Rising mortgage rates add to the affordability squeeze for Seattle-area homebuyers

It’s no longer just skyrocketing prices and a thin list squeezing Seattle-area home buyers. Add to the list: Rising interest rates.

After hitting rock-bottom lows earlier in the pandemic, mortgage rates have been rising steadily this year amid inflation concerns. Since the start of the year, the average rate for a 30-year mortgage has risen from 3.22% to 4.72%, the biggest three-month jump since 1994. Freddie Mac,

Rising rates eventually started angering the runaway housing market after many buyers moved or took advantage of lower rates during the last two years. Nationally, home prices climbed about 19% last year, and 14% in King County. Many economists expect the growth rate to be slow this year.

But for those still trying to shop in expensive markets like Seattle — especially low-spending buyers — rising interest rates are posing another challenge.

Jim Murphy said, with Caliber Home Loans in Kirkland, for every 1% interest rate increase, home buyers can spend about 10% less for a home.

With rates changing rapidly, “you’re talking about buying a home for more than you anticipated a short time ago,” Murphy said. “If you haven’t spoken to your lender since November, you need to.”

As Zachary St. John and his girlfriend look for a home in Thurston and Pierce counties this spring, high interest rates make the already difficult search even more difficult.

The combination of bidding wars and high interest rates prompted the couple to push their maximum budget beyond their initial $425,000 and add a roommate or Airbnb guest to their new home to help cover their monthly costs. Started planning to rent the room.

“We can’t be so competitive,” said St. John, who works for a nonprofit and whose girlfriend is in school to become an elementary school teacher. “The homes we’re looking at are some of the cheapest livable homes in western Washington.”

The average single-family home price in King County last month was $930,000, up 8.4% from a month earlier and 12.7% from last year, according to data released Thursday by the Northwest Multiple Listing Service.

The median home price was $557,000 in Pierce County, $505,000 in Thurston, $800,000 in Snohomish, and $538,500 in Kitsap.

“It’s a double whammy,” said Jun Lu, branch manager at a Movement Mortgage branch in Renton. “Prices keep rising, but their purchasing power is decreasing from $50,000 to $100,000 every month.”

First-time buyers face another escalating cost: rent.

After a drop in some areas at the start of the pandemic, rents in the Seattle area have skyrocketed. In King County, the average rent for new leases is 19% higher in 2021 than at the same time, according to apartment list, Before the pandemic, rents increased by 11% compared to the same time in 2019.

Home buyers are “in panic mode” facing both hike in rent and rising interest rates, Lu said.

To combat rising costs, brokers and lenders say some buyers are looking to areas farther away from Seattle, shopping together with family members, or tapping into loans or gifts from parents. However, not everyone has access to that type of help.

Trisha Marks and her husband are looking for their first home in Seattle after the couple and their young children moved to the area in late 2020 to be closer to family. They hope to stay at Magnolia, where they have been renting, but recently had to cut their budget from $1.3 million to $1.2 million due to rising interest rates.

Marques, who works in marketing and whose husband works at an advertising agency, said the couple has expanded their search to other neighborhoods, including Ballard and Fremont, and have talked about buying a home that will ” A little old and it needs a little more work to be able to enter here.”

“We’ve had all kinds of talks, we can’t even buy it at Magnolia, but can we afford it in Seattle? It’s tough,” Marks said.

The market still feels competitive for many buyers, but there are signs of cooling.

Nationally, a large proportion of home sellers are slashing their prices, according to redfin, The company’s chief economist, Daryl Fairweather, said in a statement, “Sellers can no longer overprice their homes and still expect buyers to shout at their doors. That’s because higher mortgage rates are more affordable than homebuyers’ budgets.” I’m eating.”

In some areas of the Puget Sound region, home buyers are buying fewer homes than they were last year. According to the listing service, pending sales in King County were down 11.5% in March compared to the same period last year. Pending sales were up 8.6% in Pierce County, nearly flat in Snohomish and down 8.7% in Kitsap.

Still, inventory is tight. Last month more new homes were listed for sale than in February, a sign of general spring growth. Still, it would take less than two weeks for all homes for sale in King, Pierce and Snohomish counties to sell at current demand, according to a measure known as inventory months. The listing service once considered four to six months of inventory a “balanced” market.

“Some buyers are getting scared or put off by a rise in interest rates, but then I also have buyers who think that interest rates are only going to go up, so it’s putting pressure to buy a home even more quickly. ,” said Bellevue-based Windermere agent Taylor Brazen Tagge.

For a pair of Brazen Tag’s customers, a rate hike between late March and last year reduced the home price from $940,000 to $800,000 to maintain the same monthly payment. “We have had to broaden our search,” she said.

St. John finally got a break this past weekend, when he and his girlfriend acquired a two-bedroom 1940s home near the State Capitol campus in Olympia for $435,000. After paying to get a lower interest rate, which is known as “Buying Down” RateThe pair landed at 4.63%, St. John’s said.

The house would require some work, but “we did everything we could for what we had,” he said.

“I really feel like if we don’t get a house on this interest rate jump or in the next one or two, it’s going to be unattainable for us.”

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