Market Update — February 2023
We believe timely and relevant data is key to making good decisions. To this end, we are committed to providing our community and clients with actionable data and insights about the local real estate market.
Local real estate market
With the data from January 2023 in, here’s an overview of the key aspects of the local real estate market. The real estate data below is collected from Northwest Multiple Listing Service (NWMLS).
Median price: The chart below shows the latest median sales prices of homes over the past five years. Since our buyers typically buy properties in King, Snohomish, and Pierce Counties, here’s the Year-Over-Year (YOY) median closed price increase in these counties over the past 12 months:
King: +8.3%
Snohomish: +10.9%
Pierce: +8.1%
To put these numbers in perspective, S&P 500 and Nasdaq have moved by -8% and -3.4% YOY, respectively.
And here are the median sold prices of residential properties in the Greater Seattle area over the past three years:
New construction: 488 new construction homes were sold in January 2023. The median sale price of new construction homes was $735,990.
Months of inventory: At the current rate of sales, it’ll take 2.5 months for every listed home to sell. To put this number in context, note that the months of inventory for a balanced market is considered to be 4 to 6 months. So the current value of 2.5 confirms the persistent shortage of supply relative to demand in the area.
Homes sold: 3,264 homes were sold in January 2023. This translates to a dollar value of $2.18B.
New listings: 4,925 new listings were added to the NWMLS database in January 2023. This is a decrease of -16.9% from January 2022, which exacerbates the low supply. This indicates fewer property owners are interested in selling their homes exacerbating the chronic shortage of supply.
Mortgage rates: Mortgage rates have climbed down from their peak in October 2022 and edged lower since January 2023. The majority of January was characterized by sharp decline in mortgage rate volatility and the lowest rates in several months, the first week of February has done its best to erase that progress. This is a process that began in earnest after last week's jobs report, but it continued into the current week. Part of the reason for yesterday's move toward higher rates was the market's anticipation for today's comments from Fed Chair Powell. Buying down rates remains a popular strategy for buyers to lock in lower rates.
30 Year Fixed Mortgage Rates — February 2022 to February 2023 (Source: Freddie Mac)
Broader economy
Are More Fed Rate Hikes Ahead This Year? As expected, the Fed hiked its benchmark Fed Funds Rate by 25 basis points at its meeting last Wednesday. The Fed has now hiked the Fed Funds Rate eight times since last March, bringing it to a range of 4.5% to 4.75%. The Fed Funds Rate is the interest rate for overnight borrowing for banks and it is not the same as mortgage rates. When the Fed hikes the Fed Funds Rate, they are trying to slow the economy and curb inflation.
Fed Chair Jerome Powell acknowledged that inflation has been declining, which he noted was encouraging. However, he said the Fed has more work to do to ensure inflation is on a sustained downward path. He emphasized that the Fed would continue to make their “decisions meeting by meeting, taking into account the totality of incoming data and their implications for the outlook for economic activity and inflation.”
