EVERETT — The real estate market made an abrupt U-turn this spring.
Interest rates for a 30-year fixed rate mortgage shot up to 6% in May. During the winter, rates hovered around 3.5%.
Suddenly, it became more of a buyers’ market.
For over two years, sellers have been in the driver’s seat.
Multiple offers, bidding wars and above-list price offers were the norm. Homes sold quickly, with many going under contract in less than a week.
Buyers had to make snap decisions about whether to submit an offer, often after viewing a property once or twice for 20 or 30 minutes.
When the rates rose, the world stood still for a couple weeks, some local real estate agents said.
Dafna Shalev, real estate broker with Cascade Team Real Estate in Woodinville, definitely felt the lull.
“I was putting listings on the market right when the interest rates increased,” Shalev said. “The buyers stopped coming. There were no showings. Nothing.”
What happened next?
Prices began dropping, she said.
Price cuts are becoming more common especially when properties sit on the market for more than a week, Shalev said.
Still, the trend is for homes to sell above list price, though the percentage appears to be steadily falling.
According to the Northwest Multiple Listing Service’s report for June, sales “fetched 105.7% of the asking price, down from April when it was 107.7% and March when it was 108.2%.”
With the change in the market, buyers are feeling less pressure to waive home inspections and appraisals.
As part of some deals, sellers are helping buyers with closing costs.
Contingency deals that benefit buyers — should they not be able to meet the terms of a contract — are back on the table, Shalev said.
In a news release, Northwest Multiple Listing Service director Meredith Hansen said, “With higher interest rates and more inventory, we are seeing sellers becoming more flexible in what terms they will accept. It is an excellent time for buyers who were discouraged in the past frenzied market to step back in and find a home.”
Still not be ignored is the fact, that as the cost of borrowing rises, home ownership becomes less affordable.
With each half a percentage increase in the interest rate, buyers typically qualify for a little less home, local real estate experts say.
In recent weeks, there is some indication that mortgage rates have leveled off.
Last week, interest rates averaged 5.3% on a 30-year-fixed rate mortgage, according to Freddie Mac.
By comparison, last year’s annual average rate was 3%, the lowest annual average in three decades. In 2019, the average annual rate was nearly 4%.
Buyers had more options in June and July.
The number of active listings in Snohomish County in June was 1,973, compared to 1,182 in May, according to data from the listing service.
In June, the median price for a single-family Snohomish County home was nearly $800,000 up from $716,000 in 2021, an 11% increase year over year, according to the listing service.
In 2020, the median home price was $541,875.
The median is the point at which half of all homes sold for more and half sold for less.
Median home prices are continuing to rise throughout the Puget Sound region, but the rate has slowed a bit, according to an analysis by the John L. Scott Ballard/Madrona Group in Seattle and Lynnwood.
“Increased interest rates and a large number of new listings is bringing the Snohomish County real estate market back to a more normal state,”
With interest rates above 5%, some buyers have been priced out of the market, said Shawn White, mortgage loan originator with Caliber Home Loans, which has offices in Snohomish and King counties.
Does that mean the market is falling apart?
“No. We’re still on the very low end of the spectrum in terms of mortgage rates in terms of what we’ve seen over time,” White said. Mortgage rates, for example, topped 16% in 1981.
Home inspection contingencies, which traditionally allow buyers to back out of a deal and recover their desposit, if significant problems are uncovered, have begun to stage a return.
In the frenzied real estate market that prevailed earlier this year and last, buyers often waived the inspection to clinch the deal.
“Nobody liked to see them waived,” White said. “We’re starting to see them come back. They just feel more protected.”
Also new: sellers are being coached by real estate agents and others, to consider helping buyers buy down interest rates, she said.
That’s when sellers or builders purchase mortgage points to lower a buyer’s interest rate. Points are are a one-time fee paid upfront. Depending on the buydown terms they can reduce the interest rate for the first few years of the loan or the term of the loan, according to Rocket Mortgage.
“We anticipate that homes will hold their value,” White said. “So buy whenever you can.”