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The real estate market has been experiencing a sustained and unprecedented boom over the past year, thanks to low inventory, rising demand, and rock bottom mortgage rates. Will this trend continue? Or will 2023 bring an end to the Seattle housing market explosion? Here are our top seven 2022-2023 Seattle housing market forecast predictions.
Having a little foresight into what the local real estate market will do in Seattle can help buyers and sellers make better-timed decisions. The question is, what is the real estate market in Seattle doing this year? We’ve got the Seattle housing market forecast predictions you need.
2022 was supposed to be the “year of the buyer” in Seattle’s housing market. Yet inventory remains low. This, along with many other factors, point to a continued seller’s market. Along those lines, here are our seven predictions for the Seattle housing market for the rest of 2022 going into 2023.
Since late 2019, Seattle’s housing market picked up quite a bit following a temporary slowdown in 2018 and much of 2019. Since then, home prices have been on a rapid incline due to several factors, including low inventory, high buyer demand, and the low mortgage interest rates that kickstarted 2022.
Here are the top seven predictions for the Seattle housing market forecast through 2022 and into 2023
Heightened demand for homes in the greater Seattle area has driven inventory into the ground, and new home builds — an industry stagnated by the pandemic — have no clear path forward to catch up in the region. As a result, buyers can expect low inventory to continue well into 2022 and beyond. Right now, Seattle still has less than a month supply of available inventory, which is incredibly tight.
This shortage of inventory will likely continue into 2023 with no clue as to when new housing will start to pick back up. Further, as an increasing number of millennials with decent savings and income levels enter the housing market — both in Seattle and across the nation — the pressure of demand will exacerbate the inventory shortages.
Instability in the labor market has led many homebuyers to delay putting their houses on the market, especially when looking at forecasts that predict home prices will only continue to rise. This narrows the available inventory even more than usual for this time of year, and is creating aggressive bidding wars for available properties.
Not long ago, price reductions were a rarity in the Seattle real estate market. As long as sellers priced their homes close to comparable sales, they were practically guaranteed to have buyers lining up. And in many cases, those buyers were making offers well above the asking price. As of the time of this writing, the median home price in Seattle was $960,925.
But times have changed, as it is now projected that from now until well into 2023, home prices will rise at roughly the same pace as they did over the course of 2022 in Seattle. While there was rampant speculation back in Q4 2021 that the precipitous rise would at least slow down, this hasn’t been borne out by recent events; the price increases continue to rocket upwards with no signs of relenting.
Clearly, there is no denying that Seattle has seen some of the fastest price appreciation among major cities throughout the country. This was evident throughout much of 2021 and 2022, as home prices in Seattle rose drastically year over year. Moreover, low-interest rates made it easier for borrowers to afford their monthly mortgage payments and open up the market for first-time homebuyers.
However, the record high prices are now joined by rapidly rising mortgage rates, driving down affordability.
For example, a $500,000 home with 20% down and an interest rate of 6% on a 30 year fixed mortgage has a base mortgage payment of $2,398 per month.
If the same house still costs $500,000 but the interest rate goes up to 7%, the base mortgage payment jumps to $2,661 a month; a difference of nearly $200 a month and almost $2,500 a year.
If the same house costs $600,000 and the interest rate stays at 6%, the base mortgage payment jumps to $2,877 a month; a difference of nearly $500 a month and almost $6,000 a year.
If the same house costs $600,000 and the interest rate goes up to 7%, the base mortgage payment jumps to $3,193 a month; a difference of nearly $800 a month and more than $9,500 a year.
Many homebuyers just don’t have that big of a swing in their mortgage payment budget.
Mortgage rates in Seattle have more than doubled in recent month. As of this writing, the rate for a 30-year fixed-rate mortgage is just over 6%. The Mortgage Bankers Association (MBA) expected the rate for a 30-year loan to average 4% by the end of 2022. Obviously, they were way off the mark, and if you can afford to buy a house now, you should move fast.
Rising rates are in line with earlier Seattle housing market forecast predictions that noted the streak of rock bottom mortgage rates was coming to an end and that rates would be climbing slowly and steadily as the economy began to recover. Of all of the predictions made in 2021 about the state of the Seattle housing market in 2022, this one is being borne out by current events, although the rise in rates has been much faster than anticipated.
While home prices declined in Seattle a couple of years ago, they crept back up and remain some of the highest prices in Washington. The price for a home in the city is still far more expensive than most other cities in the state of Washington. This makes housing affordability an issue.
According to reports, homebuyers and owners need an annual income of $106,618 to be able to afford the principal, interest, taxes, and insurance payments on an average-priced house in the city. For many households, this number is not easy to attain, therefore making home buying in Seattle difficult.
