- Home sellers really need to re-think their expectations.
- The days of “multiple offers and waived inspections are behind us.”
- Active Listings up a whopping 59% from a year ago.
- Both pending sales (mutually accepted offers) and closed sales during May were down from a year ago.
- Rising interest rates coupled with inflation are causing buyers that rely on conventional mortgages to reconsider the affordability.
“Home sellers really need to re-think their expectations,” suggested Mike Larson, a member of the board of directors at Northwest Multiple Listing Service (NWMLS) when commenting on statistics summarizing May activity. The new report showed a significant increase in active listings compared to a year ago, a slowdown in sales, and prices still rising.
Larson, the managing broker at Compass in Tacoma, said the days of “multiple offers and waived inspections, at least in Pierce County, are behind us.” He described the market as “more balanced and not so crazy, and that’s a good thing. Buyers are getting a little relief – not much, but a little as we’re slowly easing back into the kind of market we had pre-COVID.”
NWMLS members added 13,075 new listings to inventory during May, up 9.7% from a year earlier and the highest monthly number since June 2021.
At the end of May, buyers could choose from 8,798 active listings system-wide, up a whopping 59% from a year ago when there were only 5,533 properties in the database. That is the largest selection since September 2020 when there were 9,099 single family homes and condominiums offered for sale across the 26 counties served by Northwest MLS.
Two counties more than doubled their number of active listings from a year ago. The selection in Snohomish County jumped from 500 to 1,182 listings (up 136.4%). Douglas County had a similar increase, rising 134.5%. Also nearly doubling their inventory from a year ago were Cowlitz, Island, and Walla Walla counties.
“The significant increase in the number of homes for sale has some speculating that the market is about to implode, but that is very unlikely,” stated Matthew Gardner, chief economist at Windermere Real Estate. “What’s more likely to occur is that the additional supply will lead us toward a more balanced market, which after years of such lopsided conditions, is much needed,” he added.
Even with the healthy uptick in inventory, there is still less than one month of supply area-wide (0.97 months). Twenty of the 26 counties in the report are showing more than a month of supply, with the tightest inventory (0.85 months or less) in the four-county Puget Sound region.
Both pending sales (mutually accepted offers) and closed sales during May were down from a year ago, but up from the previous month.
1. What does the changing housing market mean for Sellers?
This isn't 2008. Home prices haven't started falling. Looking at Western Washington: Area-wide prices for single family home sales (excluding condos) in King County also increased, climbing nearly 20% from a year ago, from $830,000 to $995,000.
And though the supply of newly built homes has increased, that's actually a small part of the overall market. Inventories of existing homes are still some of the lowest on record, as of April.
2. What do increasing interest rates mean for Buyers?
“We are starting to see signs of impact from the significant rise in mortgage rates earlier this year, such as an increase in active listings and months of inventory creeping higher, but the full impact will likely not be felt for a few months,” said Matthew Gardner, chief economist at Windermere Real Estate.
With mortgage interest rates drifting upward in anticipation of the Federal Reserve’s hikes in its baseline interest rate, some brokers recommend quick action by prospective home buyers.
“We will not likely see interest rates back to 3%. Never before has it been more important to get preapproved and get serious about finding a home as now,” stressed Leach.
3. How do increasing inventory levels affect both Buyers & Sellers?
Commenting on growing inventory of single-family homes (up 27% from a year earlier), Young suggested higher priced homes requiring a mortgage “are feeling some heat from recent interest rates.”
The NWMLS report shows there was about three weeks (.78 months) of inventory of single-family homes and condos combined at the end of April. By this metric, that is the highest level in nearly 18 months. MLS data show there was .80 months of supply in October 2020.
4. What is the current forecast for home prices between now and Q1 2023?
Sell Now! Rates of 7 to 8.5% WILL affect home prices!
Best case scenario? The best-case scenario is that the home prices we have now will be the same prices we have next march. That means waiting 11 months will gain no value and we’ll basically have a flat market.
Likely scenario? If we get rates of 7%+, coupled with inflations and we now have economist warning of a possible recession we could see a 10% drop in prices. (I would say this scenario is slightly more likely than us being flat. 55/45 range.)
That being said: I spoke with some people this week. Their home is worth 2 million right now if they were to list. The exact same home model in their same neighborhood sold last April for $1,650,000… So:
• Their home has increased by $350,000 in a year.
• There are not going to be bidding wars going $Hundreds of thousands over.
• If they wait a year, they could very easily lose $200,000 in equity.
• It’s unlikely the home gains any value.
5. What is the forecast for interest rates between now and Q1 2023?
The Fed has unequivocally said they are raising rates: Many source are saying 7 to 7.5% is likely with some suggesting rates go past 8%.
- Wage-Price Spiral Could Send Rates Above 8%
- Analysis-U.S. trucking downturn foreshadows possible economic gloom
- Existing-home sales fall as soaring interest rates scare off homebuyers
The National Association of Realtors now expects existing-home sales to decline 10% over the course of the year
The average interest rate on the most popular U.S. home loan climbed to a 12 year high last week and fewer homebuyers sought properties in a sign that the Federal Reserve's aim of cooling the housing market may be beginning to have an impact, data from the Mortgage Bankers...
6. What is the overall effect of inflation on the housing market?
The bottom line: Though the frenzy is over, "there's still a lot of pent-up demand from people who've been shopping for a year. NOW is most like the very best time to both Buy and Sell when factoring in rising interest rates which could hit 8% by January and decreasing values which may drop 10% come January 2023.