Rising interest rates not yet slowing home sales or 'too concerning' for NWMLS officials
KIRKLAND, Washington (April 7, 2022) - Rising mortgage rates are not yet slowing home sales in most areas across Washington state, according to several brokers who commented on the latest statistical report from Northwest Multiple Listing Service. The report showed a 7.4% year-over-year drop in pending sales, but brokers suggested the decline is likely a reflection of limited supply.
"Typically, by now, we would start to see rising mortgage rates impacting homes sales and/or prices," observed Matthew Gardner, chief economist at Windermere Real Estate. "That has yet to happen despite rates rising significantly since the start of the year."
Freddie Mac reported the average rate for a 30-year loan rose to 4.56% last week, with rates climbing at the quickest pace in almost three decades.
Gardner said he expects mortgage rates to continue trending higher in the coming months, adding, "I will be watching to see if there are any negative market impacts, but as of now, I'm not too concerned."
Northwest MLS brokers reported 10,059 pending sales (mutually accepted offers) during March across 26 counties. That's down from the year-ago figure of 10,863, but compared to February, the volume of pending sales jumped nearly 31%.
Broker Dean Rebhuhn, the owner at Village Homes and Properties, also said rising mortgage rates have not slowed activity. "However, if homes are priced over the market, savvy sellers are making price adjustments." For now, Rebhuhn said multiple offers "are still the rule. Buyers are making strong offers, pre-inspecting homes, and making sure financing is in place."
Well-paying jobs and lifestyle needs are driving the market, with some buyers using investments, 401K funds, and family assistance, according to Rebhuhn. He noted Grays Harbor and Ocean Shores offer "good inventory and great values." Prices in Grays Harbor County surged nearly 25% from a year ago, rising from $280,000 to $349,950. That's about $489,000 less than the median price in King County.
"The market is following the normal seasonality of spring," according to J. Lennox Scott, chairman and CEO of John L. Scott Real Estate. "This season brings more resale listings coming on the market."
The latest MLS report shows brokers added 11,197 new listings of single-family homes and condominiums to inventory during March, up from the year-ago total of 10,562. Last month's total is up from February's figure of 7,920 for a gain of more than 41%. It also marked the highest volume of new listings added during a month since September 2021 when members added 11,373 listings.
James Young, director of the Washington Center for Real Estate Research at the University of Washington, noted improvements in inventory in "many of the markets along the I-5 corridor." His analysis of active listings shows robust growth since January in several counties, including Snohomish (up nearly 54%), Lewis (up 47%), Thurston (up 42%), and Pierce (up nearly 40%), and Skagit (up 32%).
Nevertheless, with pending sales (10,059) nearly matching new listings, inventory remained limited system-wide. The MLS report shows only 0.58 months of supply, with King, Pierce, Snohomish, and Thurston counties all having less than two weeks of supply.
"When you consider at one time a normal market inventory was 4-to-6 months, we now consider that measure a relic of times gone by," commented Dick Beeson, managing broker at RE/MAX Northwest Brokers, adding, "We will not see such numbers of homes for sale for possibly a generation or more."
The supply squeeze is contributing to competition among hopeful homeowners and rising prices.
"We continue to see fierce competition for the available inventory," stated Frank Leach, broker/owner at RE/MAX Platinum Services. "Buyers have been very frustrated with some writing as many as 15 offers before landing on a home."
Median prices continue to escalate.
For last month's 7,989 completed transactions, the area-wide median price was $638,000, up about 16.4% from a year ago and up 9% from February.
Of the 26 counties in the report, only one county (Ferry) reported a year-over-year price drop, and only three counties had single-digit increases; all others had double-digit gains from a year ago.
Gardner noted median listing (asking) prices continue to rise, saying "this suggests that sellers remain quite bullish when it comes to pricing their homes."
Beeson described rising prices as being at "shock and awe levels," noting it is the third consecutive year for such escalations.
Northwest MLS figures show prices in the four-county region (King, Kitsap, Pierce, and Snohomish) have surged nearly $200,000 (38.5%) since March 2020, jumping from a median price of nearly $520,000 to nearly $720,000.
"With rising interest rates and fuel prices, it will be an interesting time for the markets along the I-5 corridor," remarked Young. "Increased costs make purchasing a home outside of the urbanized areas a less viable option for first-time buyers and others seeking value to move up the housing ladder."
Young believes the return to the city has begun in earnest. He also commented on steadily rising prices in King and Snohomish counties. "Since January, prices in King County are up 16.5% and up 10.5% in Snohomish County. No other counties in the central Puget Sound region break double digits in house price growth for this period."
Nevertheless, recent census reports indicate people are moving out of King County. Such reports are "allowing surrounding counties, such as Snohomish, Pierce, and Kitsap to prosper," surmises John Deely, executive vice president of operations at Coldwell Banker Bain. "In part, this is due to a lack of affordability and King County's inability to create new inventory given restrictions on development and the tight labor markets." He also cited work-from-home policies as "helping people decide to live in other places" - a trend he expects will continue.
Like many areas, Kitsap County is "dealing with a very active market with prices hitting unprecedented values as inventory remains extremely low," reports Leach. MLS figures show there is slightly more than a half-month supply (0.56 months of inventory).
The median price on last month's sales of single-family homes in Kitsap County rose 19.7% from a year ago, from $450,000 to $538,500. Year-over-year condo prices shot up nearly 54%, from $297,500 to $457,000.
"While we often speak in percentages, the actual numbers of listings are drastically low, and the demand is outstripping supply," Leach stated. On a brighter note, he added, "Kitsap continues to grow, and new inventory continues to pop out of the ground throughout the county. There are thousands of new residential, condominium, and apartment buildings under construction and due to be available in the fall of 2022."
Leach also noted rents are rising in Kitsap County, "and there appears to be no relief on the horizon." He suggests the only way to control future expenditures in housing is to own. "With interest rates on the rise, there is no better time to buy, refinance, or resize your real estate investment."
Deely saw hopeful signs in the March statistics. "King County's new listings last month exceeded the number of both pending and closed sales. Whenever new listings exceed pending, the standing inventory increases with more selection available for buyers. It's still a great time for sellers to come to the market due to buyers who are willing to pay a premium. While interest rates have gone up, slightly narrowing the buyer pool, there's still high demand."
Scott pointed to the overall economy "and specifically job growth in the central Puget Sound region" as factors for the future housing market. "For the local areas considered lifestyle and destination markets, we will be watching local in-migration as a key indicator of future home price appreciation."
Beeson acknowledged not everyone shares a rosy outlook, noting a report from the Federal Reserve Bank of Dallas that stated price and value have "become unhinged and now have little relationship to each other." He said they fear a housing bubble may be brewing, adding, "It does feel strange to be in a market that no one has experienced before. There is no road map for this one."
Commenting on an "unexpected 4.1% decline" in U.S. pending home sales, Lawrence Yun, chief economist at the National Association of REALTORS®, suggested the dip was mainly due to the low number of homes for sales, adding, "It is still an extremely competitive market, but fast-changing conditions regarding affordability ahead."
Northwest Multiple Listing Service is a not-for-profit, member-owned organization that facilitates cooperation among its member real estate firms. With more than 2,300 member firm offices and 30,000 brokers across Washington state, NWMLS is the largest full-service MLS in the Northwest. While based in Kirkland, Washington, its service area spans 23 counties and it operates 20 local service centers.