Home shoppers in 2022 have been on quite a rollercoaster ride. With inflation, rising rates, and volatile markets, much uncertainty has been injected into the housing market. What was already a competitive market has turned into an opportunity for many to ask “Is this the right time to buy a house?”
Luckily, I am writing from the Greater Seattle area where we have seen some of the strongest home value growth in the past year. That means that even though we are seeing declines in asking prices, and modest declines in median sale prices, we are still seeing a significant gain in value year over year in our local housing market.
So how do potential buyers proceed in a market that seems determined to sap their resources? It’s important to see your home buying goals in the context of your overall financial strategy. That’s where we are seeing a great trade in affordability between a period of low rates and inflated prices and no higher rates and more realistic prices. Where offering 2ook over asking just to secure a home was the norm in 2021, 2022 is about being opportunistic with declining asking prices and less competition. There also may be some adjustments to your home feature expectations.
Below is a chart showing the difference between rates and home prices in just a few scenarios that have been encountered between April and September this year. In these two scenarios, we see someone who has a goal of keeping their monthly payment under $4k but has seen drastically different interest rates available to them from a low of 5.5% to a high of 7% as the market has fluctuated. You can see that the impact has been a decrease in the purchase price in order to keep the budget in line.
The great affordability trade has cost the buyer $100k in purchasing power. Ouch, right? We are trading paying for more home with paying for more loan. This begs the question we mentioned above of whether it’s a good time to buy or not.
As demoralizing as this exercise can seem, the next necessary question is whether it makes sense to wait. Would waiting a year for rates to come down also coincide with declining prices? While the market data shows modest decreases in sales prices from June to September, it’s important to note that year over year prices still show an increase such as the 8% example for home prices in Bothell.
While this data shows significant volatility in the real estate market, I hope you can see that there is still great value in acting sooner than later when it comes to buying a home in the Seattle area. Work with a professional, set a budget, and be opportunistic. And remember, once you own your home, build some equity and rates decline, you will be positioned to refinance and recover what may have been lost in this tumultuous time.