Higher interest rates driving higher monthly payments appear to be here to stay. After super-low rates between 2% and 4% earlier in the pandemic, Fannie Mae projects rates will hover around 6% throughout 2023. The new year will bring Seattle a new housing market, one without the runaway prices and jaw-dropping bidding wars, yet still difficult for anyone but the region’s wealthiest shoppers. Base one estimate, homebuyers in the Seattle area must earn $169,000 a year to afford the median home with a 20% down payment. That’s higher than the metro area’s record-high median income of $101,700.
Economists say home prices are likely to fall or flatten here and across the country. Fewer people will buy homes. Rents, too, may climb far more slowly than they have in recent years, as people stay put. Even as prices dip, the monthly cost of affording a home is climbing. The monthly payment for the median King County home is now about $4,300, that is $1,200 more than a year ago, according to the real estate data firm Attom Data Solutions. (Median means half of homes cost more, half cost less.)
Seattle’s rents and home prices will remain far out of reach for many. The pandemic frenzy is over. After two years that saw home prices shoot up by double-digit percentages, particularly in suburban areas like the Eastside, prices are now on the decline. Rents across King, Snohomish and Pierce counties dropped 10% in 2020 and shot up 21% in 2021, according to Apartment List.
Economists expect that to continue in 2023, as a recession threatens and interest rates remain high. Nationally, home prices could fall between 4% and 5.5%, according to forecasts from Moody’s, Redfin and Wells Fargo. Zillow has a slightly more reserved outlook: The Seattle-based listing site expects that home values nationally will be flat.
Seattle is likely to see a sharper decline. The region is already one of the fastest-cooling housing markets in the country. Seattle-area prices could fall far faster than the national trend — as much as 10% — said Redfin chief economist Daryl Fairweather. Windermere economist Matthew Gardner has a more modest prediction. He expects average sale prices for single-family homes to dip 5.3% in the Seattle area in 2023.
Seattle could see a sharper downturn than other markets in part because, when home prices are already this high, rising mortgage rates can quickly push mortgage payments out of reach, Fairweather said. Add to that: If rents level off (more on that in a minute), even highly paid tech workers might hold off on buying homes.
