Seattle Real Estate News

The spike in home prices and interest rates has significantly impacted first-time homebuyers. The following three tips can help such buyers successfully navigate the market as they look to purchase their first home. 

1. Expect to move quickly.  Inventory remain very low so buyers will likely need to move quickly and make an offer if they see a home they like. Chances are the property won't be on the market too long before it's sold. 

2. Apply for mortgage Pre-Approval. The market's competitive nature for buyer means it's in their best interests to arrange financing before beginning their home search. A mortgage Pre-Approval indicates to sellers that buyers' won't ben denied a mortgage or lack financing after making an offer. Gather these documents and with a local mortgage broker for your pre-approval letter. 

3. Set a realistic budget and expect to offer over the asking price. In the current market, buyers should know that they will likely need to pay more than the asking price for a home. 

Compare our rates here and let me assist with your Pre-Approval Letter. 

Since 2020, the income needed to afford a typical house in the Seattle-area has almost doubled from $120,000 in 2020 to $214,000 in 2024 – thanks to skyrocketing home prices and interest rate hikes. Mortgage rate increases over the last 18 months  drove up the monthly cost of buying a home. At the same time, a shortage of homes for sale kept Seattle-area home prices from plummeting.  Real estate economists expect interest rates to dip some in 2024, but not to drop dramatically since it's an election year and the Fed seems  happy with it's current inflationary policy.  Fannie Mae projects the rate on a 30-year fixed mortgage will average 6.7% in 2024 and 6.2% in 2025, as the Fed continues to try to fight inflation. Lawrence Yun, chief economist at the National Association of Realtors, has a similar, but slightly lower, projection that rates will average 6.3% in 2024. 

While the income needed to afford a home shot up 79% from January 2020 to January 2024, median income in the region increased only about 22%, the analysis found. According to Zillow’s based on the housing affordability index from the Washington Center for Real Estate Research at the University of Washington, homebuyers earning the median income can afford a median-priced home in only two of Washington’s 39 counties, Lincoln and Columbia. The index assumes a 20% down payment and a household spending only 25% of its gross income on mortgage payments.

Few homeowners are listing their properties for sale due to “lock-in-effect” either they bought their house or refinanced during the pandemic era (2020 – 2022). Even, if they are willing to sell – their purchasing power is reduced drastically due to high mortgage rates.  That combination has throttled the housing market as homebuyers struggle to get in the door.

So, how are homebuyers coping?

• Many homebuyers are spending more than 40% of their income on housing (10% more than what is recommended).
• Some buyers rely on loans or gifts from family members to help cover down payments and closing costs.
• There are several financing options for homebuyers with low down payment - HomeReady program with 3% down payment or FHA with 3.5% down payment or VA financing with 0% down payment.
• Others are teaming up with friends to afford a home or leaning toward condos and many are simply waiting longer to buy. 

For those who succeeded in the current market – congratulations since property appreciation and Return on Investment (ROI) have been in double digits.

Since 2020, home values have skyrocketed particularly in outlying areas that offer more space and affordability. For example, according to ZIP-code-level data from Zillow, the value of a typical home in a zip code covering Seattle’s Capitol Hill and Central District neighborhoods increased about 8% from 2020 to 2024, compared to 51% in a Renton zip code and 61% in Mill Creek.

• The No.1 regret across all generations was buying a property that was too small. 
• The second most common mistake was not saving enough money before buying their first home. Most buyers anticipate the money the'll need for their mortgage, homeowner's insurance and taxes but they don't always budget for home maintenance and repairs. As a general rule of thumb, most financial experts suggest saving at least 1 percent of the home value annually for repairs. 
• Homeowners spent the most money on new appliances (16%) during their first year followed by replacing the roof (13%), replacing a furnace or air conditioner (11%), landscaping (10%) and replacing flooring (9%). 
• Nearly half said they spent more than their budget during the first year of home-ownership.