The recent rise in interest rates – both for 10-year Treasury notes and mortgage loans – has added a level of anxiety to the housing landscape for buyers seeking a needle-in-the-haystack home, while prompting more owners to consider putting their place on the market as soon as they can finish laying new carpet and planting fresh sod in the front yard.
This convergence of events is reminiscent of just a few short years ago – 2018 – when the ferocious housing market cooled from rapid boil to rolling simmer. It was around April/May. Interest rates climbed about a half-point from the start of the year and pushed some buyer-wannabes back to the sidelines amid affordability concerns.
Since the start of this year, rates for a conventional 30-year fixed mortgage have risen by about a half-point, from roughly 2.875% to 3.375%, for Seattle/King County homes priced at or below $776,000. (Rates vary based on an applicant’s financial circumstances.) What’s going on? Institutional investors are slowly shifting money from safer-haven U.S. Treasury holdings into riskier investments, as they see positive signs about America’s slow return to “normal” following more than a dozen months of closures and caution. Selling bonds and notes typically send their prices lower and, more notable, yields higher.
Economists anticipated this development and feel the housing market will lose a level of selling intensity by the second half of the year. For now, though, sellers see an opportunity to take advantage of soaring home prices and consumers in buying-frenzy mode – at least through the peak spring season.
Some experts believe we will start to see a tipping point around Memorial Day, like 3 years ago (chart shows direction of all Active and Pending listings in King County since January 2018). This time, interest rates are climbing as the vaccination journey gains speed toward herd immunity. With the rise in interest rates, buyers’ ability to borrow will become more expensive and prompt some (or many) to back away from price wars. We are seeing a lot of craziness in the market right now, with single-family homes on the Eastside selling up to 25% above asking price – but for how long?
Come summertime, will consumers with slightly less purchasing power be looking to buy a home … or spending it with family on a vacation getaway for the first time in more than a year? My money is on the road trip and hotel stay … not to mention day trips to West Point Lighthouse in Discovery Park (pictured).
There is a lot of talk in our industry as well as on the other Capitol Hill about the Biden administration’s proposal for a $15,000 first-time homebuyer tax credit. If passed by Congress, funds from the First Down Payment Tax Credit could be accessed immediately by the buyer when closing the home purchase.
On its surface, the proposal sounds like a great tonic for what ails many people unable to secure enough funds for the down payment. After all, a new report suggests 60% of us cannot afford a median-priced home today. But digging a little deeper, many feel the idea is flawed and could make things worse.
Here and in most parts of the country, there are far too few homes on the market and a flood of interested buyers. By some measures, housing availability is at a 50-year low. This supply-demand imbalance has helped send prices up by a median 8%-18% in the four-county Puget Sound region compared with 12 months ago.
Selfishly speaking, we don’t need more people with $15,000 “gift cards” competing with the existing buyer pool. You think soaring home prices in King County are high now? Wait until you see the market after this Biden proposal is signed into law.
Don’t get me wrong: We are all in favor of Americans jumping off the rent rollercoaster and hopping on the highway to homeownership – especially among minorities, where ownership is falling – but at what price? In addition to the first-time buyer credit, there must be another way to solve our inventory issue.
“What I think needs to happen,” says realtor.com Senior Economist George Ratiu, “is to address the new-home construction market because, to a large extent, that’s where our [housing] deficit really lies.”
He’s right. Home builders are cranking out quality homes as fast as they can but there aren’t enough people to hammer in nails and pour concrete. A recent survey of national builders showed rising construction costs, heavy oversight from local government and a lack of skilled workers among top concerns for national builders. (New-construction homes in the U.S. climbed by a median of $16,000 in the past year because of rising lumber prices alone.)
“In the wake of the last recession,” notes Ratiu, “a lot of people left the construction industry permanently … and builders haven’t recovered from that.”
Shouldn’t the government develop a program that helps incentivize people to take up trade skills as well as retrain the unemployed to increase the number of builders and support members?
To butcher the great line from “Field of Dreams:” “If they build it, they will come.” Well, right now, more of them – buyers – may be preparing to come whether it’s built or not.
And another thing(!) … there are already down-payment assistance programs geared toward first-time buyers in every state. Washington has a good array of programs developed by the state’s Housing Finance Commission to help consumers defray the costs of the down payment.
Will the Biden proposal alter existing assistance programs? I put the question to Dietrich Schmitz, Down Payment Assistance Program Administrator in our state:
“It is honestly not possible to predict the outcome of it until some changes are actually implemented. In the final analysis, we are here to make home ownership more obtainable for the residents of Washington and will always continue with our programs to do so.
“From my personal perspective, having a greater inventory of affordable homes for first-time homebuyers is going to be key with this, as even with a great program, there has to be homes for people to buy.”
You can read more about the different assistance programs from the Living the Dream blog archive. And buyers can learn about the many down payment myths debunked.
In addition to constructing glass and steel high-rises across our region, builders are actively putting up multi-family homes. Those traditional two- to four-unit residential buildings are growing in popularity in suburbs and outlying city areas.
