The Seattle-area housing market is dragging. Here’s why

The Seattle-area housing market remained lethargic in November, as high interest rates converged with the typically slow season. Home prices were essentially flat compared to the previous month and few new homes hit the market.

The median single-family home in King County sold for $885,500 in November, roughly the same as a month earlier. Even so, that price climbed 7% from a year earlier, according to data the Northwest Multiple Listing Service released Wednesday. Median home prices reached about $725,000 in Snohomish County, up 4% from a year ago; $540,000 in Pierce County, up 3%; and $550,000 in Kitsap County, up 9%. 

Sellers listed fewer homes in all four counties, with new listings in King County down 29% from October and 11% from the same time a year ago. The Seattle area recorded one of the biggest year-over-year drops in new listings in the U.S. last month, according to Redfin. Only Atlanta recorded a sharper drop, and San Francisco tied with Seattle.  

Fewer homes meant fewer sales. The number of pending sales was down all across the region in November, particularly in Kitsap and Pierce counties, where sales were down by double-digit percentages from a year earlier.

Many would-be sellers have been holding off for months, worried about affording their next home at today’s mortgage rates. 

“The move-up buyer is parked … They’re not going to leave a 2.5% [or] 3% interest rate to jump in,” said Bellevue Windermere agent Kelly Sublett.

The supply of homes for sale is likely to get even slimmer as winter arrives and homeowners hunker down for the holidays, Sublett said. “Inventory, which was already low, is dwindling even lower.”

Buyers facing costly mortgage rates are sitting still, too. That’s especially true for first-time buyers who are hit particularly hard by high rates.

“Everybody is sitting on the fence just waiting. I have so many buyers who will not buy right now because they just can’t,” said Poulsbo John L. Scott agent Lisa Diehl.

Many, she said, are “waiting for that interest rate to just dip a little.”

Mortgage rates remain high, but have begun to ease slightly.

The average 30-year fixed-rate mortgage carried a 7.2% rate last week, down from 7.8% in late October. “The current trajectory of rates is an encouraging development for potential homebuyers,” said Freddie Mac’s chief economist Sam Khater in a statement. 

But rates are still higher than a year ago, when they averaged 6.5%, and far higher than the ultralow 2.5% and 3% rates buyers secured early in the pandemic. Higher rates erode buyers’ budgets by driving up their monthly payments. For most buyers in the Seattle area, home prices haven’t declined enough to offset higher rates. 

All over the country, high mortgage rates throttled the market this year, slowing down home sales and leading fewer people to take out mortgages. 

Given current rates, “the purchasing power of prospective buyers remains stunted relative to a few short years ago,” Mason Virant, associate director of the Washington Center for Real Estate Research at the University of Washington, said in a statement.

Although buyers are finding fewer new homes on the market in and around Seattle, many homes for sale are lingering longer before they sell than at the height of the market frenzy a couple of years ago. 

The listing service estimates it would take between six and seven weeks to sell all the single-family homes for sale in King County, given current demand. That dynamic is a bit tighter than a year ago, when it would have taken about two months, but offers buyers more breathing room than in November 2021, when it would have taken less than two weeks.  

More than half of single-family homes and condos listed in October in the Seattle area did not go pending within 30 days of listing, according to John L. Scott.

In a slower market, some developers and home sellers are scrambling for new ways to entice buyers. 

A luxury Alki condo building announced in late November it would cut prices by up to 20% for the next six buyers if the buyers are under contract before the end of the year and close by Jan. 31, among other perks.

“It’s a sign of the times for developers right now, but we need to do what it takes to meet the market,” James Wong, CEO of the project’s developer Vibrant Cities, said in a statement. 

Some brokers expect the market to pick up after the new year. 

While potential buyers may walk into an open house at this time of year, “a lot of them specifically say, ‘I’m going to wait until January,’” Sublett said.

The recent half-point drop in mortgage rates has already pulled some home shoppers back to the market, said Crystal Hill, a Keller Williams agent with Chill Homes in North Seattle.

“I’ve definitely noticed an uptick,” Hill said.

If rates continue to drop and more homeowners decide to sell, “come spring, we’re going to have a pretty boppin’ time,” Hill said.

But affording a home won’t get much easier for those hopeful buyers on a tight budget, particularly if a drop in rates boosts demand and pushes prices up. 

“The young folks are going to really struggle,” Diehl said. “If they’re buying, they’re getting less of a home and in worse condition … That’s the reality of the market now”

Hill advises cash-strapped shoppers to make an “adjustment in your expectations” and look for other neighborhoods or smaller homes as a starting place.