index and their confidence index has been down for 10 months in a row.

And now we’re seeing that that confidence is dropped by about half. And I think that’s kind of scary to me and not in maybe the way you would think. I have some f very good friends that are builders that are sitting on the sidelines now with their purchases. They’re trying to finish up some of their projects and sell off their projects, but they’re gonna pull out and just kind of see what happens. Watch the market they don’t need to build. But what happened during the, the last 10 years is we haven’t had enough new construction to keep up with the demand, at least in the Seattle area. but if we look at charts and graphs, and I’ll, I’ll show you one right here, but as we’re looking at this graph, this is, this shows how much new construction was built in the previous decades, and then we get to the last one and we’re like, what?

Like we didn’t build very many houses around the country. New construction’s a lot bigger part of the real estate market, the Seattle area, there are a lot of auxiliary markets outside of the core, but a lot of the real estate and new construction in and near the city is urban infill one house at a time, a couple townhouses here and there are small little development. It’s not the same scale as you’re seeing, you’re not building massive communities as often, not near the city. You’re out a lot farther, but around the country there’s a lot more of the larger communities being built. Well, we’ve also seen that the demand in those areas has dropped off a lot for the new construction. Again, it’s not as big of a factor here in the Seattle area, but the new construction is also seeing prices reduced. And that’s tough because builders are having increased costs, right?

And they’re not selling for as much as they thought they might, and so they’re not walking away with as much. So the incentive to build is down, but the fact that we still need the new construction, we still need the housing is there. In the Seattle market, we are seeing 10, 15, 20, 30 offers on houses. Not every house, but most houses we’re having multiple offers and the demand’s gone right now for buying, but the people are still here. And Seattle hasn’t been keeping up with the demand for housing. We’ve been super, super low supply. I haven’t had enough inventory. And again, the demand’s down, so there’s enough right now. But what happens when things change? Again, what if people aren’t building and the demand’s already, again, the demand’s on the sidelines, but if the demand comes back and there’s no new houses, then we’re again, back to the same problem.

We just don’t have enough houses for all the buyers. And it’s gonna be the same in some of these other bigger markets around the country too. If we’re not building new stuff, what’s gonna happen in the future, right? Maybe not immediately. There won’t be an issue, but there might be an issue in the long run, again, with just supply. So I understand builders sitting on the sidelines. I think it makes sense for a lot of people. there are mortgage companies going under right now and some of them are just going under because well, it makes more sense to pull out while you’ve made the money and get out and not lose anything and protect what you have. Some of them, some of them are in a tough spot, but others, these owners have made billions of dollars and they’re just like, you know what?

I think I’m good for now. I think I’ll sit out, see what happens, and I’ll jump back in when the market gets better. And of course that affects a lot of people that work for them. They have to go find jobs elsewhere. But I think there’s a lot of protecting happening right now to what people have gained o over the last few years. But I think the ramifications might be pretty large. So we’ll see what the future holds here. Obviously I don’t have a crystal ball or know the future, but as I’m looking at builders sitting on the sidelines, yeah, they’re obviously concerned about the market and so was everybody else. But I think what that means for the long term is that we’re gonna have still this competition and lack of inventory because new construction’s the way we’re gonna get more inventory or mass exodus. Thanks so much for tuning in to this week’s Seattle Market Watch. If you got some value out of this video, please give it a thumbs up. And if you want to follow along with the channel and hear my thoughts on a regular basis, please consider subscribing.