We are at the half way mark for 2019 though we won’t have June numbers until later in July. While the significant rise in the number of homes for sale this year has grabbed our attention perhaps the most impactful story is what has happened with interest rates since last fall.
Interest rates reached their peak in October of last year where home mortgage rates were just over 5%. At that time most experts predicted that rates would continue to rise, and many speculated that by this time, mid 2019, we would be looking at mortgage rates in the 5.5% to 5.75% range. Well, everyone was wrong.
From October through the end of March rates slowly floated downward into the mid to high 4% range. Then in early April rates dropped again and we are now have mortgage rates under 4%. And while the drop in rates versus what everyone predicted is dramatic, perhaps more interesting is the fact that the experts now all say rates could go lower later this year.
So why have rates dropped. It is simply the weak world economy that is driving interest rates. And while the US economy is relatively healthy as is the Seattle economy, the rest of the world is not doing so well and there is no quick turn around in sight. So, our real estate market is the beneficiary of weak economies in other parts of the world.
The result of the dramatic drop in interest rates means an increase in buying power or the amount a buyer can afford to borrow of over 20%! This fact along with the increase of available houses to buy and the softening of prices sets up a great scenario for today’s home buyer.
Let’s look at the most recent market sales statistics. The current numbers show the Seattle and Eastside markets with little or no appreciation. Median prices, which are not a great indicator of appreciation are down 5.4% for Seattle and down 3.25% on the Eastside from this time last year. The latest Case-Schiller index (a more accurate measure) for the Seattle area shows appreciation at a little over 1% over last year at this time. We see this as little to no appreciation at the present time and prices could go negative in the coming months.
Listing inventory still continues to grow with Seattle having 1.75 months of inventory while the Eastside has 1.82 months which is still out of balance in favor of sellers. The number of sold units for the year are up nearly 15% on the Eastside and 6.5% in Seattle.
Buyers need to take advantage of favorable interest rates and good selections of homes to buy and sellers, who have enjoyed years of great appreciation, may want to consider cashing in their equity.