Rising mortgage rates are helping to limit affordability for home buyers in the Seattle area

It’s no longer just sky-high prices and thin inventory squeezing home buyers in the Seattle area. Add to list: rising interest rates.

After mortgages hit lows earlier in the pandemic, mortgage rates have risen steadily this year amid concerns about inflation. Since the beginning of the year, the average rate on a 30-year mortgage has risen from 3.22% to 4.72%, the biggest three-month jump since 1994, according to Freddie Mack.

Rising rates may finally begin to subside the housing market after dozens of buyers tried to take advantage of low rates or relocate over the past two years. Nationwide, house prices rose nearly 19% last year and 14% in King County. Many economists expect this growth rate to slow this year.

But for those still trying to buy in expensive markets like Seattle – especially for lower-cost buyers – raising interest rates poses another problem.

For every 1% increase in interest rates, home buyers can afford about 10% less for housing, said Jim Murphy of Caliber Home Loans in Kirkland.

As rates change rapidly, “you’re talking about buying a home for more than you thought recently,” Murphy said. “If you haven’t spoken to your lender since November, you need to.”

When Zachary St. John and his girlfriend were looking for a home in Thurston and Pierce counties this spring, higher interest rates made the already difficult search even more difficult.

The combination of war bidding and higher interest rates forced the couple to stretch their maximum budget beyond the original $ 425,000 and start planning to rent a room in their new roommate or Airbnb guest to cover their monthly expenses.

“We just can’t be that competitive,” said St. John, who works for a nonprofit and whose girl is in school to become an elementary school teacher. “The houses we’re looking at are the cheapest homes in Western Washington.”

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

The average housing price was $ 557,000 in Pierce County, $ 505,000 in Terston, $ 800,000 in Snahomish and $ 538,500 in Kitsap.

“It’s a double whammy,” said June Lou, manager of the Movement Mortgage branch in Renton. “Prices continue to rise, but their purchasing power is declining by $ 50,000 each month to $ 100,000.”

Growth occurs when buyers first face a rise in value: rent.

After falling in some areas at the start of the pandemic, rents resumed in the Seattle area. In King County, the average rent for new rents has increased by 19% compared to the same period in 2021, according to the list of apartments. Rents rose 11% from the same period in 2019, before the pandemic.

Buyers of the home, who are facing both rising rents and rising interest rates, are “in a state of panic,” Lou said.

To combat rising costs, brokers and lenders say some buyers are looking for areas away from Seattle, teaming up with family members to buy or taking out loans or gifts from parents, though not everyone has access to such assistance.

Tricia Marquez and her husband were 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 in Magnolia, where they rented, but recently due to rising interest rates had to cut their budget from $ 1.3 million to $ 1.2 million.

Marquez, who works in marketing and whose husband works in an advertising agency, said the couple has expanded their search to other areas, including Ballard and Fremont, and talked about buying a home that is “a little older and requires a little more work to be you can get here. ”

“We’ve had all sorts of conversations, even we can’t afford it in Magnolia, but can we afford it in Seattle? It’s hard, “Marquez said.

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

Nationally, a larger share of home sellers are lowering prices, according to Redfin. The company’s chief economist Daryl Fairweather said in a statement that “sellers can no longer overstate the value of their home and still expect buyers to shout at their door. This is because higher mortgage rates eat up the budget of home buyers. ”

In some areas of the Puget Sound region, buyers are buying fewer homes than at this time last year. According to the listing service, in March, sales in King County fell 11.5% year-over-year. Sales pending fell 8.6% in Pier County, roughly equal to Snahomish and rose 8.7% in Kitsap.

However, inventory is difficult. More new homes were put up for sale last month than in February, a testament to the usual spring. Despite this, according to a measure known as months of inventory, it will take less than two weeks to sell all homes for sale in King, Pier and Snahomish counties at current demand. The listing service once considered stocks of four to six months to be a “balanced” market.

“Some buyers are scared or disconnected because of rising interest rates, but I also have buyers who think interest rates will only rise, so it also makes buying a house even faster,” said agent Windermere of Bellevue. Said Taylor Brazen Tagge.

For one pair of Brazen Tagge customers, rising rates between late last year and March lowered the price of a home they could afford, from $ 940,000 to $ 800,000 to maintain the same monthly payment. “We had to expand the search even further,” she said.

St. John finally found a break last weekend when he and his girlfriend bought a 1940s 2-bedroom home in Olympia near the State Capitol campus for $ 435,000. After paying to get a lower interest rate known as the “buyout” rate, the pair landed at a rate of 4.63%, St. John said.

We will have to work in the house, but “we went for what we had,” he said.

“I really feel that if we don’t get a house in such a jump in interest rates, or in the next one or two, it will be unattainable for us.”

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