King County's housing market is ‘looking pretty bad'

It's shaping up to be another disappointing spring for Seattle-area home sellers - and many buyers.

Despite the arrival of warm weather that typically reinvigorates buyers, more listings are lingering on the market or dropping in price as home shoppers grow wary of looming economic conditions intensified by the war in Iran.

Real estate agents say their buyers are suffering from information overload. The war in Iran has sent mortgage rates up. Higher gas prices are stretching budgets. Layoffs lurk in the back of tech workers' minds.

"Our buyer confidence is just up and down - and mainly down. They are quick to talk themselves out of lots of things," said Renton Windermere broker Heather Maddox.

Last month, the median single-family home price in King County dropped 7% to $960,000 year over year while closed sales fell 1%, according to data from the Northwest Multiple Listing Service released Tuesday.

The sluggishness is especially apparent in some of the county's most active markets. Seattle's median single-family home price dropped 3% year over year to almost $999,000, although closed sales haven't budged. Eastside homes suffered even more, with prices down 5% to around $1.6 million and closed sales down 13%.

"On the whole, it's looking pretty bad in King County," said Steven Bourassa, director of the Washington Center for Real Estate Research. "But none of it is surprising. We knew a month ago that the war in Iran was likely to put upward pressure on interest rates."

Mortgage rates briefly dipped below 6% in late February just days before the U.S. and Israel struck Iran. The oil-rich country retaliated by effectively blocking the Strait of Hormuz, one of the world's busiest oil-shipping channels. The blockage sent energy prices soaring, which in turn sent mortgage rates up to nearly 6.5% in early April.

Mortgage rates are influenced by a variety of factors, including bond market movements, inflation expectations and economic conditions - all of which have been impacted by the war.

While a fragile ceasefire is in place, the strait remains effectively closed. Mortgage rates fell slightly to 6.3% at the end of April, but that was high enough to deter buyers, Bourassa said.

"You would expect (home) prices to go down in this kind of a situation," he said. "I don't see things improving anytime soon."

Single-family median prices in neighboring counties, however, held strong. Pierce and Kitsap counties saw median prices jump a few percentage points from last April to nearly $600,000, while Snohomish County's median price didn't budge from $800,000.

Despite no movement in median price last month, closed single-family home sales plummeted 15% in Snohomish County - indicating sellers are holding firm on listing prices there, Bourassa said. Closed sales in Pierce fell slightly from the year prior, while they inched up in Kitsap.

Still, the slow market hasn't stopped a flood of new single-family home listings from hitting the market.

New listings rose 13% in King County, 19% in Snohomish County, 18% in Pierce County and 17% in Kitsap County from a year ago.

Bourassa said sellers are pushing forward with listing their homes despite the weaker market because they're tired of waiting for interest rates to fall after years of hovering between 6% and 7%.

"When interest rates went up, sellers were reluctant to sell, just as buyers were unable to purchase," he said. "I think (sellers) have just gotten to the point where they just don't want to put it off any longer."

‘Falling through the cracks'

Even real estate agents, normally bullish no matter the market conditions, are feeling disappointed this spring. Buyers are feeling more uncertain about the future amid the global political tensions and rising costs.

"Gas prices are high. Grocery prices are high. All the other parts of their budget are much higher than they've been in the past, and so money just feels stretched," Maddox said. "It sort of takes kind of this perfect home and perfect week for buyers to really get excited and jump."

That has split the market, brokers say. Some listings are flying off the market within days with multiple offers. But homes that don't make the cut are lingering.

"I think we have more homes falling through the cracks than ever before," she said.

Price cuts are often necessary for those homes sitting on the market. But Maddox said many of her sellers are grappling with a new grim reality after seeing homes sell for pretty pennies during the pandemic, when extremely low mortgage rates set demand on fire.

That's especially painful for homeowners looking to upgrade or downsize. With higher interest rates, their buying power hinges on what they can net on their current home.

Real estate agents are having more pricing conversations than ever with sellers, to explain a home is only worth what a buyer is willing to pay, "regardless of what your neighbor's home sold for or what Zillow is telling you or what you need or want," Maddox said.

Kim Colaprete, owner and managing broker of Team Diva Real Estate in Seattle, said she has noticed an influx of town homes that are particularly difficult to sell this season. As new town homes hit the market with updated interiors, older town homes with deferred maintenance are falling behind.

"Part of the problem is there's just so many of them," she said.

'Successful way' for buyers

If you've tried selling a Seattle-area condo recently, you're probably thinking, "Welcome to the club."

The condo market has been bogged down by high homeowners association fees and a lack of interest since the rise of remote work. Those factors continued to add pressure on the market as sellers entered the usual peak selling season last month.

Compared with a year ago, the median condo sale price fell 10% to $539,000 in King County. In King County's most active condo markets in Seattle and on the Eastside, median prices fell 4% to $575,000 and 7% to $700,000, respectively.

Although the slow condo market has plagued condo sellers, buyers who seek a more urban lifestyle are receiving price discounts and concessions, Colaprete said.

The broker herself experienced that when she decided to downsize from a house and buy a Seattle condo last month. She said she watched the condo's price fall month over month as it sat on the market.

"That's a successful way to purchase properties," she said. "Look for properties that are sitting on the market and go in strong."

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