Real Estate Market Update - December 2023
Happy Holidays
The birth of our daughter was "scheduled" for December 26th, but she decided to arrive on November 28th, which made things a bit hectic around here. Poppy was born healthy at 6 lbs. 4 oz. and my wife is also doing well, as she continues to recover. Our son, Otto, is getting used to not being the only child and is helping out as best he can. We feel very blessed and grateful. We just had a happy Hannukah and are now looking forward to a merry Christmas. We wish you the happiest of holidays and a healthy new year!
Real Estate Market Update
The resilient Seattle-Bellevue residential real estate market in 2023 endured several historic anomalies, including low housing inventory/supply, endless mortgage rate increases, and a shortage of Buyers. However, this market still appears poised for annual home price appreciation of 9% to 10% in 2023, subject to the incoming economic data in coming weeks. I believe the primary reason for this real estate appreciation is the persistent housing shortage in the Puget Sound region coupled with a strong and diverse local economy. I believe demand (Buyers) will continue to exceed supply (homes) in the Seattle and Bellevue areas for the foreseeable future.
Many other markets (e.g. New York, Florida, Texas, etc.) have been reporting price decreases, however, the market bottom for King County (Seattle and Bellevue metro areas) home values was in January 2023, as previously reported in February 2023.
Mortgage interest rate increases appear to be over for 2024. As previously reported last month, the Mortgage Banker’s Association (MBA) forecasted decreasing 30-year fixed rate mortgages for 2024 (example: Q2-2024, 6.6%; Q1-2024, 6.1%). Subsequently, the Federal Reserve pivoted from hawkish (rates will be higher for longer) to dovish on December 13th by not raising the Fed funds rate for the third consecutive time while indicating it will consider rate cuts in 2024 if the inflation rate decreases and/or there is economic slowing. Currently, the 30-year fixed mortgage rate is 6.6%, which is down 2% from the peak of 8.6% in October 2023. I’m anticipating that rates will decrease towards 6% into 2024 as forecasted by MBA.
I believe 2024 will be a very busy year as more Sellers find it feasible to upgrade and more Buyers feel comfortable with the monthly cost of ownership as we enter the selling season from January into June. This should produce significant increases in home values.
Guidance for Buyers
The Seller’s market continued through 2023 as the pool of ready, willing, and able Buyers exceeded the supply of homes for sale, which remained at historic +10-year lows. However, the pent-up Buyer demand that has built up over the last 15 months has the potential to create a more highly competitive marketplace. Be prepared to pre-inspect properties in a short amount of time and negotiate competitive offers that escalate in value—I would be happy to guide you through the process. I do not recommend trying to time the market based on interest rate decreases, assuming you intend to own the home five years or more. It’s about time in the markets, not timing the markets.
Guidance for Sellers
The ideal time to sell (list) a property is from late February until mid-May. Keep in mind you will likely require approximately two months to schedule contractors to prepare the property, if necessary, and stage it. Stagers will be booked out six to eight weeks and photographers three to four weeks. I understand that any related sales expenses (e.g. brokerage fees, listing preparation costs, staging fees, etc.) can be deducted from your taxable gain. Please consult with your Certified Public Accountant (CPA) to confirm. See this article. Sold Your Home This Year? Consider Writing Off Some Common Expenses.