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Axios Seattle Thought Bubble

Axios Seattle

Data: Point2Homes; Map: Tory Lysik/Axios Visuals

Seattle renters earned less than half of the income they would need to afford a starter home in October, according to an analysis by real estate website Point2Homes.

Why it matters: Higher mortgage rates and housing costs are keeping homeownership out of reach from many first-time buyers.

By the numbers: Renters in Seattle earned a household income of $70,164 on average in October, while the income needed to cover a mortgage on a starter home was $162,361, according to the study.

A typical Seattle "starter home" cost an eye-popping $645,382. That's among the highest in the nation, the study found, analyzing September data from Zillow.

Researchers considered "starter home" properties valued in the lower one-third of all available homes for sale.

The big picture: Los Angeles topped the list of cities where renters can't afford a starter home. Seattle was tied with Austin at 10th.

Across the U.S., the share of first-time home buyers has shrunk to a record low, according to the National Association of Realtors. First-time buyers made up 26% of all buyers in 2022, down from 34% last year, the group found.

Following October's interest rate hike, renter households in 15 of the 50 largest U.S. cities made less than half the income needed to buy one of the cheapest homes in town, per the analysis.

Go deeper: 3 reasons it's getting harder for renters to buy

Seattle renters can't afford starter homes

Seattle renters earned less than half of the income they would need to afford a starter home in October.

Seattle renters earned less than half of the income they would need to afford a starter home in October, according to an <a class="gtmContentClick" data-vars-link-text="analysis" data-vars-click-url="https://www.point2homes.com/news/research/starter-homes-where-to-find-them-entry-level-house-myth.html" data-vars-item="in_content_link" href="https://www.point2homes.com/news/research/starter-homes-where-to-find-them-entry-level-house-myth.html" target="_blank">analysis</a> by real estate website Point2Homes.Why it matters: Higher mortgage rates and housing costs are keeping homeownership out of reach from many first-time buyers.

Real Estate

News

Data: Freddie Mac; Chart: Madison Dong/Axios Visuals

The Seattle metro's real estate market is starting to level off, according to the latest data from Redfin/MLS.

Why it matters: After two-plus years of plummeting inventory and sky-high home prices, buyers in the Seattle area have waited a long time for a little relief.

What's happening: Mortgage rates started to surge in May and have since passed 7%, squeezing homebuyer budgets.

By the numbers: Inventory is up 10.2% and pending sales are down 36.8% since May.

Median home sales prices fell from $850,000 to $760,000 from May to September.

Sellers are increasingly dropping their asking price. In September, 46% of listings saw price cuts, up from 35.8% in May.

Meanwhile, a shrinking share of homes sold above the listed price. More than 21% of homes sold above list price in September, down from 67.6% in May.

Homes are now sitting on the market more than four times as long. In May, homes sold in five days on average, compared with 21 days in September.

Yes, but: Monthly mortgage payments are significantly more expensive than they were a year ago.

The bottom line: While Seattle's market is calmer, rising mortgage rates may keep homeownership out of reach for many.

Buying a house in Seattle is finally easier, but not cheaper

But monthly mortgage payments are significantly more expensive than they were a year ago.

Housing

The Seattle metro&#x27;s real estate market is starting to level off, according to the <a class="gtmContentClick" data-vars-link-text="latest data" data-vars-click-url="https://www.redfin.com/news/data-center/" data-vars-item="in_content_link" href="https://www.redfin.com/news/data-center/" target="_blank">latest data</a> from Redfin/MLS.Why it matters: After two-plus years of plummeting inventory and <a class="gtmContentClick" data-vars-link-text="sky-high home prices" data-vars-click-url="https://www.axios.com/local/seattle/2022/10/27/fast-cooling-home-prices-remain-high-seattle" data-vars-item="in_content_link" href="https://www.axios.com/local/seattle/2022/10/27/fast-cooling-home-prices-remain-high-seattle" target="_self">sky-high home prices</a>, buyers in the Seattle area have waited a long time for a little relief.

Local experts predict 2023 will bring lower home prices to the Seattle-area market. 

1. Houses will flood the market this spring.

Inventory in King County is expected to be "higher than we've seen over the past three years," Matthew Gardner, chief economist at Seattle-based Windermere Real Estate, tells Axios.

J. Lennox Scott, CEO of John L. Scott Real Estate, forecasts a peak of new inventory during the pre-summer months of May and June.

Gardner predicts home prices will continue to slow following the frenetic markets of 2020 and 2021.

"With inflation starting to cool, mortgage rates are modestly pulling back, which is good news for home buyers," Gardner says.

Buyers can expect a wider selection of homes to choose from, plus fewer multiple-offer situations with premium pricing, Scott says.

3. Mortgage rates will still pose a challenge.

Those buyers who do get in the market will have more negotiation power. But high interest rates and other economic factors may chill demand, says John Manning, managing broker at RE/MAX Gateway.

