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Market Minute | August 2023

Real Estate

Market Minute | August 2023
Home values are stable. That is the single most important takeaway of what I'm about to share with you, which is a good thing! The median sales price for the city of Seattle was $880,500 at the close of August 2023, which is down 2.7% since August 2022.
 
If you compare the current median sales price to January 2023, the median price has increased by 10%. How we choose to look at and analyze data matters. We can't look at one metric or timeframe. We must look at various data points along the way to tell the most accurate story about what's happening in the real estate market. Because, as you can see, home values can be both up and down within a one-year period.
 
To answer the most popular question in real estate (Is now a good time to sell/buy?), we have to consider these factors, too:
 

How fast, and how many?

Understanding available inventory is a crucial metric to understanding the mechanics of the real estate market. How fast are properties selling? And, how many properties are available for sale? These types of statistics tell us how quickly a market is moving, and how competitive the landscape is for a buyer (and seller). This is what creates inventory data. Usually, the lower the inventory, the higher the absorption rate.  Currently, there is 1.5 months of available inventory. This means it would take 1.5 months to sell all available single-family homes in Seattle. This number hasn't shifted dramatically in the last year. It has shifted nearly one whole month since August 2021, but the market is still moving incredibly fast. 

What are home values historically?

Home values are a finicky thing. But, there is one thing that's not finicky - values. They keep going up. Seattle home values have been steadily on the rise for the past ten years. Values have increased 125% since January 2013. This isn't unusual. Many cities around the nation have experienced similar-paced growth in values. It's the nature of real estate, which is why it makes for a smart longterm investment.

It can be hard to objectively assess a home's values as a homeowner and buyer. It's a bit too emotional. I get caught in this trap myself as a homeowner and feel my home is worth more to me than any potential buyer! But, there is data behind home values, and it serves as a guide to set reasonable expectations about what your home is worth. A good real estate agent will then be able to advise on your exact position in the dataset based on the condition of the home, its location, and upgrades.

Do a seasonality reality check.

It's easy to be caught off-guard by the seasonality of the Seattle real estate market. Prices and sales always dip from October to January. This usually peaks in January, so listing your home after January is bestFor a buyer, this time of year can be a great time to secure properties at or below fair market value, and with much less competition. This means that you get to write offers with contingencies in place, allowing for a much more relaxed home-buying experience. This is also the time of year when we negotiate great deals for our buyers. 

This year has been particularly slow, home sales are down 31% in Seattle. We're expecting the remaining months of 2023 to have similar cadence, and for the spring market in 2024 to ramp up in early March. Lauren and I are working on some classic Seattle homes for the spring market and have a few other sellers waiting in the wings. It's hard to know when the time is right to sell, we can help with that. In fact, it's our specialty.

 

To buy, or not to buy?

We say yes. IF you can afford to do so. Prices are slowing for the first time in a long time. Not dramatically, but it's entirely possible values increase 10% once interest rates drop to a certain threshold. If that's the case, you'll save about $18K-$25K on your down payment and closing costs if you purchase now. The monthly mortgage payment at current 7.125% interest rates will be lower (or similar) than your future payment with the potential lower interest rate of 6.5% or 5.75% because home prices are lower, and you're borrowing less money from the bank. Therefore, you are paying less interest over the lifetime of your loan.

Take a look at the payment scenarios below. We have also factored in a refinance in the future because we don't let our clients miss an opportunity to lower their monthly payment and reduce the amount of interest paid! It's likely a refinance will lower current mortgage payments by $1,000-$1,800/mo depending on the size of the loan. Imagine your payment reduced from $5,576/mo down to $4,235/mo. That's a $1,341 per month savings. I'm going to say that again: a $1,342 per month savings on your mortgage payment. Why wouldn't a consumer capitalize on this time in the marketplace?

Even if values didn't increase 10% over the next few years and remain flat. You'll still have a lower monthly payment with the refinanced payment. The math behind waiting doesn't really add up. Yes, there is cost involved with refinancing a loan, but you will recover those costs in 3 months to a year with the savings on your monthly payment. It's expected that values will continue rising in the metropolitan area over the next few years. Sure, waiting for interest rates to come down feels like the logical thing to do. But, it seems100% likely to cost home-buyers more money.

To sell, or not to sell?

This question is a little more difficult to answer. It all depends on where you're heading next and your goals for the property sale. Many of our clients are sitting on 10-30 years of home equity, and aren't chasing top-of-the-market sales prices. They care more about the costs associated with preparing their home for market, the hard costs of selling (fees, taxes, etc.), and their exposure to capital gains taxes. Another segment of our clients are hopeful to sell their starter home and make the move into their next home. In this case, they're in the tough position of deciding when the time is right to capitalize on lower purchase prices and potentially forfeiting a higher future sales price on their first home.

The bottom line is to make real estate decisions that align with your life goals and financial reality. We're here to help ask you tough questions and provide sound advice so that you're equipped to make these challenging decisions. If you're considering a move in 2024, now is the time to connect. Let's get your consult scheduled sooner rather than later - we know you have questions you're dying to ask us!


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