Data for median home prices across the U.S. were released Tuesday morning for July 2023. We can see the overall index is posting new highs for median home values, with recent growth since the beginning of the year replacing price corrections experienced during 2022 when the market was initially reacting to the dramatic rise in mortgage rates.
The Seattle Metro Area continues to post modest month-over-month median home price increases but still digests a 5.5% value correction for the year ending July 2023. This continues to shore up the notion that the inflection point is behind us, and waiting to buy may mean less selection, higher prices, and the potential for more price escalation via bidding when more buyers come off the sidelines as mortgage rates stabilize and/or begin retreating.
The recent Fed comments suggest we are in for a sustained period of higher mortgage rates, perhaps seeing some gradual rate declines by mid-2024. I’d anticipate a round of editorial discussions on this topic based on S&P data, to be followed next week by NWMLS data for September 2023.
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I think buyers have a real advantage today to purchase with less competition, albeit digesting tougher underwriting as affordability and lender qualifications are more elusive with current mortgage rates. We know that the new construction pipeline is also crimped, limiting supply ahead. So, my sense is we’ll see a buyer spike by 2025 as we get past the U.S. Presidential elections, the “soft landing” economic period, and as mortgage rates make their hopeful retreat into the targeted 5% range deemed to balance the market for buyers and sellers. This could mean increased demand arrives at a time of anemic inventory and rising prices, which could spur a new buyer boom.
There is little distress out there, so the idea of waiting for short sales or REO inventory isn’t likely to help with more supply or cyclical bargains like we saw after the Great Recession. The more conservative tact may be to buy now, if able, and manage higher mortgage rates for a period of 18-24 months then refinance. I think most motivated sellers would be willing to look at that cost being reflected in an offer and counteroffer process.