About one-third of multi-family building has moved to lower density markets over the last year. In fact, the National Association of Home Builders reported the Marysville-Anacortes area is the third-most active region in the country for multi-family construction. (Jackson, Miss., topped the list, followed by Mankato, Minn.) For the Snohomish/Skagit county area, this push for more multi-family homes is likely in response to an increase in migration trends from cities like Seattle and San Francisco.
Why are people moving – because they can or because they must?
A study from the Puget Sound Regional Council (PSRC) explored why people pull up stakes and move. The report covered a five-year period before the pandemic and shows that 26% – about 163,000 local households – relocated due to one or more displacement factors.
A quarter of the households who moved within the region between 2014 and 2019 relocated because of rising housing costs, falling incomes or loss of community. One in five white households (22%) felt pressured to leave their homes, as did 14% of Asian-American households. But nearly one in three (30%) of households consisting of “other people of color” (including African-Americans, American Indian or Alaska Native, Native Hawaiian or Pacific Islander, Hispanics and multiracial groups) moved elsewhere because they had to.
Displacement hit households with seniors harder, the study showed. About one in three households with someone over 65 had a negative reason for leaving their previous residence. For all other households, it was around one in four.
February’s housing report from the Northwest MLS saw a continuation of low inventory and frenzied activity among buyers. The result: home prices that were through the proverbial roof.
How hot is the market? This mid-century rambler in the Lake Hills section of Bellevue listed in January at $719,950. The home is likely a tear-down (no offense to the sellers) and yet it fetched $900,000, or 25% above asking, after being on the market 2 days.
Our ultra-competitive market is great news for the few owners willing to put their home on the market. February median prices rose 10% year-on-year (YoY) across all home types (condos, townhomes and single-family detached houses) in King County, to $679,075, and up 11% for single-family only ($750,000).
Drilling down, single-family home prices on the Eastside gained 28% YoY, to $1,265,000, and 10% from January alone. The sharpest YoY increases were in the area south of I-90 from Factoria and Newport Hills to Issaquah and Upper Preston, where prices rocketed 34% YoY (after a 42% YoY rise in January), to $1,312,500. The exclusive area West of I-405 in Bellevue (including Medina) saw prices jump 17% YoY ($3,108,370) and a whopping 25% from January.
Seattle single-family residential prices rose 9.2% in the past 12 months, to $798,000, led by a 13% increase in Queen Anne/Magnolia ($1,121,000). Southeast King County (Auburn, Covington, Maple Valley) remains hot, with median residential prices up 15% for the year and 9.1% month-to-month, to $600,000.
Total number of single-family homes for sale is 41% lower than a year before across the county, including a 57% deficit in listings on the Eastside and 56% lower in Southeast King. Only pockets of Seattle (SODO/Beacon Hill and Southeast Seattle, east of Rainier Avenue South, around Seward Park) experienced significant increases in listings from a year ago.
The condo market continues to offer a wider selection of homes. Seattle – and Capitol Hill/Central District in particular – has 84% more listings today than this time last year, at a median $475,000, down 1.3% from 2020. Downtown/Belltown condo prices tumbled 11% YoY and were off 10% from January, to $617,450. Meantime, Eastside median prices were headed in the opposite direction, up 13% YoY, to $537,060.
Inventory of single-family homes in King worsened from January, now at 0.6 month (or 18 days’ remaining supply if no other listings hit the market), from 0.7. Seattle months of inventory slipped to 0.8 from 1.0, and Eastside remained unchanged at 0.6. Condo inventory shrank in most parts of the county (1.5 months from 1.7) and in Seattle (2.8, from 3.5).
Elsewhere, single-family prices were up in Snohomish County (21% YoY), Pierce (17%) and Kitsap (7.4%). Condo prices soared 19% in Pierce and added 2.8% in Snohomish but fell 8.1% in Kitsap. Combining single-family and condo homes, inventories for each of these counties were about 0.5 month.
Click here for the full monthly report.
Our state Legislature is taking up a proposal that would require permanent removal of racial covenants from property title and deeds. These covenants and deed restrictions, while not enforceable, are an explicit legacy of racial discrimination in housing that must be vanquished.
Since 2018, Washington homeowners could take action to remove the language from their title and deed – if it were present – but now Olympia is stepping up to systematically expunge this discriminatory language from existing documents.
If enacted into law, HB 1335 would establish a team from universities to review all such language and alert affected property owners. Owners would be informed how they can take the legal action to have the wording removed from property documents.
The proposal also would add to the Seller Disclosure Statement – a survey about the condition of the property completed by the homeowner before selling – a notice to buyers that covenants or deed restrictions based on race and other protected classes are unlawful and specifies the methods by which such restrictions can be struck.
In addition, Realtors® are required to notify buyers at the time of sale of any recorded covenants or deed restrictions that includes unlawful racial or other restrictions on property ownership or use against a protected class.
These are all great steps forward to establishing equity and inclusion in real estate, a topic our company CEO, Lennox Scott, opined about in a recent article.
The proposal is still in review by lawmakers, but it is expected to win approval and receive the governor’s signature.
