Lower Mortgage Rates Could Ease Seattle Housing Costs in 2024

December 21, 2023
Last updated:
December 22, 2023
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This report reviews recent mortgage rate trends at the end of 2023 and how they could help reduce Seattle housing costs in 2024.

Home prices in the Seattle area have started creeping upward again, following a 12-month downturn that was part of a nationwide real estate slowdown.

Because of this trend, some home buyers in the Seattle area could have difficulty purchasing in 2024. When home prices rise over time, we see a corresponding decline in overall housing market affordability.

The good news is that mortgage rates have been declining steadily over the past few months, and we may see lower mortgage rates in Seattle in 2024. Lower interest rates could improve the housing affordability situation in Seattle over the coming months.

Here’s an updated look at recent mortgage rate trends at the end of 2023 and what it might mean for Seattle home buyers in 2024.

Mortgage Rates Dropping at the End of 2023

Mortgage rates in Seattle and elsewhere have risen significantly over the past couple of years. But this trend reversed a couple of months ago when home loan interest rates began to drop steadily.

This is a positive trend from a home buyer’s perspective, especially in a relatively expensive real estate market like the Seattle metro area.

In late October 2023, the average rate for a 30-year fixed mortgage (America’s most popular home loan) peaked at 7.79%. That was the highest average in more than two decades, according to the weekly nationwide survey conducted by Freddie Mac.

But since reaching that 20-year high, mortgage rates in Seattle have been steadily declining again. According to that same nationwide survey, rates have dropped for the past seven weeks as of mid-December.

When this article was published, shortly before Christmas of 2023, the average rate for a 30-year home loan was back to 6.95%.

According to a December 14 statement from Freddie Mac:

“Potential homebuyers received welcome news this week as mortgage rates dropped below seven percent for the first time since August. Given inflation continues to decelerate and the Federal Reserve Board’s current expectations that they will lower the federal funds’ target rate next year, there will likely be a gradual thawing of the housing market in the new year.”

Seattle Housing Market Affordability in 2024

If this decline in borrowing costs continues into 2024, as many economists expect, it could improve the housing affordability situation in the Seattle area at a time when it’s much needed.

In August 2023, The Seattle Times published a report about home buyer affordability challenges in the Seattle area real estate market. To quote their report:

“The income needed to afford a starter home in the Seattle area climbed even as the price of a starter home dipped about 6%. That’s because prices haven’t fallen enough to offset higher mortgage rates.”

They referred to the sharp rise in mortgage rates during 2022, as mentioned previously. But now we are seeing a flip version of this scenario. Home prices across the Seattle metro area are starting to inch upward again while mortgage rates are declining.

How will this play out in 2024 regarding overall affordability within the Seattle real estate market?

While home prices are showing strength again, most forecasts predict only modest gains during 2024—or even a slight decline in house values.  Zillow, for example, recently predicted that the median home value for the Seattle-Tacoma-Bellevue Metro area would dip by around 1.6% over the next 12 months.

But even if prices remain flat or increase slightly next year, lower mortgage rates in Seattle in 2024 could lead to a net improvement in housing market affordability. In other words, lower mortgage rates for buyers in 2024 could help offset higher house values in 2024.

Fed Policy Changes Could Bring Lower Rates

The Mortgage Bankers Association recently predicted that 30-year mortgage rates would average 7% during the first quarter of 2024 and decline steadily after that. They expect home loan rates to drop to 6% by the end of next year.

This could go a long way toward improving housing market affordability in Seattle and elsewhere across the country. Some economists expect more home buyers to enter the real estate market over the coming months, enticed by lower rates.

The Federal Reserve plays a role in this trend. While the nation’s central bank does not control mortgage rates directly, its monetary policies can indirectly affect consumer borrowing costs.

As you probably already know, the Fed implemented a series of rate hikes over the past year or so. They did this as part of an ongoing effort to curb inflation in the U.S. But last week, their policy team announced they would hold the federal funds rate at its current level rather than increasing it.

Fed officials also signaled that they might be willing to make several rate cuts during 2024, which could bring even lower mortgage costs for Seattle-area home buyers.

Lower Mortgage Rates in Seattle in 2024 Could Spur the Housing Market

We are at an exciting time right now, where a continued decline in mortgage rates could stimulate the Seattle real estate market from both the buying and selling side.

When mortgage rates decline steadily over time, we see increased home-buying activity. We’re seeing the early signs of this right now. A recent report from the Mortgage Bankers Association revealed a 7.4% increase in home loan applications nationwide.

That connection is somewhat apparent. But lower mortgage rates in 2024 could also spur the Seattle real estate market in a less obvious fashion.

Specifically, it could make homeowners who’ve been reluctant to sell their homes in the past more willing to do so.

Over the past year or so, higher mortgage rates have made a lot of Seattle-area homeowners hesitant to list their properties for sale. Homeowners with favorable existing rates are often less likely to sell because buying a new home would mean taking on a higher rate.

Similarly, many homeowners have also hesitated to refinance their mortgages if the rate they’re currently locked into is much lower than today’s going rate. Since one of the big reasons to refinance is to save money with a lower mortgage interest rate, refinancing when rates are very high makes little sense for many homeowners.

But now that home loan rates are dropping, housing market analysts believe more properties could come onto the market. This could lead to a general increase in sales across the Seattle area since there would be more homes for buyers to purchase. It could also lead to an uptick in mortgage refinancing.

The bottom line here is that we could see lower mortgage rates in Seattle in 2024, which may improve housing market affordability while increasing home sales activity at the same time.

If you want to buy a home or refinance, partner with a seasoned mortgage team. At Sammamish Mortgage, we’ve helped buyers in Seattle and all across WA, OR, CA, ID, and CO with their mortgage needs since 1992. Reach out to our staff if you have questions or would like to apply for a mortgage.

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