As Seattle’s weather gets a little more frigid, there have been signs of chillier headwinds in the local housing market, too — especially when compared to 2021’s red hot trends.
In November 2022, the number of homes sold in the city dropped 47.8% year-over-year, and median sale prices were down 11% from April. But that doesn’t mean everything is cooling off. The median sale price in Seattle was $810,000 in November, still up ~5.2% over last year — and prices were higher in every neighborhood except Belltown and downtown.
So, what does the forecast call for in 2023? Let’s check the radar.
Look out for dropping list prices
Matthew Gardner, chief economist for Windermere real estate, said the big story for next year will be a continuing downturn in the local market — but not anything like a collapse. The skyrocketing market from 2021 — when home prices were up as much as 22% — was “clearly unsustainable,” he said, and now there’s a correction. That — together with rising interest rates — may result in a more even-keeled year.
Matthew predicted King County home prices will be ~4.7% lower across the board in 2023 — a modest dip. The key is to look for the list price trends rather than sale prices, since the former is a leading indicator. Once you see those Redfin and Zillow list prices continually dropping, you know we’ve officially gotten away from what Matthew called “the frenetic market.”
Possible value in the outskirts
With so much uncertainty, it will be tougher to tell where the true “values” are for area home-buyers. However, Matthew liked White Center, Burien, and even areas further Southwest — from Normandy Park all the way down to Dash Point — for those on the house hunt.
Matthew also thought the market will still be impacted by remote workers. That means the “rise of the suburbs” he predicted in early 2022 will continue — but there’s a limit to how far the demand will go. Lake Forest Park and Montlake? Yes. Skagit County? Not so much.
If you like riding boats, also keep an eye on the houses in Kitsap County, which includes Bainbridge, Bremerton, and Port Orchard, since there’s a lot of land out there (and beautiful scenery, of course). Des Moines also might start looking pretty sweet if the fast ferry to Seattle takes off.
Worth it to wait?
Those hoping for rock-bottom prices just around the corner may be out of luck. Eastside sales have slowed recently, but the median sale price for a home in neighborhoods like Bellevue is still above $1 million — unaffordable for most first-time buyers.
Matthew said neighborhoods close to the water (like West Seattle) will still see a great deal of action. But the market may be slower in areas closer to the city’s core like Queen Anne, Capitol Hill, and Magnolia.
What about renting?
Recent data from Apartment List showed that rents in Seattle had the second-largest monthly drop of all major metro areas in the US. Matthew believed the rate of growth may continue slowing, but rent prices likely won’t soon return to a place that would help folks save money.
He pointed to the 600,000 millennials in King County — many turning 30 soon — who are looking to buy, but can’t find anything affordable. Thus, they become “forced renters” that crowd the market, driving up the cost of a lease. “They still have the short end of the stick,” he said.
The supply + demand problem
In January, Matthew alluded to the problem of more buyers than sellers. Well, that’s still an issue. Those who locked in low mortgage rates in recent years are unlikely to want to sell now since they’d be paying more than double now.
There’s also the issue of new construction slowing due to high costs. Gardner reiterated the need for land owned by city, county, and state government to be freed up for more housing — and for Seattle to re-examine zoning regulations to allow for more building types.
“What I’d love to see is housing for people made more affordable for those making 80-120% of the median income — the firefighters, the teachers, the nurses,” said Matthew. “The trouble is builders aren’t creating houses for those incomes.”
Matthew predicted next year will still not be a buyer’s market. However, there is good news for those who want to nab their dream home. The days of wild bidding wars, multiple all-cash offers, and homes selling way above their list prices likely aren’t sticking around.
Seattle homes that sold above list price in November dropped 24% year-over-year, with places staying on the market an average of 22 days (two weeks longer than in 2021). “Sellers have a heavy expectation of the value of their homes and have been in the driver’s seat for a decade,” said Matthew. “Now they have to be more realistic.”
Peer into Matthew’s 2023 crystal ball for more real estate predictions.