Monday, February 6, 2023
Feb. 6, 2023

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While Seattle-area home prices plateau, the Eastside dips

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SEATTLE — The three-bedroom home on a cul-de-sac in Kirkland hit the market in September at nearly $1.1 million. A few weeks later, the sellers dropped the price, then dropped it again — and again.

In early December, the home was still for sale, an illustration of the region’s cooling housing market.

“Just several months ago, that would have been off the market in five days,” said Jen Cameron, the listing agent and managing partner at The Agency.

It’s not just this one house in Kirkland. Home sales have slowed and prices have plateaued all over the Seattle area, particularly on the Eastside, where the pandemic-fueled housing frenzy once pushed prices up 30% in a year.

After that kind of runaway growth, “the correction was inevitable,” said Windermere broker Max Rombakh, who less than a year ago sold a home in Bellevue for nearly $1 million over its asking price. “At some point, it had to slow down.”

High interest rates and fears of a recession have kept buyers out of the market and forced sellers to wait longer or pull their homes off the market altogether.

Jennifer German, the seller of the Kirkland home, watched a similar house down the street sell this spring for $1.6 million, $325,000 above its asking price. By the time she and her husband listed for $1.095 million in hopes of moving to Palm Springs, California, “we thought we were pretty competitively priced, back down to pre-COVID prices in the neighborhood,” she said.

Potential buyers passed through open houses, but the house sat unsold. One offer fell through.

“The market has changed so quickly up here,” German said. “It seemed like things were selling in three days and then just all of a sudden, they just stopped.”

Falling flat

The housing market has slowed down all over the Seattle area as higher interest rates have made it harder for first-time buyers to afford homes.

Prices are basically flat compared to a year ago: The median single-family home sold in November for $827,000 in King County and $700,000 in Snohomish County, both up less than 1% from the same time in 2021. In Pierce County, the median home sold for $525,000, up about 2% from last year, and in Kitsap County, the median home sold for $505,471, up about 1%.

While this time of year is typically slow in the real estate market, that’s a notable difference from November last year, when prices were up by double-digit percentages.

“It’s a bit like a fire that had a bucket of cold water poured onto it,” said Redfin deputy chief economist Taylor Marr.

Despite flat price growth, mortgage interest rates are keeping homes from being affordable to many buyers.

The monthly mortgage payment on a typical home in the Seattle metro area stands at $3,841 per month, up 60% from a year ago, according to Zillow. Average mortgage rates dropped slightly in recent weeks to about 6.5%, but remain about twice what they were a year ago, according to Freddie Mac. A 1% rate increase can reduce a buyer’s purchasing power by about 10%.

Mortgage rates are one factor slowing sales across Western Washington. Home sellers and buyers in King County made 42% fewer deals in November than at the same time last year and 41% fewer than in November 2019, before the pandemic. More than three times as many King County homes were sitting on the market at the end of the month as there were during November 2021.

Eastside slowdown

While home prices have leveled off across the region, a notable dip is taking place east of Lake Washington.

At this time last year, Eastside home prices were up nearly 35% from the year before. This year, they’re down nearly 8%. The decline is striking compared to Seattle, where prices are up 6.5%.

Big price jumps in recent years were driven in part by remote work, which fueled demand for homes on the pricey Eastside. White-collar employees sought room for home offices, home gyms and outdoor entertaining.

“People wanted more space versus the other way we were going, which was, ‘give me more urban walkability,’ “ Cameron said.

The area also has witnessed rapid tech growth.

Facebook’s parent company, Meta, and Amazon have expanded their footprint in Bellevue in recent years, joining Microsoft, whose presence has shaped neighborhoods in Redmond and Bellevue. Amazon had nearly 10,000 employees in Bellevue this summer and planned to grow that to 25,000.

As remote work persisted, the company later paused some construction in Bellevue, saying it planned to “reevaluate the designs.” More recently, layoffs have hit the tech sector, including at Amazon, Meta and Microsoft.

Real estate agents report anxieties about the broader economic outlook bubbling up among clients, though many said they haven’t yet seen deals fall through because of tech layoffs. So far, the cuts appear to represent just a small fraction of all the region’s tech workers.

Job cuts can have a “psychological impact,” spooking some potential homebuyers even when their jobs are safe, said Redfin economist Marr. At the same time, with remote work likely here to stay, “I would expect that there’s going to be a little bit more demand for housing out in the suburbs than there is in the core part of Seattle,” Marr said.

Single-family homes are still more expensive on the Eastside: The median home sold for about $1.3 million in November, compared with $905,000 in Seattle.

Redfin projects home prices across the Seattle area could drop 15% from their peak this spring to a low point sometime in the middle of next year, Marr said.

Trade-offs for buyers

While Seattle’s downturn is so far less dramatic than the Eastside, buyers are hesitating here, too.

“The confidence to make that jump [to buy a house] has diminished drastically,” said Seattle Coldwell Banker Bain agent Roy Powell. “Part of that is interest rates. Part of that is employment. And part of that is not wanting to overspend.”

The number of home sales that went pending in Seattle in November was down 42% from the same time last year.

The slowdown showed up this fall at a cluster of townhomes in Westlake. A three-bedroom townhome that hit the market in July sold in 12 days. Another in the same development hit the market in mid-September and took a month to sell. Both sold below their list price.

While many buyers are holding off, those ready to buy now are enjoying a quieter market.

“We were happy to see that we weren’t totally in a cutthroat environment,” said Ashley Newcomb, who recently bought a sage-colored three-bedroom house in West Seattle. On a whirlwind October trip from the East Coast, where Newcomb and her husband currently live, they visited 20 houses in 10 days.

“There was a surprising amount available in our budget,” Newcomb said.

The trade-off: Interest rates chipped away at what they could afford. The couple’s budget started around $1.1 million. But when rates jumped from about 3.5% to more than 7%, it shrank to between $800,000 and $900,000 for a three-bedroom house with a yard.

The couple made the leap because they’re expecting a baby, Newcomb said, but “between interest rates, the uncertainty of the market and forthcoming recession, it was definitely not our ideal time.”

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