Published August 13, 2020
August Market Update
Our market continues to move forward with significant pace driven by low inventory and interest rates. Once again we're reporting 'lowest ever' interest rates as of July averaging 2.99%, though this has risen slightly due to overwhelming demand for refinance and purchases. In talking with lenders, we're hearing they are overwhelmed with applications and files are simply taking longer to process - though the good news is nearly all lenders are prioritizing purchases.
Sellers continue to be favored in the market with minimal inventory of only about 1.0 to 1.5 months which is leading to a rising average list to sell price ratio moving from 100.0% last year to 101.2% this year. We're seeing this result in upward momentum for home prices with a 8.9% rise in median home price in King County from last year, and 15.1% in Snohomish County - which is a phenomenal increase which is likely more a statistical anomaly than true market movement (see inset).
As we look to the future, we see interest rates continuing to stay low though perhaps a bit higher (0.25-0.325%) than the lowest levels as lenders control demand with slightly higher pricing. The lack of inventory will continue to drive a seller favored market with low days on market and high list to sell price ratios. We see this continuing for the foreseeable future, unless there is an interruption in our overall economy or a significant rise in inventory.
Median Home Price Increase - Values Rising & Market Focus
While we believe home values are rising in the Puget Sound, we also believe there is evidence the large jump in median home price may be driven by lower overall demand for homes in the lower price points. We did a brief analysis of houses and condos sold in South Snohomish county in May to July 2019 vs. 2020 and found there was a 27% drop in sales from $450k and below, a 16% gain in homes selling between $750k to $1.05M, with sales between $450-750k being essentially equal year over year. This shift in volume within the market segments will greatly change the 'statistical median' which it has... driving it up 15% in Snohomish County and nearly 9% in King County, however it does not mean actual home values increased to these levels. They are likely only up about 5-6% in reality.
This data aligns with the anecdotal evidence we're seeing where households with typically higher incomes from tech and other industries which pivoted more easily in the crisis are driving the market, whereas those with potentially more moderate incomes are feeling greater instability and waiting to take action to buy or sell until the economy continues to regain ground in its recovery.
Economists with much larger datasets and more powerful tools I'm sure will be analyzing these trends further, however for now we think the truth of the market is a bit more moderate than the median home price gains of July would suggest.
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