Seattle’s housing market is slowing faster than any other housing market in the country amid rising mortgage rates, inflation, a slowing stock market and broad economic uncertainty.
That’s according to a Redfin analysis that ranks the 100 most populous U.S. metropolitan areas based on how quickly they’re cooling, according to the change in numerous housing metrics from February 2022 to August 2022. Those metrics are prices, price drops, supply, pending sales, sale-to-list ratio and speed of home sales.
The 10 markets cooling fastest are almost all either West Coast markets that have long been expensive, or places that became significantly less affordable during the pandemic because they attracted scores of relocating homebuyers. Las Vegas came in second place, followed by San Jose, CA, San Diego, Sacramento, CA, Denver, Phoenix, Oakland, CA, North Port, FL and Tacoma, WA.
Seattle, San Jose, San Diego, Sacramento, Denver and Oakland are all among the 15 most expensive housing markets in the U.S. Las Vegas, San Diego, Sacramento, Phoenix and North Port are all on Redfin’s list of the 10 most popular migration destinations. That’s based on net inflow, or or how many more Redfin.com users looked to move in than leave.
“These are all places where homebuyers are feeling the sting of rising home prices, higher mortgage rates and inflation very sharply. They’re slowing down partly because so many people have been priced out and partly because last year’s record-low rates made them unsustainably hot,” said Redfin Chief Economist Daryl Fairweather. “The good news is that the slowdown is dampening competition and giving those who can still afford to buy more negotiating power.”
Measures of homebuyer demand and competition are dropping off quicker in Seattle than any other major metro this year. About 34% fewer homes sold within two weeks in August than a year earlier, a big swing from the 7% increase in February. And the typical home sold for 5% more per square foot in August than a year earlier, compared with a 23% year-over-year increase in February. Additionally, home prices are falling from their peak, with the typical home selling for 2% less in August than a month earlier.
Those stats indicate that Seattle buyers have more to choose from, homes are taking longer to sell and prices are rising much slower than they were earlier this year. Tacoma, located about 35 miles south of Seattle, is also among the 10 markets cooling fastest.
The housing market is cooling particularly quickly in the Seattle area and other pricey West Coast metros like San Jose, Oakland and San Diego largely because the Fed’s rate hikes and resulting rising mortgage rates have made it even more difficult to afford a home in those already-expensive places. In dollar terms, high mortgage rates make a bigger difference for more expensive homes. The typical monthly mortgage payment on the typical Seattle home, which costs $775,000, is more than $4,400 with today’s 6% mortgage rates. That’s up from about $3,300 with the 3% interest rates common at the beginning of the year.
“A lot of sellers aren’t able to get the price they want because buyers don’t want to compete with other offers when mortgage rates are double what they were a year ago,” said Seattle Redfin agent David Palmer. “That means there are fewer sellers listing their homes and fewer buyers making offers on the ones that do hit the market.”
Persistently high inflation is another factor, with the rising price of things like food and fuel cutting into buyers’ budget and reducing demand. The volatile stock market also dampens demand in tech hubs like Seattle and the Bay Area because many many residents’ incomes are tied to the stock market.
Economic forces like rising rates, inflation and the unpredictable stock market are a double-edged sword for homebuyers: They make it more difficult for house hunters to buy homes, but they also make the housing market friendlier for those who can afford to purchase a home. Prospective buyers who can still afford to buy a home finally have negotiating power, meaning they have more time to find the right home, they can include contingencies like inspections and appraisals in their offers, they’re unlikely to face bidding wars and they may be able to get an offer accepted for under the asking price.
Rising mortgage rates are also a major factor in the quick cooldown in homebuying hotspots for relocating remote workers like Las Vegas, Sacramento, Phoenix and North Port, making those markets attractive for buyers who can afford to remain in the market.
Those places all welcomed scores of remote workers from pricier parts of the country like Seattle and the Bay Area, many of whom were cashing in on last year’s record-low mortgage rates. The influx of out-of-towners caused home prices to rise rapidly. The typical Las Vegas home cost $416,000 in August, up nearly 35% from $310,000 in August 2020, at the start of the pandemic. And in Sacramento, the typical home sold for $570,000, up 33% from $430,000. Those higher home prices combined with higher mortgage rates have sent those areas from affordable to not-so-affordable, dampening demand and slowing the market.
Many locals are priced out of these housing markets, and the flow of out-of-town homebuyers is also slowing as the pandemic wanes, some workers return to the office and mortgage rates continue their rise.
But while the intense popularity of places like Las Vegas and Phoenix has made it difficult for many people to afford a home, buyers who can afford to remain in the market are seeing some relief. Homes are still more expensive than they were before the pandemic, but demand has slowed enough that prices are falling from their peak and supply is building. Las Vegas home prices were down 3% in August from the month before. And about 26% fewer homes sold within two weeks than a year earlier, compared with a 6% increase in February.
“The housing market has changed very quickly in buyers’ favor,” said Las Vegas Redfin agent Tzahi Arbeli. “Not only have prices fallen in recent months, but sellers see the market cooling and they’re more open to negotiating prices, giving concessions and paying closing costs. They may accept an offer that’s $20,000 below asking price and pay for repairs the buyer found during an inspection. Sellers can still get a fair price–but it’s with the understanding that they may have to wait several weeks for the right offer, and buyers are no longer willing to overpay.”
The rankings in this report are based on changes in the year-over-year housing-market stats below from February 2022 to August 2022.
The rankings in this report are from a Redfin analysis of the U.S. metros with housing markets that cooled down fastest from February 2022 to August 2022. The ranking is based on year-over-year changes in prices, price drops, supply, pending sales, sale-to-list ratio and the share of homes that went off market in two weeks from February to August. The analysis compares August to February because in many U.S. metros, that’s when the housing market reached a peak in terms of demand and competition while the number of homes for sale was at a low. To be included in this report, a metro must have been among the 100 most populous in the U.S. and had data available for all six variables included in the analysis.