"At the same time, homeowners that purchased or refinanced in recent years will be less likely to sell, with many opting to hang onto their low mortgage rates," Manning tells Axios.

Seattle home prices may cool in 2023

Experts also predict buyers can expect a wider selection of homes to choose from.

Illustration of the year 2022, with a keyhole for a zero, which zooms in so you can see through the keyhole to the year 2023.

Local experts predict 2023 will bring lower home prices to the Seattle-area market. Here&#x27;s what they&#x27;re saying.

Data: U.S. Census American Community Survey; Chart: Jacque Schrag/Axios 

The pandemic shaved a few minutes off your trip to work.

What's happening: The average one-way commute in Seattle was 3.3 minutes shorter in 2021 compared to 2019, per the latest U.S. Census data.

Why it matters: More people working from home and fewer commuting by car have reshaped the traditional back-and-forth.

Seattle embraced remote work more than almost any other city in the country, according to the data. Nearly 47% of workers in the Emerald City primarily worked from home in 2021.

Between the lines: Traffic congestion is down about 27% across major U.S. cities' downtowns compared to pre-pandemic levels, reports Axios' Alex Fitzpatrick.

Nationwide, the average one-way trip to work was two minutes shorter than in 2019, per the Census data.

What we're watching: For those who do go back into the office, flexible work arrangements make it easier to avoid rush hour and cut back on some of the stress around commuting, Adam Kamins, a senior director at research firm Moody's Analytics, told Axios.

Go deeper: The number of people working remotely tripled during COVID

Seattle commutes get a little bit shorter

More people have been working from home or with flexible schedules, census data shows.

The pandemic shaved a few minutes off your trip to work.What&#x27;s happening: The average one-way commute in Seattle was 3.3 minutes shorter in 2021 compared to 2019, per the latest <a class="gtmContentClick" data-vars-link-text="U.S. Census data" data-vars-click-url="https://www.census.gov/newsroom/press-releases/2022/people-working-from-home.html?utm_source=newsletter&amp;utm_medium=email&amp;utm_campaign=newsletter_axiospm&amp;stream=top#_ga=2.73988241.2035717673.1665499575-amp-nRoaB8glk6WrcNozOf8Dpw" data-vars-item="in_content_link" href="https://www.census.gov/newsroom/press-releases/2022/people-working-from-home.html?utm_source=newsletter&amp;utm_medium=email&amp;utm_campaign=newsletter_axiospm&amp;stream=top#_ga=2.73988241.2035717673.1665499575-amp-nRoaB8glk6WrcNozOf8Dpw" target="_blank">U.S. Census data</a>.

Business

Local experts predict 2023 will bring lower home prices to the Seattle-area market, writes Axios' Sami Sparber.

Why it matters: In one of the nation's most expensive housing markets, would-be buyers and sellers are avidly watching market trends.

Details: Inventory in King County is expected to be "higher than we've seen over the past three years," Matthew Gardner, chief economist at Seattle-based Windermere Real Estate, tells Axios. 

Quick take: Gardner predicts home prices will continue to slow following the frenetic markets of 2020 and 2021.

Yes, but: Those buyers who do get in the market will have more negotiation power. But high interest rates and other economic factors may chill demand, says John Manning, managing broker at RE/MAX Gateway.

Zoom in: Zillow senior economist Jeff Tucker told Axios Seattle that houses are staying on the market longer and buyers are finding friendlier conditions and less pressure to sign away contingencies such as an inspection that could reveal problems with the home, he said.

Boomers and other high-equity homeowners are in a good position to sit tight or sell, though admittedly at off-peak rates, and move to more affordable or warmer climes, Redfin deputy chief economist Taylor Marr told Axios Seattle.

But, but, but: Affordability remains a huge challenge for want-to-be homeowners who missed last year's low-interest-mortgage boat. 

By the numbers: The interest rate hikes seen since last year translate into monthly mortgage payments that ballooned by more than 50% in 2022, Tucker said.

The monthly mortgage payment on a $684,900 loan in September 2021 — when the 30-year-fixed rate was 2.75% — penciled out to $2,796. At 6.4%, the rate as of yesterday, monthly payments soar to a whopping $4,284.

Be smart: A nice drop in interest rates would help would-be owners the most, said Tucker, but that's not expected in 2023. 

In the meantime, homeowner hopefuls can prepare for better shopping days by paying down debt and working on credit scores, he said. 

Forecasting Seattle's real estate market in 2023

Experts predict that inventory will rise and increases in home prices will slow in the coming year.

Local experts predict 2023 will bring lower home prices to the Seattle-area market, writes Axios&#x27; Sami Sparber.Why it matters: In one of the nation&#x27;s most expensive housing markets, would-be buyers and sellers are avidly watching market trends.

Sami Sparber

Featured stories

Seattle home prices may cool in 2023

Forecasting Seattle's real estate market in 2023

Seattle renters can't afford starter homes

Buying a house in Seattle is finally easier, but not cheaper

Seattle commutes get a little bit shorter