How Will I Know When It’s A Good Time to Buy a Home in Seattle Again?

You may have seen a lot of scary-ish words in the headlines recently. Words like “recession” and “inflation” and “layoffs.” And what is actually going on here? How much should we read between the lines? Is the real estate market going to crash? How will we know when it’s a good time to buy a home again? 

We have been diving into the numbers recently. Like, REALLY diving in. We are always keeping tabs on the market, so we can best advise our clients. And right now, we are taking the time to really educate ourselves so we can continue to help our clients make the right choices whether you plan to buy, sell, invest… or all of the above. 

But before we get into the nitty gritty, know this: 

Folks who work in the real estate industry are prime targets of propaganda, and they also help spread it. 

Real estate professionals’ livelihoods depend on their productivity, aka how many homes are they selling. And real estate agents and mortgage brokers can be easily deceived by propaganda, because it’s usually positive news about the housing market and the economy. Positive news = productivity. 

Lending institutions, the investor class, the National Association of REALTORS®, and every other ruling power spin the news that’s shared with REALTORS®, mortgage brokers, and the like. That way, when REALTORS® and mortgage brokers share their thoughts with clients, clients will be influenced by what those controlling authorities want the public to think. Have you ever noticed that most real estate professionals will *always* say it’s a good time to buy, and a good time to sell, no matter what is actually happening? There’s always a way to spin it. Plus, we all want to believe things won’t be that bad. So not much persuasion is needed. 

Everyone has fallen victim to this at some point. But we’ve got to say… right now we’re feeling skeptical. Plus, we love data. 

So: What’s ACTUALLY going on in the real estate market right now? What can we expect in the months to come? 

TBH, there are no simple answers. And although the data gives us a picture of where we are now, and where we are *probably* heading, no one can predict the future. However, we’re going to do our best to show you what we’re seeing in the numbers. 

This past week, we texted several of our clients to see what their current questions are about the market. We wanted to take some time to answer these questions. We’re going to break this down into multiple blog posts so you can have a larger understanding of Seattle’s current situation and the possible issues that may come up with the real estate market. 

But let’s get started by answering questions that many of our clients have about buying a home!

Q: We want to buy a house soon. Should we wait and see if home prices come down faster than interest rates go up? 

A: This is a great question, and a complicated one. To answer this, let’s first establish the geographic area we are talking about. In the numbers to follow, we are referencing the area that’s as far north as Bothell/Shoreline, west to Elliott Bay, east to Lake Sammamish, and south to Renton. This is where most of our clients are buying homes. 

Currently, prices in this area are similar to where they were in July 2021. Our median prices peaked in May 2022. However, prices are down 14% since May 2022.

The good news: Even with the declines this year, homes are still 4.5% higher YOY. 

The bad news: We are still trending down. 

As we analyze some of this data, keep this in mind: Above all else, the monthly payment is the most critical parameter for most buyers. All other criteria usually stems from monthly cost as the basis. 

In May 2022, the median home price was at $1,040,000 (rounded for easy math) and interest rates were at 3.5%. If you bought a home for $1,040,000 with 20% down, your monthly payment would have been $4,604. 

Currently in October 2022, the median home price is at $891,000 (also rounded) and interest rates are at 7.2%. If you bought a home for $891,000 with 20% down, your monthly payment would be $5,491. 

Know that the house for $1,040,000 ($4,604/month) and the house for $891,000 ($5,491) are the same house. 

See the problem? 

In our experience in working with our clients, most buyers looking at the median home price point have a tolerance for about a $4,800 mortgage. And anything above $5,000 becomes a much harder pill to swallow.  

Q: What will be the signs that the time is right to buy a house in Seattle again? 

A: You should look for the relationship between the median home price and monthly payment at the high interest rate to get to just below $5,000 per month. Why $5,000 per month, you might ask? Based on what about 90% of our first-time tech worker buyers tell us, this is how much they are willing to spend monthly on a housing payment.

Additionally, you will also need to see a significant decline in the U.S. inflation numbers. If both of these conditions are present, then the housing market is about to shift in the other direction. So it’s time to buy, buy, buy! You can always refinance your mortgage later when the rates have come down, but you will have purchased at the low point. 

Q: So when would be the best time to buy? 

A: The best time to buy might be mid-spring of next year (2023) before rates start to reduce. Once rates lower for two quarters in a row, everyone will know the wind has changed.

In our blog post “What Does the Future Hold for Seattle’s Real Estate Market?” we are sharing a couple of different scenarios as to how the future might play out based on the data we currently have.

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And as always: Please do not hesitate to reach out if you have any questions. Even though many people may try to “time the market,” every situation is unique. There are often reasons that people need to buy or sell, no matter what the market is doing—life happens. Either way, we are ready to help you strategize and make a plan! 

Here are a few other blogs we’ve written about our current market:

– What Does the Future Hold for Seattle’s Real Estate Market?

– How is Inflation Impacting Seattle’s Current Housing Market?

– We’re Very Optimistic About Seattle’s Housing Market & Here Are a Few Reasons Why

– Is Now a Good Time to Buy A New Construction Pre-Sale Home?