Real Estate Market Update - October 2023
The resilient residential Seattle-Bellevue real estate market endured another economic record-breaking month that included the 10-year treasury note yield briefly pushing above 5% for the first time in 16 years while the 30-year conventional mortgage interest rate rose to over 8% for the first time in 23 years. Nationally, mortgage demand fell to its lowest level since 1995.
The Seattle-Bellevue residential market activity continued sideways with virtually the same quantity of inventory on the market (for sales), closings (solds), and pending contracts as of September 2023. Based on local seasonal trends, I anticipate there will be a decline in sales and pending contracts from November until January 2024.
As stated last month, 30-year fixed mortgage rates are approximately 2.5% to 3% in excess of the 10-year treasury note. There are many financial experts forecasting that mortgage interest rates will decrease towards 6% by the end of 2024. However, other experts are also forecasting much higher interest rates over the next several years. For instance, Rick Santelli with CNBC is forecasting that the 10-year treasury note yield is headed to 13.5% to 14% in 7 years. If Mr. Santelli is correct, I believe demand for 30-year fixed mortgage rates, at 16% to 17%, would likely be replaced by adjustable-rate mortgages. Hopefully, such rate increases are unlikely.
As Reported in July 2023, I do not believe interest rates will decrease materially in the foreseeable future unless there’s some negative exogenous recessionary event. The average 30-year mortgage interest rate for over 50 years exceeds 7% and the market, including Buyers, Sellers, Lenders, etc., is adjusting to the reversion, during the past 18 months, of mortgage interest rates to such long-term average.
Additionally, I expect that home prices will not decrease in the foreseeable future. If there is some negative exogenous recessionary event that motivates the Federal Reserve to stimulate the economy by reducing the federal funds rates, I believe a significant backlog of pent-up Buyer demand will increase home values.
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