Seattle Real Estate News

April 2025 - Seattle’s Million-Dollar Homes Now Entry-Level for Buyers

Seattle, once known for modestly priced homes and thriving neighborhoods, has seen the cost of single-family houses rise to staggering new heights. Today, $1 million affords what many would consider an entry-level home — typically an older, smaller residence, often requiring repairs or updates.

In today’s market, even with a budget exceeding $1 million, buyers often struggle to find a suitable home within desirable communities such as Greenwood, Phinney Ridge, and Ballard. In a city where the median price for a single-family home now stands at exactly $1 million, compromises on size, condition, or location are now common. Areas like Beacon Hill, West Seattle, and Southeast Seattle offer slightly more affordable options under $1 million, while Eastside suburbs like Bellevue and Mercer Island are far more expensive, with median home prices well over $2 million.

According to data from the Northwest Multiple Listing Service and Zillow, today’s million-dollar homes are markedly smaller than in years past, and competition remains fierce for well-situated properties. Homes located near public transit and amenities tend to attract multiple offers, while condominiums and townhouses see less buyer enthusiasm.

Seattle’s high cost of land and construction continues to limit the building of traditional detached homes, with many builders turning instead to townhomes and condominiums. Consequently, buyers who wish to remain within city limits must adjust their expectations or prepare to spend considerably more.

Even tear-down properties now often command prices exceeding $1 million, driven largely by the value of the land itself.

Despite the challenges, the desire to own a home within Seattle remains strong — a reflection of the enduring appeal of urban living and the lasting spirit of homeownership.

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.  

Despite the modest cooling in late 2023, a buyer in the Seattle area now needs an annual household income of nearly $231,000 a year or twice the city's median household income to afford the area median price of nearly $750,000. 

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. People are renting longer instead of buying a home.

Despite recent rate cuts from the Federal Reserve, a major structural problem remains - close to 60% of homeowners have outstanding mortgages that are locked in at rates below 4% according to Redfin. Few homeowners are listing their properties for sale due to this “lock-in-effect” or golden hand cuffs" 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. 
• Work with a mortgage broker to obtain better mortgage rates.

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.

In February 2023, King County home prices tumbled 7% with the median home sold for $800,000. The biggest difference in 2023 is the increase in mortgage rates. Higher rates mean less purchasing power for potential homeowners and in turn creating less competition for homes.  Some home sellers are waiting to see if rates would dip down again and markets would pick back up.  Others want to make sure their jobs are safe before making a move. 

The inventory was already tight before but now with homeowners with lower mortgage rates – they are staying put longer and not listing their homes. Others are becoming a landlord instead of selling especially if they have extremely low interest rates on their current property. 

To attract potential buyers, sellers are taking on more home improvement projects such as painting, upgrading carpets or replacing light fixtures and faucets before listing their properties.  Buyers are demanding more to compensate for higher  mortgage rates. 

Find an experienced local mortgage broker. If you find yourself in a bidding war, a local broker as opposed to a big bank can make all the difference.

The new year will bring Seattle a new housing market - one without the runaway prices and jaw-dropping bidding wars. Yet still difficult for anyone but the region's wealthiest  shoppers. Here's what real-estate forecasters expect for in 2023.  

After 2 years of home prices shoot up by double-digit percentages - prices are now on the decline driven by elevated mortgage rates and fear of rescission. 

Seattle-are prices could fall faster than the national trend with as much as 10% according to Redfin in part because Seattle home prices are already high and combined with current rising mortgage rates environment - this could push mortgage payments even more out of reach of prospective buyers. 

Could I afford to buy a house? 

The median mortgage payment here in King County is about $4,300 (median means half of mortgage payment is more than $4,300 and half of mortgage payment is less than $4,300).  Here's the current median prices in greater Puget Sound Area.  

By another estimate, Seattle homebuyers must earn $169,000 a year to afford the median home with 20% down payment.  With persistence inflation and stagflation in 2023 - elevated mortgage rates appear to be here to stay after super-low mortgage rates of between 2% and 4% during the pandemic years.  Fannie Mae projects rates will hover around 6% throughout 2023.  Check out our temporary rate buydown option to help you manage your rate for the first few years of your loan payment. 

Many people buy a house and stay put for years so they can build-up some equity when they eventually sell. However, this may not be the case for people who bought in the past few years (between Jan. 2021 through Sept 2022) and to sell in 2023 due to extenuating circumstances.