Are Home Prices On The Decline?
Have real estate prices in the Seattle area and the east side come down? The short answer is they sure have. The median home prices for our area is down about 10%, where we were at a high of around $1 million in May, now we’re down to a $899,950.
So what’s causing these prices to constrict a little bit? Well, the predominant factor is the recent rise in interest rates. While the rates now reflect a more normal range now, of 5% to 6%, what we have seen over the past two years was a hyper low environment, lower than historical norms in rates and inventory. So, what does that mean for home buyers, well these new rates are going to be the norm for a while, and bear in mind these are still historic lows for rates, but it does affect the buying power of potential homeowners. In real terms what that looks like is this. If you are approved for a million-dollar mortgage a few months ago and you want the monthly payment for that mortgage to remain the same, that will put you at around $900,000 mortgage now.
In some ways you can say the price is the same. It’s about 10% off on interest rates and 10% off on home prices. So, what does that mean? Exactly for those looking to purchase a home? We think it’s still a great time to buy, there’s more available inventory for sure, and we are seeing more houses come on the market. While the stats show more houses came on the market through June and July, and then August shows that a lot of those properties went pending, this indicates that there are still buyers in the market that are seizing on the opportunities that are out there right now. Buyers have more choices than seen over the past year, and sellers are more willing to negotiate. So, if you’re afraid of those higher interest rates consider that sellers might be able to buy points as part of their selling strategy. Which means a discount on your interest rate, the result being your mortgage payments are kept lower over the long period of time.
As purchasers you can also look at adjustable-rate mortgages. We have actually seen FHA and VA and mortgages in the high 4% recently, so there are still options out there in the 4% range. What causes interest rates to go up? In essence the Fed raises the rate to try and curb inflation. Inflation rose to a forty year high of 9.1% and the thought was that it would go higher, however reports from August show that inflation actually beat the statistics and started to level out. We are starting to see that prices at the gas pump are down a little bit, so that’s always good news, and it can be an indicator of what’s happening with the inflation rate.
Now what does all this mean for individuals hoping to sell their homes? If your house has been on the market for a while and it hasn’t sold, then it might be time to do a price improvement to reflect the recent shift in home prices, that 10% drop that we mentioned earlier. Consider adding some incentives for buyers to want to purchase your house by buying the interest rates down, which as we mentioned before could be better over the long term for a buyer rather than the price reduction. You can get more, per se, on buying the buyers rate down than doing the price improvement, as you get closer to your asking price and the buyers get a lower monthly payment.
As always, consult a professional in the real estate industry, that’s what we’re here for. Troy has worked through two market cycles now, with over 20 years of experience. So, reach out to us,