Living Life as a Contribution® is the core value to John L. Scott Real Estate. Starting from the top, with aspirational messages of support from Lennox Scott, right on down to community participation from the firm’s thousands of agents and staff, we strongly believe in helping one another – especially children.
The John L. Scott Foundation sponsored 25 events for 17 children’s hospitals in 2020, which helped raise more than $10 million for children’s healthcare. For many years, the foundation and people with ties to John L. Scott offices in Western Washington have participated in delivering freshly prepared dinners to the families at Ronald McDonald House in Seattle. Those dinner events were halted during the pandemic, but the foundation and John L. Scott agents continued to support them by providing residents with catered meals. It was the least we could do during this difficult time!
I personally cannot wait to get back to the Ronald McDonald House kitchen and partner with my John L. Scott agents in Seattle to make a great meal for the families who simply need a helping hand in the middle of dealing with their own crisis.
To be sure, 2020 was a terrible year on many levels but for John L. Scott, its foundation and wider family, it was an unprecedented time to help others across the Pacific Northwest. I couldn’t be prouder of our effort to live life as a contribution.
We may only be in March but there are a surprising number of interesting luxury homes on the market.
>> Starting with one of the priciest listings on the MLS, First Hill Plaza is one of the all-time classiest condo high-rises in the city. It has been home to some of the most successful people in Seattle – lawyers, doctors, entrepreneurs. A well-known property management company owner is selling one of the condo’s penthouses – a 6900+ sq. ft., 4-bedroom, 5-bath, 32nd-floor stunner. The home includes a separate guest suite with kitchen. Did I mention the deeded 6-car garage parking spaces? The property was first listed in 2019 at $15.885M, with no takers. It’s now up for grabs for $13.5M ($1951/sq. ft.).
>> If you’re looking for something a little closer to the water (and under eight figures), how about a home within a hotel? Four Seasons Residences in downtown has a $9.75M ($3110/sq. ft.). The home includes 2 bedrooms, 2.25 baths across 3135 sq. ft. … and the most amazing west-facing views the city (including the Great Wheel) has to offer. Have a look.
>> Escala is one of the great luxury condo buildings in the city and it is the fictional home of the “Fifty Shades of Grey” trilogy. It’s also home to a wonderful 3-bedroom, 3.5-bath, 2-office, 4220 sq. ft. home with outstanding views of the bay, mountains and city. Resting on the 24th floor, this place has it all: chef’s kitchen, spacious walk-in pantry, 140-bottle wine fridge, custom-made wood treatments on walls and ceilings … and plenty of space for your own art collection. Plus, there are three balconies! The home has been on and off the market since 2018, when it was listed at $8.588M. Now you can get it for a steal: $6.895M ($1634/sq. ft.).
>> West Seattle offers some amazing mid-century homes with breathtaking views. Take this 3-bed, 3.25-bath, 3399 sq. ft., 1 ½-story manse, created by the late Al Bumgardner in the 1950s with contemporary updates from Ben Trogdon, both noted Seattle architects whose firms remain design stalwarts today. The home, in the Arbor Heights neighborhood, offers 180-degree westerly views and is located on one of the furthest points forward on a bluff overlooking a protected 10-plus acre preserve, part of which comes with this purchase. While you may hear or read a home is “quite unique,” this one frankly speaks for itself. When you see the property, it’s hard to believe the grounds are in a major city. Asking price: $2.895M ($852/sq. ft.), a steal in this market. UPDATE: The home is now in Pending Inspection status.
>> How would you like to own an award-winning home on the lake? You can if you have a few million dollars. This luxury Lake Union floating home offers 2-bedrooms, 2.25-baths, 1632 sq. ft. plus a 1000 sq. ft. land-based utility room. Check out the seaplanes and boats on your doorstep, as well as the clean, contemporary lines of this jewel box, honored as a “Home of Distinction” by Seattle’s chapter of the American Institute of Architecture and featured in Seattle Magazine. The home came on the market in September at $3.65M but is now “discounted” at $3.25M. UPDATE: This home went Pending on March 9.
>> I don’t usually share Pending listings since the buyer and seller have mutual agreement but this one is worth a look. It’s a 6-bedroom, 2.25-bath, 3820 sq. ft. tri-level home in the Leschi neighborhood of Seattle. Check out the intricate details in this lengthy listing video and read more about the home’s brief connections to Pearl Jam. This old-time masterpiece (the home, not Pearl Jam!) was listed for $1.845M. UPDATE: The sale was just consummated at a price of $1.825M ($478/ sq. ft.).
>> Want to get away? I know just the place: A stunning home with dynamic views on remote Blakely Island! The property is big – 5 bedrooms, 3.5 baths, 3652 sq. ft. and 19+ acres on the southwest-facing waterfront. You can completely disconnect, as long as you’re willing to part with about $2.55M. Blakely has one general store and is the largest island in the area without ferry service – BYOB (bring your own boat). UPDATE: Sorry, gang, but this property also just went Pending Inspection.
>> Speaking of remote and rustic, here are a look at some of the log cabin homes on the market across Washington – just for fun. [Contact me for more details.]
Whether it’s a luxury home or your first-time-buyer condo, let me help open new doors for you.