With many new buyers entering the market with cash offers, even well positioned millennials can have trouble competing for in-demand Seattle homes in prime neighborhoods. Homes are staying on the market for only a few days in some cases, while others are snapped up by property investors before they even get visibility as a public listing.
Read more: Seattle Home Prices Drop, But They’re Expected to Rise
After somewhat of an exodus from Seattle in the slump directly after COVID started, it has regained its spot as one of the fastest growing areas in the United States. It also has some of the biggest numbers when it comes to turnover in its resident population; people tend to move into, out of, and back to Seattle in record numbers.
When real estate changes hands rapidly during a time of high demand and low inventory, prices tend to keep bumping with each handoff. As demand in Seattle continues to grow despite the cost of big city living, we won’t see this real estate market boom slowing down anytime soon.
Seattle has a lot going for it, after all. A strong city infrastructure that includes readily available healthcare; a widely diverse population that welcomes people of all cultural backgrounds; and close proximity to other PNW cities with plenty of attractions within driving distance or a weekend getaway.
Seattle has great food, great music, and great scenic appeal. Despite the rainy weather 9which locals say you get used to), there’s no place quite like it in the PNW. Add to that the number of big companies willing to pay employees premium wages to help cover cost of living, and there’s no wonder this is one of the most sought after locations in the United States for prospective homebuyers.
When home prices go up and inventory goes down, rental property prices also start to tighten. Typical Seattle rents rose a record 29% year over year as of September 2022, to $2,774 per month.
The lack of available housing to buy means demand for rental space is going through the roof, and despite laws preventing landlords from raising rents over approved parameters, as leases expire the costs to rent in Seattle can be expected to continue going up steeply.
Of course, this means buyers who are investing in Seattle real estate with the hope of renting at a profit are quite likely to make their dreams a reality. Shared rental housing is continuing to trend upwards in and around the city, as those who can’t afford the rarified home sale prices struggle to find space in the congested rental landscape.
All of this leads to an obvious conclusion: the suburbs are also going to see unprecedented growth as sprawl from the city starts to take an even stronger hold and homebuyers resign themselves to a commute or opt to work from home.
Currently, these five suburbs are still (relatively) affordable compared to Seattle’s average home price of more than $960,000, many home buyers are looking further afield:
Federal Way
This King County suburb has stayed fairly affordable thus far, with homes even in the highly beloved Dash Point State Park area running only around $610,000. If living south of Seattle is an option, this could be a good pick.
Bremerton
West of Seattle, it’s buyer’s choice in Kitsap County. With a fast ferry commute, the town of Bremerton is starting to hit the radar, with homes starting around $489,441
Auburn
South of Seattle and east of Federal Way lies another relatively reasonable King County suburb: Auburn. Smaller and sleepier than its neighbor, Auburn boasts homes with around a $620,000 price tag.
Everett
The seat of Snohomish County is gaining popularity, along with Mukilteo (which boasts another recent ferry renovation.) There is plenty to do and see in Everett as well as a plethora of transit options, and homes in both the seat and Mukilteo are steady at around $679,462.
Lake Forest Park: No Longer on Affordable List
North of Seattle, Lake Forest Park gives residents a beautiful view of Lake Washington from a different point of view than Eastside dwellers enjoy. Unfortunately, this city is no longer on the affordable list: thanks to the exodus from Seattle, homes are now running around $1,043,034!
The market is still hot, driven by low inventory and buyer demand despite rising home prices and mortgage rates. However, as rates continue to rise, mortgage applications drop off, and even cash buyers may take a step back from outrageously priced residences to see what happens next.
In 2023, expect to see a slow down in the housing market and some fluctuations before things settle into a new normal. Hopefully there won’t be a recession as some fear, but everyone knew home prices couldn’t keep rising forever. It’s to be hoped that affordability will eventually come back into balance before 2023 is over.
Disclaimer: This article contains housing-related predictions that are based on current conditions, and those conditions could change over time. These forecasts are the equivalent of an educated guess and should not be viewed as certainties.
Will you need mortgage financing to buy a home in Seattle? We can help. Sammamish Mortgage has been serving buyers across Washington, Oregon, Idaho, and Colorado since 1992. We offer a wide variety of mortgage products and programs with flexible qualification criteria. Please contact us today with any financing-related questions you have.
Whether you’re buying a home or ready to refinance, our professionals can help.
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No Obligation and transparency 24/7. Instantly compare live rates and costs from our network of lenders across the country. Real-time accurate rates and closing costs for a variety of loan programs custom to your specific situation.