As rates reached over 4.5% last week for the first time in several years, the market continued to stay smoking hot. We expect that if rates continue to rise, we will start to see a material slow down on pricing and perhaps activity, but that has not happened yet. Today’s rates start at 4.625% and range up to 4.8% with requirements to pay 1-2 points even at those levels.
The start of the spring market has been as competitive. Price increases for modest homes are still escalating $200,000 and closer to $400,000 for “hot homes” or “hot neighborhoods.” In Bellevue one home escalated $1,000,000 over the list price. It’s an understatement to say it’s a challenging time to be a buyer.
Experts, like chief economist at Windermere, Matthew Gardner, say prices are not expected to stabilize until 2023. Other financial experts expect the Fed will raise rates by smaller increments than expected (in March, we saw rates increase by ¼ rather than ½ of a point) and overall for the year it will be less than expected due to market volatility and war in Ukraine. The Fed has been historically very patriotic in times of war, and it is expected that they will work to maintain functioning financial markets and to stress stability as the global shocks unfold from sanctions and war. That means they will address domestic US inflation steadily and in a predictable way in the hopes to avoid a recession which some predict by 3rd quarter. In general, many agree that all macroeconomic forecasts are under revision at this time.
Locally, buyers are coming to realize that the Seattle price hikes in housing are not going away and that we are becoming more like the California market with perpetually high prices due to the ratio of tech capital in the area. Regular home buyers need to compete with both local and national investors for housing stock; something which has been unprecedented in past housing markets.