The housing market in Washington is undergoing significant changes. With mortgage rates rising to a 20-year high of 7.08%, homes remain on the market as buyers struggle to find affordable housing. With the help of experienced real estate agents in Vancouver, WA, you can ask all of your questions and be guided to the right home for you. Homebuyers and homeowners have many key questions as rising mortgage rates and a possible recession-like scenario threaten the Washington real estate market. When will the housing market crash and will it happen at all? The current real estate market indicated the potential of a bubble-like outlook. However, experts think the housing market will slow, but it’s unlikely to crash anytime soon due to the limited housing supply.
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Housing Market Trends
Median home prices in Washington increased by 7.3% in September 2022 compared to the previous year. Housing supply remains historically low. In September 2022, the inventory of unsold used homes was 3.2 months. Inventory for sale refers to the number of unsold residential and commercial properties. The total number of sold real estate objects during this period fell to a historical low of 31.1% compared to last year. There were 21,869 U.S. home foreclosures in September 2022, down 9% month-over-month but up 113% from last year.
Key Factors Influencing the US Real Estate Market
Real estate market prices are affected by various parameters.
1. Interest rates on mortgage loans. Interest rates and real estate prices are inversely proportional.
2. Economy. The residential real estate market changes depend on the general state of the economy. Economic indicators include GDP, employment rate, manufacturing activity, and commodity prices. You can easily find out what type of real estate is in demand.
3. Government policies such as tax credits, deductions, and legislation can affect the demand for real estate. Understanding current government policies can help you predict supply and demand and spot potential real estate declines.
Real Estate Bubbles
What is a real estate bubble? A real estate bubble is a sudden rise in prices due to increased demand and limited supply. What caused the housing bubble? Volatile real estate prices lead to real estate bubbles. As with any good or service, prices are determined by relative supply and demand.
Bubbles in the real estate market are primarily caused by several key factors.
1. The growth of economic wealth is a phenomenon in which the ratio of people’s income to prices increases.
2. Mortgage interest rates. Low mortgage rates increase demand and prices.
3. A wider range of mortgage products. Potential home buyers can choose from several mortgage options available to them.
4. Access to credit. When there are more options for credit, a buyer can finance more expensive homes.
Remove any of these variables from the equation and the bubble will burst.
Real estate bubble as of now? Inventory is still low. The interest of home buyers is slowly declining. Experts agree that there is a real estate bubble, but it is unlikely to burst.
Will the real estate bubble burst? When demand falls, the real estate bubble bursts. Despite the drop in demand for housing, the supply is increasing as builders continue to build various types of real estate, including a large amount of residential real estate being built. While the market is slowing, it is not likely to burst.
Many buyers remain in the market and are hoping to discover real estate in Washington state. With the population migrating to new areas in the Post-Pandemic era, Washington with its beautiful scenery and thriving lifestyle has become increasingly popular.
Five key Reasons why a Housing Market Crash is Unlikely
1. Low inventory. As of August 2022, inventory was only available for 3.2 months. This constant lack of inventory explains why many buyers are forced to pay higher prices. In addition, the supply-demand curve shows that prices will not fall anytime soon.
2. Insufficient supply of new homes. The supply of new homes has not yet returned to the pre-2007 level. Many developers cannot buy land, obtain official permits or increase supply immediately.
3. Many new home buyers are in high demand among all demographics.
4. Strict lending rules. In 2007, several cases of fraud were registered. In the past, lenders offered home loans to anyone without a credit check or down payment. Lenders today have high standards for borrowers, and most mortgage borrowers have excellent credit ratings.
5. Redemption reduction. Most homeowners have significant equity in their homes. The personal balance sheet of the owners is much stronger today than it was 15 years ago. There is a clear difference between now and then. Thus, there is no need to worry about a foreclosure crisis.
Current Washington Housing Market Statistics
According to ATTOM Data Solutions, 34,501 households in the United States had foreclosures (notices of default, scheduled auctions, or bank foreclosures) in August 2022.
Illinois had the highest foreclosure rate in August, with 1,926 homes foreclosed, according to ATTOM data. Delaware was next.
In August 2022, lenders foreclosed on 3,938 properties in the United States, ending the foreclosure process, also known as real estate ownership, or REO. According to ATTOM data, Illinois had the most REOs (493), followed by New York (337).
Eight months later, existing home sales fell to 4.71 million adjusted annual units. Sales revenue decreased by 23.8% compared to the same period last year and by 1.5% since August. Additionally, the median price of homes sold rose 8.4% year-over-year to $384,800.
Between August 2021 and August 2022, home prices rose 7.7%, according to NAR.
The average fixed rate for a 30-year conventional mortgage rose to 6.11% in September from 5.22% in August, according to Freddie Mac. The average level of liabilities in 2021 is 2.96%.
Buyers must make smart, informed decisions based on their key needs, budget, and research. Before proceeding, the buyer should use a mortgage calculator to calculate monthly housing costs.
Advice on Buying an Home at a Good Price
1. Increase your earning potential. To buy or finance an home, you must have a stable financial situation. Despite the recession and rising mortgage rates, you need to find ways to increase your income. 60% of workers who changed jobs in the past year were able to earn more in their new position and beat inflation.
