Seattle-area home prices have reached new heights, as the demand for housing continues to outstrip the supply. According to a report by HSH.com, a mortgage information website, the median home price in the Seattle metro area was $735,000 in the fourth quarter of 2023, up 13.6% from a year ago. The report also calculated the annual income needed to afford a median-priced home in the area, based on a 20% down payment and a 30-year fixed-rate mortgage. The result was $146,000, which is more than double the median household income in the area. The report showed that Seattle is one of the most expensive housing markets in the country, and that many potential buyers are priced out of the market.
Low inventory and high demand drive up prices
One of the main factors behind the soaring home prices in the Seattle area is the low inventory of available homes for sale. According to the Northwest Multiple Listing Service (NWMLS), the inventory of active listings in the area was 3,487 in December 2023, down 31.8% from a year ago. The inventory was equivalent to 0.7 months of supply, which is far below the four to six months that is considered a balanced market. The low inventory means that there are more buyers than sellers, and that the sellers have more bargaining power and can ask for higher prices.
Another factor behind the rising home prices is the high demand for housing in the area, driven by various economic and social forces. Some of the drivers of demand are:
- The strong job market and the presence of major employers, such as Amazon, Microsoft, Boeing, and Starbucks, which attract workers and professionals from across the country and the world.
- The population growth and the demographic changes, such as the influx of millennials and immigrants, and the aging of baby boomers, which create more demand for different types of housing.
- The lifestyle and the amenities of the area, such as the natural beauty, the cultural diversity, the recreational opportunities, and the quality of education, which appeal to many people who want to live in a vibrant and dynamic city.
- The low interest rates and the favorable lending conditions, which make borrowing cheaper and easier for many buyers, and increase their purchasing power and affordability.
Buyers face challenges and trade-offs in the market
The high home prices in the Seattle area pose many challenges and trade-offs for the buyers who want to enter or move up in the market. Some of the challenges and trade-offs are:
- The affordability gap and the income inequality, which make it difficult for many buyers, especially the low- and moderate-income households, to save enough for a down payment and to qualify for a mortgage. According to the report by HSH.com, the median home price in the Seattle area is 9.6 times the median household income, which is much higher than the national average of 4.9 times.
- The competition and the bidding wars, which force many buyers to act fast and to offer more than the asking price, or to waive contingencies and inspections, in order to secure a home. According to the NWMLS, the median days on market for homes in the area was 10 in December 2023, down from 18 a year ago. The median sales price was 102.9% of the list price, up from 100.5% a year ago.
- The compromise and the sacrifice, which require many buyers to lower their expectations and to settle for less than their ideal home, or to move further away from the city center and the job hubs, in order to find a more affordable home. According to the report by HSH.com, the annual income needed to afford a median-priced home varies widely across the counties in the Seattle metro area, from $197,000 in King County to $85,000 in Pierce County.
Experts predict more price growth and more challenges in 2024
The experts predict that the home prices in the Seattle area will continue to grow and that the market will remain challenging for the buyers in 2024. Some of the predictions are:
- The home prices will increase by 8.9% in 2024, according to the forecast by Zillow, a real estate website. The forecast is based on the current trends and the expectations of the future supply and demand in the market.
- The inventory will remain low and the demand will remain high, according to the outlook by Windermere Real Estate, a brokerage firm. The outlook is based on the analysis of the historical data and the current market conditions.
- The affordability will worsen and the inequality will widen, according to the report by the Runstad Department of Real Estate at the University of Washington. The report is based on the research and the modeling of the housing market and the income distribution in the area.