Fall Market Update 2023
Market Analysis
As we head towards winter we are seeing rates drop a bit, recently down at 7.2%. We are seeing homes sit on the market right now and this can sometimes translate into good deals for buyers. Looking out a little further, in recent weeks rates hit a high of 7.72% and mortgage applications fell to their lowest rate since 1996. While some had hoped this would be a short period of contraction, the Federal Reserve has indicated that rates will remain high at least until 2025 to fight inflation.
What should buyers and sellers expect as we head towards 2024?
Sellers
For sellers it appears we will start to see prices coming down in 2024. In 2023 there was notably no significant drop in Seattle area housing prices, except for those homes in marginal condition or in periphery areas. Most sellers held on to their prices in 2023 and received at least 1-2 offers on their home sales often at full price. Price escalations on homes with multiple offers were more modest, but for some homes in luxury markets or core areas some sellers still saw hefty increases. However as we move towards 8% interest rates and a slower 4th quarter larger price drops are now taking place as buyers become emboldened with greater price drops expected in 2024.
Buyers
Buyers in 2024 who need to use financing are facing a difficult atmosphere where their purchasing power has shrunk. As rates climb, mortgage payments are now about $930 more per month for a $400,000 mortgage then they were over a year ago when rates were 3%. The good news for buyers is they have options to lower their payments. Buyers can add on to the purchase price or sellers can offer credit towards their purchase to buy down their interest rates anywhere from 1-3 years. This can help lower payments substantially for buyers. Having a great lender to discuss options with is essential.
Commercial
Lending activity in the commercial real estate industry is down in volume and now is more risk adverse and restrictive with higher capital requirements, more reporting, increased costs and less flexibility. Many developers have paused or stopped altogether their projects. Regional banks have strong concern for office building loans who are stuck with high vacancy, many may not be able to refinance due to fewer tenants, less cash flow and thus lower asset values is commercial real estate loans. Due to these factors, it is rumored that a crisis is looming for office commercial real estate.