Three key elements to pay attention to when assessing prices and the real estate market.
As we round out the first quarter of 2023, three real-time trends that help us understand what is currently happening in the real estate market are absorption data, interest rates, and inventory levels. Right now, the market is heating up due to seasonality, pent-up buyer demand, and rates finding their new normal. The media often lags in reporting the latest information (pending sale data) and uses closed sale data, which is outdated. I will share frontline market activity, so you are connected to the most current data.
Let’s start with absorption data. Month-to-date (3/1/23-3/27/23), days on market are shrinking and sale price to original list price ratios are climbing. This means that houses sell faster, and negotiations are more competitive for buyers. I have collected data from Snohomish County to King County and analyzed four zip codes: 98296 (City of Snohomish), 98020 (Edmonds), 98155 (East Shoreline), 98117 (Ballard).
Available inventory is constricting due to an increase in absorption and new listings lagging. As we head into spring, we will see a seasonal uptick in new listings which will be welcomed by a healthy buyer audience. Month-to-date, inventory levels based on pending sales show we are in a seller’s market (0-2 months). Months of inventory is calculated by taking the number of available homes and dividing it by the number of pending sales. If no new homes came to market the trend suggests we would sell out of homes in this amount of time. I pulled the data for the four zip codes to represent a sampling of both Snohomish and King Counties.
Both of the trends above, absorption and inventory, have been determined by buyers becoming more comfortable with the new normal of interest rates. The correction in the market that we experienced in 2022 was a result of a 3-point increase in interest rates. After prices adjusted to levels that would work with the higher rates, buyers started to return to the market. 2-3% and maybe even 4% interest rates will be folklore we tell our grandchildren about. People that want to make a move have come to terms with adapting to the higher rates and making these important life transitions. Today’s rates are much more in line with the average over the last 30 years.
At the start of 2023, the 30-year fixed mortgage was at 6.48%, then dropped to 5.99% in early February, peaked at 7.1% in early March, and is now back down to 6.54% at press time. Rates have been volatile as the Fed tries to manage inflation. You can access a video below from Matthew Gardner explaining the effect of Fed decisions, the recent bank failures on interest rates and the real estate market overall.
One item to note is that mortgage rates are long-term interest rates, and when you hear about the Fed raising rates they are referring to short-term rates such as car loans, credit cards, and home equity loans. The media does not make that distinction, often confusing the public. In fact, in some cases when the short-term rate has been increased, we have seen mortgage rates drop. Here is a great website to follow to get a real-time read on rates.
Interest rates finding their way, the psychological acceptance of the new normal, and people needing to make moves to adapt to their life changes have led to prices starting to stabilize and even grow in some markets. In analyzing the month-to-date median price data for the four zip codes, it appears prices are leveling and growth is happening or will be in the near future. The good news is that 93% of all homeowners in the U.S. have positive home equity and 48% of homeowners have more than 50% equity.
When I am asked the question, “How’s the Market?”, I am always curious to know what you have heard and what you want to learn about. Sweeping statements can be misleading so I am committed to diving into the data to educate my clients on how the trends affect their investments and their lifestyle.
I hope you call on me when your curiosity is piqued, or you have an emergent need in your world related to real estate. I take pride in understanding the latest trends and helping you apply them to your goals. Also, if you know of anyone that needs real estate help, please pass my name along or get me in touch with them. Your people are my people and helping them stay well-informed to empower strong decisions is my mission. As we encounter change and recalibrate, this expertise will be more important than ever; I am honored to have your trust and endorsement.
You’re invited to our annual Paper Shredding Event & Food Drive. We partner with Confidential Data Disposal to provide a safe, eco-friendly way to reduce your paper trail and help prevent identity theft.
Saturday, April 15th, 10AM to 2PM*
4211 Alderwood Mall Blvd, Lynnwood
Bring your sensitive documents to be professionally destroyed on-site. Limit 10 file boxes per visitor.
This is a paper-only event. No x-rays, electronics, recyclables, or any other materials.
We will also be collecting non-perishable food and cash donations to benefit Volunteers of America Western Washington food banks. Donations are not required, but are appreciated. Hope to see you there!
*Or until the trucks are full