According to recent research, Seattle’s housing market is slowing more quickly than any other in the nation as purchasers with limited funds become more reluctant to buy homes.
The West Coast is where the real estate market is cooling down the quickest, according to a report by the real estate company Redfin, which rated the country’s most populated centres using measures including pricing, price reductions, and supply.
In addition to a major departure of residents discouraged by increasing mortgage rates, crime, and forecasts of an impending recession, it is believed that property values in West Coast urban regions are falling as a result of an abundance of houses on the market.
Based on annual fluctuations in prices from February to August 2022, expensive Western places that had seen their prices rise since the epidemic, such as San Diego and San Jose, helped fill out the top 20 fastest-cooling towns.
Cities that emerged as hotspots for house purchases during the epidemic, such Phoenix, Las Vegas, and Dallas, were also present. However, their markets have quickly shrunk as the newly emerged trend of remote employment continues to fade.
As Americans try to get over the epidemic and resume their normal lives, the market as a whole has grown after entering an unheard-of freefall in recent years.
Redfin’s research, however, indicates that the more expensive cities, like Seattle and those that border the Pacific, where homebuyers are experiencing the consequences of the sharp increase in housing prices, have mostly missed out on this comeback.
The report also comes after the Federal Reserve hiked its benchmark interest rate by 0.75 percentage points on Wednesday, the fifth increase since March, possibly raising the cost of purchasing a house.
As of August 22, the survey revealed that in Seattle, where the average house price is around $775,000, 34 percent fewer properties were sold within two weeks of being on the market than the previous year.
The data reveals that, after a year of record growth in the Windy City, the number of fast sales is swiftly declining. This is up from a 23 percent year-over-year rise witnessed in February of previous year.
Redfin said that the nation’s rising mortgage rates—which soared beyond a record 6 percent this month—were a factor in the swift cooling that occurred for Seattle and other areas that made up the top 20.
With today’s mortgage rates of 6%, the business estimates that a monthly mortgage payment on the median-priced property in Seattle will be more than $4,400, up 33 percent from the $3,300 observed earlier this year.
The number of residences available for sale in the city has increased by more than 100% since last year.
These figures imply that Seattle buyers have more alternatives for purchases, that properties are taking longer to sell, and that prices are growing much more slowly today than they were earlier in the year.
According to the survey, Tacoma, which is situated approximately 35 miles south of Seattle, is also among the top 10 cities cooling down the quickest, indicating that the expensive West Coast metro region has also been impacted by the recent rise in housing prices.
Las Vegas, which became a popular “relocation” destination during and shortly before the pandemic as residents of the nearby Golden State fled eastward due to high taxes, soaring house prices, and natural catastrophes, came in second to Seattle in the rankings.
As of August, the price per square foot (PPSF) in Sin City has significantly decreased (14.5 percentage points year over year). In contrast, the median selling price in Vegas was $416,000 as of the previous month, a decrease of 3% from the previous month alone.
Many of the places on the list, including as Las Vegas, Phoenix, Sacramento, and North Port, functioned as “relocation hotspots” during the transition to remote work that occurred during the epidemic, but those markets are now rapidly cooling as monetary policy tightens and employees go back to the office.
However, practically all of the other properties listed by the Seattle-based brokerage business were in West Coast cities that have historically been pricey, such San Jose, a city with a large tech industry, and picturesque San Diego.
Redfin’s top five fastest-falling property markets were completed by three Californian cities: San Jose, San Diego, and Sacramento, which came in third, fourth, and fifth, respectively.
Other Golden State cities that made the top ten list included the core of the Bay Area, Oakland, the neighbouring city of Stockton, the more southern Bakersfield, and the city just north of Los Angeles.
Despite a recent rise in mortgage rates, prices have decreased. According to the federal government’s lending firm, Freddie Mac, the interest rate on a 30-year fixed-rate mortgage presently stands at 5.66 percent, an increase of over three percentage points from the same time last year.
Goldman Sachs economists recently issued a warning that weakening demand and an abundance of available homes will cause house price rise in the United States to fully stop next year.
The head economist for Moody’s Analytics, Mark Zandi, issued a warning last month, stating that certain areas of the country’s values were up to 72 percent overpriced and that if there is a recession, home prices may fall by as much as 20 percent the next year.
Due to record-low mortgage rates, the housing market was relatively affordable in 2020 and last year throughout the pandemic, despite prices rising over that time to meet an equally rising demand.
However, this year, just before the Fed decided to increase interest rates to battle record inflation, banks sharply increased mortgage rates in an attempt to offset any losses that may be suffered in a predicted recession.
The 30-year fixed-rate mortgage, the most common home loan package, increased to 5.78 percent in June from 5.23 percent at the end of May, marking the highest one-week increase since 1987.
Since then, it has increased to a more obvious 6% as of September.
The affordability rate was 2.9 percent a year ago, which is less than half of what it is now.
According to experts, the decline in demand will cause house price rise to peak by the end of the year before eventually falling.
Robert Dietz, chief economist of the National Association of Home Builders, described the situation to The Wall Street Journal as “a home affordability catastrophe,” pointing out that real estate companies have recently lowered their asking prices to reflect the quickly altering housing market.
According to Redfin, average house prices have dropped recently in places like Boise, Idaho; Phoenix; and Austin that have seen a significant price rise in previous years.
The number of sales of existing houses decreased 8.6 percent from last year to a seasonally adjusted annual pace of 5.41 million as high prices and increasing rates squeezed young purchasers, many of whom were millennials entering their prime homebuying years.
A large percentage of house sellers reduced their asking price in July, especially in previous recession boomtowns, according to a different Redfin research released last month.
Seventy percent of ads in Boise, Idaho, which was a popular location for West Coast remote workers during the epidemic, were reduced in July, up from only a third a year earlier.
Last month, 58 percent of homes were taken off the market in Denver, while 56 percent of listings in Salt Lake City had their original asking prices lowered.
According to Boise Redfin realtor Shauna Pendleton, “individual house sellers and builders were both eager to cut their prices early this summer, mostly because they had unrealistic expectations of both price and timing.”
They overpriced since their neighbor’s house just sold for an outrageous amount, and they had heard rumours that numerous bids would come in during the first weekend, so they had set their expectations accordingly.
“My advise to sellers is to price their house fairly from the outset, acknowledge the slowdown in the market, and be aware that it can take longer than 30 days to sell. Someone shouldn’t have to lower their price if they are selling a great house in a popular area.
Despite industry statistics showing that property prices are still higher than they were a year ago across the board and in almost every area, listing reductions have sharply risen as sellers’ high hopes collide with hard realities.
Redfin reported that in July, a record amount of houses were listed for sale throughout the country with price reductions.