Don’t panic, though. It’s not a crash; it’s more a correction of an unsustainable frenzy. Only two months ago, newly listed houses received multiple escalating offers with no contingencies in days.
Then the Federal Reserve raised interest rates, and with the resulting higher mortgage rates, we saw an immediate change.
The Fed’s rate increase coupled with inflation caused a drop in consumer confidence. We’re also in a traditional seasonal lull. Schools are out, and people are taking summer vacations with a vengeance after two years of staycations. The end of June and July are usually slow, even in an otherwise busy year.
The available housing inventory in late July showed 2.9 months of inventory, a huge change from what we’re accustomed. Prior months showed only two to three weeks of available supply.
While it’s still technically a seller’s market, it’s much closer to a neutral market than we’ve seen in almost a decade. Real estate analysts define a neutral market as four to six months of available houses. But what we had was not just a seller’s market; it was an unhealthy housing market. Again, it’s slower, but it’s more sustainable. Area 390 (our neighborhood) saw 140 homes go to pending status in the last month.
Houses are still selling; they’re just selling differently.
While hysteria is unfounded, there are a few fundamental shifts. Sellers can’t throw any high price out there and expect buyers to flock to them. Buyers with the right advice won’t be willing to compromise on a home purchase when the mortgage costs them more money than it did three months ago. We may see a stream of people moving from the more rural properties bought during the early days of the pandemic returning to city neighborhoods. With more employers calling people back to offices, even in hybrid plans, and regular in-person schooling, commute times matter again. That’s great news for our neighborhoods.
What’s staying the same
Seattle remains a great place to live, and our neighborhoods are perennially attractive. Even when interest rates are high, people still buy homes. Unlike the recession, this financial correction isn’t affecting jobs — the unemployment rate is low. Area employers are still hiring, people are still working, and they have the means to buy a house.
What it all means for buyers
Buyers have time to breathe and assess their situations. Some potential buyers are opting to rent instead, to see where the real estate market settles. The Seattle rental market is insane this year, with the same kind of competitive bidding we saw in sales. This leaves space and time for buyers who want to own their homes.
Standard offers are back, with contingencies for inspections, appraisals and financing. Buyers aren’t rushed into making offers against other buyers because there aren’t competing offers. They want fair market value, not the artificial prices we saw this past spring. I just worked with a buyer who saw a house seven times before making a realistic offer.
We looked at the data — real comparable sales, average days on market and fair market value. I’ve been through the overheated markets but also worked through the recession. I knew the data told us that we could go slower, be careful and make a standard offer at less than the asking price. The buyer was hesitant, wondering if an offer below asking would be accepted. The data told me that it was a strong offer, and because there weren’t other offers, it had a great chance to succeed. My buyer got the house, is protected by contingencies and is paying a fair price. Experience and due diligence worked in my buyer’s favor.
What it all means for sellers
Sellers must change their mindsets. That means pricing realistically, making the necessary repairs and getting the house into showing condition. It’s time to touch up the paint and make sure you’re presenting a place someone wants to call home.
Interview for your broker. Ask about the plan to market your home, who will do the staging, who will take the photos and the media in which it will be featured. Most importantly, how will the broker attract the right buyer?
Stay calm and patient. Don’t get discouraged if your home doesn’t sell as quickly as your neighbor’s did this spring. Use the data to determine your fair market price and buyers will react accordingly.
How to succeed
Understand that the market has fundamentally changed. Whether buying or selling, you need a broker with experience, connections and a data-driven approach. Not just someone who could buy and sell houses when it was easy, but a broker who knows how to scrap and grind to get the job done in a more challenging environment.
If you have any questions or concerns about how the market has changed, what it means to you and the investment in your home, I’d love to talk to you. My team is one of the top real estate teams in the state. We have been successful in this market because we’re willing to be flexible and do the work that others won’t to get those wins for our clients. As a reminder, my home, my office and my team are focused here in Madison Park. If you’d like to set a time to talk through any matters involving real estate, my door is always open.
Madison Park Resident
Managing Broker Coldwell Banker Bain | Global Luxury