Published November 21, 2022
October 2022 - Real Estate Market Update
October's market statistics tell an interesting story of today's unique and evolving market. Let's take a look at it from two perspectives... one you are likely hearing in major media, and another through the lens of the major underlying statistics which are the indicators of market health.
Major Media Statistics
Major Media Statistics
Major media are focusing on the 40% decrease in transaction volume in our region over the last year, and I can't argue with them as this is a very significant shift. We can all see it in yard signs in our neighborhoods, as well as decrease in celebratory posts and pleas for moving boxes on social media from our friends buying or selling homes.
In addition, the media are focusing on the historic rise in mortgage rates to 7.08% as of the start of the month which is 3.94% higher than they were at this time in 2021. There's no way of sugarcoating us, this is a huge shift which has an enormous impact on housing affordability by decreasing mortgage buying power by more than 30% for the average home buyer.
When you read the statistics, it would be easy to assume our market is foundering and things look bleak. However, when you look deeper into the other metrics of the market you can it is not as robust as it was 18 months ago, though it is rapidly adapting to this major market shift. Here are the indicators we look at on a regular basis to tell us the health of the market:
When you read the statistics, it would be easy to assume our market is foundering and things look bleak. However, when you look deeper into the other metrics of the market you can it is not as robust as it was 18 months ago, though it is rapidly adapting to this major market shift. Here are the indicators we look at on a regular basis to tell us the health of the market:
Inventory – the best indication of the balance of our market between sellers and buyers. In King County inventory decreased in October to 1.8 months from 2.0 months in September. In Snohomish County inventory stayed level at 1.9 months. Keep in mind, for a market to be "balanced" between buyers and sellers we need about six months of inventory.Days on Market – decreased in King County to 13 days in October from 15 days in September. However, they increased in Snohomish County to 28 days in October from 24 days in September. This shows a combination of weakening demand in Snohomish County, as well as potentially less realistic pricing by sellers on average in Snohomish County. Meanwhile in King County, we can see the market is still moving relatively swiftly.List to Sale Price Ratios – King County decreased by 0.1% in the last month to 98.7%, and Snohomish County stayed the same at 97.8%. When compared to the averages a year ago 103 – 104% this indicates less competition for listings, however it is an indication that homes are selling at or around their list prices which is indicative of a healthy market.Prices – the median home price in King County increased by 1.5% from September to October to $801,002, and year-over-year home prices were up 6.8% compared to October 2021. Whereas, median home price in Snohomish County decreased by 0.6% falling to $683,500, however home prices rose 5.3% year-over-year.
What's Happening & Why Does It Matter?
The huge rise in interest rates put buying and selling plans on hold for many, however as interest rates continue to rise in people acclimate to our changing economy we are seeing more people reengage with the market rather than putting their plans on hold endlessly. There is an acknowledgment that interest rates are very unlikely to return to 3% or 4% levels in the foreseeable future, and most likely they will settle out into the 5% or 6% range, at which time those who are getting mortgages in the 7% range can refi and reduce their ownership costs. Meanwhile, people taking action at the moment can take advantage of a less competitive market and potentially better pricing, meanwhile locking in 7% rates as a hedge against the potential of a 8% or 9% rates in the coming months or year.
While this shift has been profound, we're seen the market rapidly adapt to these changes which is keeping inventory from climbing significantly. In addition, the past 15 years of improved mortgage underwriting standards combined with the past decade of low interest rates has created an environment where the vast majority of home and property owners are very secure with their mortgage payments, so the risks of significant volumes of foreclosures spiking inventory levels is very low. So, in spite of everything you might be hearing in daily news stories, there is actually not much to fear in today's market. It will continue to evolve, however the underpinnings of our local housing market are strong and should provide reasonable stability as our housing economy finds a new normal.