2. Reduce your debt.
3. Research the regional market. The Washington real estate market is highly regional as market trends vary from region to region. Closing costs for buyers also vary by state and can range from 4% to 5% of the home’s sale price. If you want to get the most bang for your buck, check out the local Washington housing market.
Tips for Buying a Home in a Weak Real Estate Market
1. Don’t buy at the lowest price. When the supply of homes exceeds the current demand, the housing market in Washington will slow down. As a result, the seller must reduce the price of the house. However, it is not worth buying a house, because it is the cheapest. The seller can hide the need for major repairs. These repairs can increase the cost of your home. A home inspector can help a buyer with a thorough inspection of the property.
2. Consider the cost of ownership. A slow market is a buyer’s market. Home values will most likely go down before going up again.
3. Do not invest in real estate for the short term. If you don’t intend to stay in the property long term, don’t buy it. Buying a home for sale only adds to your inventory. A buyer may consider a shorter payback period and a higher mortgage payment. If the Washington real estate market remains weak, it will not be profitable in the long term. A downturn in the housing market may force buyers to refinance new homes.
Should I Sell the House Now or Wait?
More than half of homeowners think it’s time to sell their homes. As the market slows, inventory rises, home prices fall and mortgage rates rise, some sellers continue to face a dilemma. Sellers can make many key decisions by taking advantage of high consumer demand. However, the seller can make money on the sale of housing if the following factors are positive:
1. Mortgage rates. Mortgage rates hit a record high of 7.08% and could rise further as the Federal Reserve tries to curb inflation. Compared to 1971, today’s mortgage rates are moving toward an average 8% long-term 30-year mortgage rate. That being said, interest rates are still low and are attracting potential customers to the market.
2. If you need to move, when you find a new job or decide to retire, you have no choice but to sell the property. The best time to sell your home is when you are ready to move.
3. When expansion or contraction is needed, everyone must decide the quantity of space they require. Growing families often need more space. Retirees downsize for maintenance-free home living. Changes in family dynamics can significantly affect the decision to sell a home.
Tips for Selling a Home in a Hot Market
1. Decide how to sell at the best price. It is important to decide exactly how to sell your home. To sell your home quickly, you can sell it using the a Washington real estate agent who can put your home on the MLS. It doesn’t matter if you’re in a hot market or a slow buying market. Listing on the MLS is the best way to sell your home. About 90% of buyers are represented by buyer’s agents who have access to the local MLS. MLS listings sell 17% faster than non-MLS listings.
2. Make the necessary repairs. To get the best price for your property, you need to invest in renovations. Also, the house must be clean and tidy so that potential buyers can see the living space. You must make a good first impression. It is important to update your appeal before the arrival of potential buyers. You can prepare your home for sale with or without the help of a professional decorator. Preparing a house for sale mainly involves cleaning, moving, or renting furniture, as well as other aesthetic techniques to make the house presentable. However, this largely depends on your location and the amount of free space in your home.
Effective Tips for Selling Real Estate in a Falling Market
1. Get competitive prices. In a falling market, inventory is often high, with real estate prices continuing to fall due to low demand. It’s important to price your home competitively and get the best deal possible. Find and highlight similar home sales in your area. Redfin data shows that the typical home is selling below the asking price. If the value of your home is too high, you risk losing potential buyers.
2. Simplify the process. Selling housing in an inactive market is not an easy task. As mortgage rates peak, buyers are already resisting entering the market. Selling a home in a slow market requires making the deal more attractive. Offer financial incentives such as covering all closing costs, agreeing to all inspections, and providing a home warranty.
3. Learn how to get the best deal. The first and most important step is to find an experienced agent who will sell your home for the best possible price. For best results, list your property on the MLS. Your real estate agent offers access to the MLS.
Housing Market Predictions
For 2023, the Washington real estate market predicts that 30-year mortgage rates will range from 6% to 7.1%. As a result, the existing home sales ratio reached a ten-year low.
Here are some housing market predictions for 2023 based on expert predictions.
1. Growth of interest rates on mortgage loans. According to experts, mortgage interest rates will continue to rise due to persistent inflation, a possible recession, and geopolitical tensions.
2. Decrease in housing sales. Homes are no longer selling quickly. While the current average is 34 days, next year the market could be 35 days or more.
3. Real estate prices are falling. Some experts predict that real estate prices will not fall in 2023 due to low inventory. However, other experts believe that if interest rates remain high, sellers will conceded and lower prices. Real estate prices are expected to drop by 5-10% due to the increase in interest rates and inflationary pressure. The Federal Reserve is trying to keep inflation under control by raising mortgage rates.
4. Decrease in real estate supply/inventory. Homeowners probably won’t trade in their 3% mortgage for a new home unless they have to. As a result, the housing supply may remain low.
5. Less affordable housing. Experts assume that the supply of housing will not change significantly. Property prices may continue to fall, but not enough to offset rising interest rates. As a result, monthly mortgage payments can remain high and homes can be unaffordable. Many sellers who expect the market to pick up may give up and buy stocks.
Washington state’s housing market was hot during the pandemic, yet it is slowing. Prices will fall, but not as much as homeowners expect. The personal balance sheet of the owners is much stronger today than it was 15 years ago. A typical mortgage borrower has a well-secured fixed-rate mortgage with good credit quality and an interest rate of less than 5%. Therefore, there is no threat of price collapse. When there is high buyer demand in your area, you can take advantage of the market slowdown by selling your home.
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