New LGI Homes on May 12 in Sultan. (Olivia Vanni / The Herald)

New LGI Homes on May 12 in Sultan. (Olivia Vanni / The Herald)

Red-hot housing market cools, a bit, in Snohomish County

The amount of housing inventory is rising. Demand is slowing. Higher mortgage rates are a cause.

EVERETT — Homes are staying on the market longer and some buyers are getting discounts in the current real estate market, local real estate agents say.

It’s a welcome shift for buyers after two years of cutthroat competition and skyrocketing home prices. A red-hot market was fueled by record-low mortgage rates, a shortage of homes and a desire to relocate during the pandemic.

Now, inventory levels are rising and demand is slowing, driven by higher mortgage rates.

“This is normal,” said Ellen Bohn, owner of RE/MAX Elevate in Stanwood and Camano Island. “This is a readjustment of what was an inflated market to now a more balanced, healthy market. I think that’s a really good thing, especially for buyers, who have had it really unfair.”

Bohn, who is president of the Snohomish County-Camano Association of Realtors, said a home may receive one or two offers rather than 10 or 15. Buyers are feeling less pressure to waive inspection and appraisals. Sellers are helping with closing costs.

However, as the cost of borrowing increases, home ownership becomes less affordable.

“I think for first-time homebuyers, in particular, with each half a percentage increase, they qualify for a little less home,” Bohn said.

Rates for a 30-year-fixed-rate mortgage have nearly doubled in a year, climbing from about 3% to 5.7%, according to Freddie Mac.

Still, Bohn sees the current environment as more buyer-friendly. She noted rates remain historically low compared to previous decades.

“It is a good time to get into a home with a little less competition and prices just leveling to where they need to be,” she said.

Buyers had more options in May and June. Active listings in Snohomish County more than doubled in May to 1,182, up from 500 a year ago, according to data from the Northwest Multiple Listing Service.

Sam Mansour, a broker with John L. Scott Lynnwood, said more sellers put their homes on the market to try to capitalize on high prices.

“Usually a lot of sellers think the market is going to adjust and are trying to get ahead of that, while in reality they are a little bit too late,” he said.

He said sellers will need to adjust expectations and price their homes accordingly.

“It will give buyers an opportunity at a discount,” Mansour said. “The interest rate is higher, but you can refinance your home in a year or two.”

Even as listings increased in May, a shortage of homes remained. There were just 26 days of inventory, an improvement but still a clear sellers’ market, according to the listing service. Mansour expects supply to remain tight as higher rates discourage sellers who have locked in lower rates.

He said real estate is still a smart investment.

“You are still much better off purchasing than renting,” he said. “And you can purchase and have some negotiating power, while six months ago, you would have had no negotiation power.”

Kerry Randall, senior mortgage loan officer with Peoples Bank in Seattle and Edmonds, said clients are asking how higher rates will impact their mortgage pre-approvals.

“Our job is to provide creative financing options,” she said.

She said ideas include “buying down” a rate with mortgage points or using gift funds from family for a down payment. Adjustable-rate mortgages, which offer lower introductory rates, have also increased in popularity. Randall said she ensures clients can qualify for an adjustment if their rates go up in the future.

She said some clients have been discouraged by the higher rates. She tells them waiting may mean even higher prices and rates later.

Despite the market slowdown, a crash is unlikely, those in the local real estate industry said. They see the shift as a correction rather than a downturn. Randall said the state’s strong economy will continue to bring home buyers to the region.

Jacqueline Allison: 425-339-3434; jacqueline.allison@heraldnet.com; Twitter: @jacq_allison.

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