King County Housing Beat
About: Wife is a very active RE agent in King County (mostly Eastside). We purchased our home in June 2021, and are contemplating another purchase in Seattle proper. National Trends: - Average home purchase loan amount is down to 413,500 from 460,000 peak in March. - CDI / home purchase price has broken 10x barrier; this is the highest ratio in history. (Some hyper local markets globally break 30x; this is for a very land rich nation with an aging population). - Case Schiller index is at ATH - Basically every lagging indicator is showing new highs being reached in regards to pricing, unaffordability, etc. Local Trends: - More local indicators are showing a slow down in prices - A/P ratio is > 1.3. (Compared to <0.8 throughout most of 2021/early 2022); this is the largest indicator of the housing slow down happening now. - Agents are aggressively listing properties before the weekend on Th/F Personal Observations: (Mostly in Seattle, but Eastside as well, looking at 'starter homes' <=1.5mln) - Very few showing requests, even on desirable properties - Open house activity levels have fallen to pre-pandemic levels - Open houses have very few first time buyers, high concentration of foreign investment and 2nd+ purchasers. Very few potential buyers in their twenties/thirties. - Houses are sitting on the market for much longer; definitely a cooling off happening with price drops. - Houses are regularly selling for list/under. While list price is useless, it is still showing cracks in the prices Conclusion: - Anyone who purchased prior to November 2021 is in fantastic shape; we're very likely never going to see rates that low again (and they were only that low due to being subsidized by the fed) - Anyone who purchased Jan/Feb 2022 - April 2022 is very likely bag holding. - Current market is cooling, but slow moving. Expect significant slow down in the coming months and if previous trends align we can expect prices to bottom out in 12-15 months and stagnate there assuming there is no real crash. - Real crash is unlikely. While most high level indicators seem to follow 2008 trends (and keep in mind, that crash took years to come to fruition), it is impossible to predict. For any doomers the best hope of a crash is the CMBS issue that's been ongoing for years. EDIT: REDFIN/ZILLOW/ETC. Estimates - No clue where/how they come up with these, but they are terrible and all over the place. The best starting place we've found is to take 80% of the average of CoreLogic/Quantarium/CA estimates as a reasonable selling price, but even this has huge variance. #housing #seattle #eastside #mortgage
Nice write-up > "Anyone purchased prior to Nov 21 in great shape" If it's only because of lower rates, I would rather have lower debt at a higher rate than higher debt at lower rates, even if monthly payment is bit more.
Variance was huge in 2021, but on average you locked in a fair price at an incredible rate.
Why you're listing more probidijing vs interest at lower rate
For a first time buyer in 30s, rent for another year or buy a house in 6-8 months?
Our plan is to 'look passively'; if we find something we love we will of course jump on it, but in terms of bang for your buck it is almost guaranteed to increase with time. Low-ball aggressively as well, 20% below CoreLogic/CA/Quantarium estimates is likely a decent starting point. Redfin/Zillow estimates are extremely variable and not at all representative of the market.
Rent, there are many downwards price pressures in the coming year that need time to play out. The cost of an overpriced mortgage is far more than any rent.
My friend's house in Redmond, two blocks from Redwest, had been on the market for two weeks with very little traffic and zero offers. She will be dropping the price this weekend That backs up what you stated, OP.
Pretty typical, but that's a decent location. Personally I'd advise to drop aggressively before more rate hikes. Inventory is increasing weekly and competition to sell will only increase for the near future.
Thanks for the advice, OP. She is worried because she just made her retirement move to NC and doesn't want to be stuck holding a vacant house.
Seems like housing market slowdown is very market dependent. I wonder if the slowdown is more intense in Seattle/Bay area given how much money is from tech and how much tech stocks have corrected. What do # of open listings look like compared to pre pandemic
I generally agree but I’d put the bag holder date at around July ‘21-May’22 I’ve noticed new construction aggressively lowering prices. Much more so that older homes. Developers remember 2008. I also expect interest rates to peak at about 6.5-7% then pull back to say 4.5% over a couple years. I think Fall ‘23 will be a great time to buy a mostly cash home.
Do you still think Fall’23 is when it’s time to buy?
OP, can you please explain what current CDI / home purchase price and Case Schiller index means?
Thank timorlane! I don’t understand what current value means. Is real estate market overvalued?
Nice summary OP. Please keep up posting updates
80% of selling price estimate u must be crazy, that's like 300-400k for 1.5-2 mil homes I haven't seen a single house sell that low below asking
Interesting read, thank you for posting it