Highlights from this housing report:
- Now could be a good time to buy a home in Seattle, Washington.
- Mortgage rates recently hit an all-time record low.
- Local home prices could dip later in 2020, but should rebound.
- Low inventory continues to be an issue for Seattle buyers.
Is Now a Good Time to Buy in Seattle?
Will summer 2020 be a good time to buy a house in Seattle, Washington? That depends. For buyers with the financial means to do so, now could be a great time to buy a house.
Mortgage rates are hovering at a historical low. And there are fewer buyers in the market, due to the public-health crisis and economic downturn we are experiencing.
On the other hand, now is also a challenging time to buy a home in Seattle because of low inventory levels. The number of homes listed for sale was low going into the COVID-19 crisis. It has since dropped even lower, as some home sellers have taken their properties off market.
Ultimately, only you can decide if now is a good time to buy in Seattle. The key is to make an informed decision, based on current trends within the real estate market and broader economy. And that’s where we come in.
Here are trends and developments you should know about, if you’re planning to buy a home during the summer or fall of 2020.
Home-Price Appreciation Could Slow in 2020
As you can see in the chart below, home prices in Seattle, Washington rose steadily and significantly from 2012 to 2018. But following that six-year upward climb, house values began to decline. That was partly due to affordability issues and a growing reluctance among buyers.
Over the past year, however, home prices in Seattle have showed renewed strength. According to the real estate information company Zillow, the median home value in Seattle rose by 2.2% over the past year. Looking forward, they predict that prices will dip slightly over the next 12 months.
As of early June 2020, the company had the following forecast posted on its website: “Seattle home values have gone up 2.2% over the past year and Zillow predicts they will fall -1.7% within the next year.”
But when you zoom out and look at the broader metro area, there’s less volatility.
The chart below shows the house-price index for the Seattle-Bellevue-Kent metropolitan statistical area. It’s based on data collected by the Federal Housing Finance Agency. As you can see, the median home value for the broader metro has risen somewhat steadily (after bottoming out in the wake of the last recession).
The bottom line here is that the Seattle real estate market is still experiencing a supply-and-demand imbalance. Heavy on the demand side, but short on supply. That will continue to put upward pressure on home prices through 2020 and into 2021.
The Lingering Effect of COVID-19
As you probably already know, Seattle was one of the early epicenters of the coronavirus pandemic. In addition to prompting an economic shut down, the outbreak gave the densely populated city a kind of stigma among home buyers.
Now, in late spring 2020, data suggest that more and more buyers are looking at the surrounding areas where they can get more space. During the second half of 2020, and also into 2021, we could see higher demand (and home-price strength) in the cities and towns surrounding Seattle proper.
But getting back to the question at hand: Is now a good time to buy a home in Seattle? Does it make sense to buy a house in the area in summer 2020 or later this year?
Here’s the home-value side of it. House prices in Seattle will almost certainly rise more slowly in the coming months, due to high unemployment and other economic issues. Prices might even dip slightly during the second half of 2020. But these effects will likely be short-term in nature. As the public-health crisis eases, and the economy starts to reopen again, home-buying demand will likely rise.
In fact, we are starting to see this trend already. A recent report from the Mortgage Bankers Association revealed a 7% increase in home purchase loan applications nationwide, and a 9% increase year-over-year.
Low Inventory a Challenge for Seattle Buyers
As mentioned earlier, the Seattle real estate market is experiencing a severe shortage of housing inventory. There just aren’t enough homes on the market to satisfy the demand from buyers. This creates a seller’s market situation, in which buyers have to compete for limited properties.
The inventory situation is most severe within the city of Seattle itself. But it’s also affecting the broader metro area, including cities like Kirkland, Bellevue and Redmond — and Tacoma to the south.
According to a recent report from the Northwest Multiple Listing Service (NWMLS), available property listings in the Western Washington region have declined sharply over the past few months.
According to a May 2020 press release from NWMLS:
“The Northwest MLS report for April shows area-wide inventory fell nearly 21% from a year ago, dropping from 12,955 listings to 10,282.”
In some respects, now could be a very good time to buy a home in Seattle. That’s especially true for buyers who plan to use a mortgage loan. (More to follow on that.) But the inventory situation is a real concern for those planning to buy a home in Seattle during summer or fall of 2020.
Our advice for buyers is to start early and allow plenty of time to find a suitable property. Also, be prepared to make compromises regarding the features you want in a home. You might even consider some of the surrounding cities where prices can be lower and supply levels higher.
Let’s move on to talk about another big reason why now could be a good time to buy a home in Seattle…
Mortgage Rates Hit a Historic Low (Again)
If you follow real estate market news, you’ve probably seen the phrase “record-low mortgage rates” quite a bit in recent weeks. That’s not marketing hype. Mortgage rates have actually broken several records over the past few weeks.
They recently sank to their lowest point in 50 years of record-keeping, and they could drop even further as we enter summer of 2020.
From an interest-rate standpoint, now is a great time to buy a house in Seattle or anywhere else in America. Never before have we seen rates as low as they are right now.
The average rate for a 30-year fixed mortgage loan fell to an astoundingly low 3.15% during the last week of May. That’s based on the weekly industry survey conducted by Freddie Mac.
According to Freddie Mac’s research team:
“The 30-year fixed-rate mortgage has again hit the lowest level in our survey’s nearly 50-year history, breaking the record for the third time in just the last few months. These unprecedented rates have certainly made an impact as purchase demand rebounded from a 35 percent year-over-year decline in mid-April to an 8 percent increase as of last week…”
The Bottom Line to All of This
The bottom line here is that there are some good and bad things about the Seattle real estate market, from a home buyer’s perspective.
Home prices are a little iffy right now, and we might see some price erosion over the coming months. But that will likely be a short-term trend, after which home values should begin to climb again.
Inventory remains very tight within the Seattle housing market. Buyers entering the market in summer 2020 or later in the year should expect stiff competition from other buyers.
On the mortgage rate side of things, there has been nothing but good news in recent weeks. Mortgage rates have sunk to an all-time record low and they could fall even further later this year. Some forecasters have predicted that the average rate for a 30-year mortgage loan could fall below 3% by the end of 2020.
As you can see, there’s a lot to consider here. But we hope this information makes it easier for you to answer that important question: Is now a good time to buy a home in Seattle?
Disclaimer: This article includes forecasts, projections and predictions relating to the real estate market. Economic and housing forecasts are the equivalent of an educated guess and should be treated as such. MetroDepth makes no assertions about future economic conditions.