If we let the media determine the mood regarding the housing market, it would be time to shut the party down and call it a night. I’m here to report that we are still dancing and there is a lot to celebrate! While it is not all shiny and bright (it never is), there is a pattern of consistent growth and the sky is far from falling. The environment has changed from a year ago and we are still moving to the beat of the drum despite some rain (insert dancing emoji here).
The latest headline from the Seattle Times claims that prices have tumbled from last year. While prices are down from a year ago the story is much more detailed and it is far from a tumble. The DJ (The Fed) played some songs (hiked rates) that cleared the dancefloor for a bit, but the hits are playing now and demand is strong! The headline I have included above is a much more accurate depiction of the pricing journey over the last year and a half, and it is actually pretty great.
In King County, the median price peaked in May 2022 at $1M and is currently at $919,000 (May 2023), which is down 8% from peak to current. Prices hit bottom in January 2023 at $800,000 which was down 20% (the actual tumble) from the peak but are now up 15% from the bottom!
In Snohomish County, the median price peaked in April 2022 at $830,000 and is currently at $767,000 (May 2023), which is down 8% from peak to current. Prices hit bottom in February 2023 at $685,000 which was down 17% (the actual tumble) from the peak but are now up 12% from the bottom!
This was a relatively quick correction that is trending in a positive direction as the market gets used to higher interest rates. Quantitative Easing could not last forever and rates had to go up to combat inflation. During the same time frame detailed above, interest rates dramatically changed.
In May 2022, they averaged 5.5% (the peak) and in January 2023 they averaged 6.75% (the bottom). In fact, they started 2022 at 3.5%, a level we will likely never see again! Currently, rates are hovering in the high 6% and are predicted to slowly recede as we enter the second half of 2023. Proof that buyers have become conditioned to the new normal of rates is that prices have grown from the start of 2023 (January – May 2023): 14% in King County and 11% in Snohomish County, despite rates remaining in the 6% and at times cresting 7%. When they go down to the lower 6% or even the high 5%, expect prices to climb at a faster rate. Will there be a buyer mosh pit? Buyers should be weighing these effects as they choose when to act. Rates can always be re-financed, but the sale price cannot.
While the homeowners that purchased during those peak months have some time before they regain their home’s value, it will happen. We are a year out from the peak and the last time we had a correction in 2018 it took 17 months to recover. That subsection of sales aside and equity levels are strong. Imagine the hope you feel when watching the first dance at a wedding to the classic It’s A Wonderful World; the party is just getting started. Prices are up in King County by 27% from March 2019 to March 2023 and in Snohomish County up 46%. Ten-year gains are astounding at 140% in King County and 179 % in Snohomish County.
This leads me to my biggest takeaway; real estate moves are dictated by life changes. Maybe the DJ plays Sweet Home Alabama and you rush to the dance floor because it’s time to move closer to family, or Marry You inspires you to take the plunge into married life as you spin the night towards household formation. My point is, change drives demand.
While real estate is an investment, it is also where we live. It is our refuge, our security, and our joy. We usher in pleasure and pain in the four walls we call home and at some point, that will lead to wanting something more, less, or just different out of our home. I understand that these moves may have been put on hold while the DJ figured out the crowd. Currently, the dance floor is becoming more crowded. The attendees at the party are realizing that we only live once and that we are not going back to the discotheque of 3-4% interest rates; they are ready to boogie!
The dancing/party metaphor was a fun way to tell a complicated and emotional story. This correction and recovery have been a bit hard and confusing, especially after the disruption of the pandemic. We are just getting our dancing shoes broken in again. If life has met you at a crossroads of change and you are curious about how real estate relates to this for you, please reach out. I am deeply invested in the data and my service is always rooted in educating my clients. It is my goal to help the people I serve navigate smooth transitions that are financially stable and strong and match their homes to their hearts.
Since 1984, Windermere associates have dedicated a day of work to complete neighborhood improvement projects as part of Windermere’s Community Service Day. After all, real estate is rooted in our communities. And an investment in our neighborhoods gives us all a better place to call home.
This Friday, my office will spend the day with the Snohomish Garden Club working to put fresh produce on the tables of local families who need a little help. We will plant over a half-acre of veggies and fruits that will be harvested over the summer and into the fall.