Real Estate Market Update - September 2023

The 2023 residential Seattle-Bellevue real estate market continues adjusting to increasing mortgage interest rates together with a declining inventory of resale homes, now at historic lows.

According to Northwest Multiple Listing Service data, the median sold price for single-family homes in King County as of January 2023 was $799,950 (after the 20% price correction in 2022 due to higher interest rates), peaked in June at $940,000, then decreased to approximately $910,000 in August 2023. Therefore, home prices have appreciated over 13% in 2023 to date, and I expect the year will end with approximately 10% to 12% of annual home value appreciation. Home values and demand in 2023 appear to be adjusting to increasing mortgage interest rates.

The Federal Reserve did not increase the Federal Funds rate (currently 5.33%) on September 20th, but Federal Reserve Chairman Powell indicated rate increases would be reconsidered in November and December and that rates will likely remain higher for longer. Thirty-year fixed mortgage rates are generally 2.5% to 3% in excess of the 10-year treasury note, which is deemed a risk-free return.

I believe it’s likely that thirty-year fixed mortgage rates, which are now at their mean rate of approximately 7.3% since 1980, will maintain this level for the foreseeable future. I also believe the residential market will adjust to these higher rates, as it has in the past, and inventory will increase as natural events such as relocation, divorce, death, etc. require sellers to put their homes on the market.

I believe Buyers should consider purchasing now and refinancing later assuming thirty-year mortgage rates eventually decline (and home values increase) during the economic cycle.

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