Whether You’re Buying Or Selling Real Estate Remains A Solid Long-Term Investment
Lately clients have reached out to ask what's going to happen with the housing market. I don't have a crystal ball so I rely on my experience, market data and reliable experts to inform my opinion. The pandemic sparked an increase in housing demand in an area already suffering from too little supply. This resulted in rapid price increases for a sustained period of time. The chart shows values on the Eastside steadily rising since 2013, with double digit increases two years running for a now median sale price of $1,700,000.
There seems to be no end in sight but for a while now I've been saying that at some point people's actual affordability ceiling will be reached. Last year the median sold price was $1.35 – it’s now $1.7 and wage growth did not keep up. Throw in rising interest rates which impact affordability as this chart shows and buyer spending power is impacted. When rates were 3.75% the payment on the mortgage amount of $1,040,000 was $4,816. Now that same payment at 5% is $5,583 – a difference of $767! This will likely deter some buyers whose target home exceeds their budgets.
March's data – from sales under contract in February - doesn't yet reflect this, rather quite the opposite. 85% of the 469 homes that sold in March went above the list for a median difference of 21%. This was likely due to the sense of urgency in buyer’s minds to get under contract before rates continued upward. Recently Windermere’s Chief Economist Matthew Gardner was quoted as saying “By now, we would start to see rising mortgage rates impact home sales and/or prices.” but "That has yet to happen.” Even a recent article in the Puget Sound Business Journal cites continued high prices despite rising rates.
On top of interest rates, throw in inflation and the volatility of the stock market and conditions are ripe for a slowdown - even as we enter the Spring selling season. It’s important to note that a slowdown does not mean a crash. Consider it more of a deceleration from 85 miles an hour on the housing freeway to the more ‘normal’ limit of 55. I’m already seeing occasional signs of this with longer market times, price reductions, missed review deadlines and less aggressive offers.
So when considering whether now is the right time to buy or sell, remember Real Estate goes through cycles but remains a solid long term investment. At the end of the day you have to make a choice that's right for you at a time that's right for you. Let me know how I can help!
Call/text or email me anytime! ginam@windermere.com.
