Market Update — May 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 April 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: +3.4%
Snohomish: +3.3%
Pierce: +3.6%
To put these numbers in perspective, S&P 500 and Nasdaq have moved by 0.9% and 5.5% YOY, respectively. Of course, to make it apples to apples when comparing investing in the stock market vs. real estate, depending on your specific scenario, you also need to account to for the impact of leverage (meaning purchasing with borrowed money) and tax benefits. Leverage and tax benefits tend to significantly increase the return on investment (ROI) for real estate relative to mere asset appreciation presented above.
And here are the median sale prices of residential properties in the Greater Seattle area over the past three years:
New construction: 754 new construction homes were sold in April 2023. The median sale price of new construction homes was $733,625.
Months of inventory: At the current rate of sales, it’ll take around 1.5 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 around 1.5 months confirms the persistent shortage of supply relative to demand in the area.
Homes sold: 5,334 homes were sold in April 2023. This translates to a dollar value of $4B.
New listings: 7,303 new listings were added to the NWMLS database in April 2023. This is a decrease of -37.5% from April 2022, which exacerbates the low supply. This indicates fewer property owners are likely to be interested in selling their homes exacerbating the chronic shortage of supply.
Mortgage rates: The Freddie Mac rate shows no major change over the past month.
30 Year Fixed Mortgage Rates — May 2022 to May 2023 (Source: Freddie Mac)
Broader economy
The Fed hiked their benchmark Fed Funds Rate by 25 basis points at their meeting last Wednesday, bringing it to a range of 5% to 5.25%.
Private payrolls nearly doubled expectations last month, as the ADP Employment Report showed that there were 296,000 jobs created in April. Annual pay for job stayers increased 6.7% and job changers saw an average increase of 13.2%. While these figures are still high, they reflect a year-long slowdown and lower wage-pressured inflation, with job-changers in particular seeing the slowest pace of pay growth since November 2021.
CoreLogic’s Home Price Index showed that home prices nationwide rose by 1.6% from February to March and they were 3.1% higher when compared to March of last year. This follows February’s 0.8% rise in home prices, suggesting that the housing market is at a turning point. CoreLogic forecasts that home prices will rise 0.8% in April and 4.6% in the year going forward, which is an upward revision from 3.7% in February’s report.
