Seattle-area home sales fall amid stubborn-high mortgage rates, prices

You’re not the only one feeling sluggish as the damp weather and the Big Dark set in. Seattle’s housing market is hunkered down, too, as would-be buyers and sellers stay out of the fray. 

The number of pending single-family home sales in King County last month was down nearly 15% from a year ago, according to new data released Monday by the Northwest Multiple Listing Service. 

The drop illustrates that the chill in the market is more than a typical fall slowdown. Home sellers and buyers made 44% fewer deals in October than in the same month in 2019, before the pandemic and low interest rates fueled a frenzy in the local housing market. Pierce, Snohomish and Kitsap counties recorded a similar trend.

“There is a lot of hesitation both on the buying and selling side,” said Anna Morgan, a John L. Scott agent whose office is in Bellevue, though her clients span the Greater Seattle area.

While some listings still draw bidding wars, “we have exited a market where decisions had to be made in a 24-hour period, you had to pay way over asking and waive contingencies to compete,” Morgan said.

With that slowdown, Seattle-area home prices have been mostly flat for months. 

The median single-family home in King County sold for nearly $883,000 in October, down 2% from September and down 2% from a year ago. Median homes sold for about $730,000 in Snohomish County, virtually no change from a year ago, and $530,000 in Pierce County, down 1%. 

Some areas were outliers in October: In Kitsap County, the median single-family home sold for $556,000, up 8% over last year. In King County, tight inventory especially in outlying areas kept prices from plunging. In North King County, the median single-family home sold for $850,000, up 9% from a year earlier. Compare that to Seattle, where the median single-family home sold for $900,000, down 5%. 

Saddled with high interest rates, some buyers are seeking more affordable areas outside Seattle, Morgan said. “That is an easier entry point,” she said. In recent years, “a lot of people flocked to those areas for that reason. That definitely is still happening.”

Mortgage rates leveled off a bit in early November as the Federal Reserve opted not to raise interest rates. Still, the average 7.8% rate in late October was the highest since 2000, according to Freddie Mac. 

All over the country, those rates are contributing to slowing sales. The volume of home sales this year is on track to be the lowest since the Great Recession in 2008, Redfin economists predict.

Without more homes for sale, sluggish demand is unlikely to dampen prices dramatically, economists say.

“You only really ever get any systemic decline in prices when you’ve got too much supply and we haven’t,” Windermere economist Matthew Gardner said in an interview.

New listings were sparse in King County last month as the local market entered the typically slower fall and winter months. The number of single-family homes listed in King County dropped 26% from September to October. Condo listings dipped 24%.

Many homeowners with ultralow interest rates are holding off on selling for fear of encountering today’s higher rates once they enter the market as buyers. That is limiting the supply of homes for sale and keeping prices from plummeting.

But there may be more reasons would-be sellers are hesitating. A recent Fannie Mae survey asked homeowners if they planned to stay in their homes longer than originally intended and why. The survey found that while many homeowners with mortgages cited their low rates as reasons for staying put, many also cited other reasons. They liked the location, were near their job or family, felt home prices were too high to shop for a new home or were baby boomers hoping to age in place. 

Rock-bottom interest rates in the early years of the pandemic also pushed many millennials and others to buy homes sooner than they might have otherwise, “pulling forward home listings and sales that likely would have been more evenly distributed in subsequent years,” Fannie Mae researchers wrote. 

All those factors leave fewer people interested in listing their homes for sale today. Yet, even with few homes on the market, sellers who do list their homes have to get realistic as buyers grapple with high costs.  

“Some sellers are pricing too high because they have FOMO after their neighbor’s house sold well over asking price two years ago,” Seattle Redfin agent Patrick Beringer said in a report Friday. 

With buyers and sellers in a stalemate, the future is hazy.

The winter typically brings a lull in the market. Then, Gardner said, all eyes will be on interest rates to see if sales pick up next spring. Gardner projects rates could dip to 6% next year and in the 5% to 6% range in 2025 but says they’re unlikely to reach pandemic lows. 

“Anyone [who] sits out there saying, ‘OK, I’m just going to wait until I get a 3% mortgage again,'” Gardner said, “they’re going to be waiting a very, very long time.”