Seattle-area housing market ends 2023 on a sleepy note

Home sales across much of the Puget Sound region continued to decline in December from a year earlier — a sign that the local housing market remained quiet as 2023 came to a close. 

In King County, buyers and sellers struck 3% fewer deals and closed 10% fewer sales in December than in December 2022, according to data the Northwest Multiple Listing Service released Friday. The listing service will release data for the full year of 2023 later this month.

Median home prices dipped from November to December across the region, but remained higher than they were a year earlier in most Seattle-area counties. Median home prices in December hit about $850,000 in King County, up 3% from December 2022; $536,000 in Pierce County, up 6%; $545,000 in Kitsap County, up 9.5%, and $685,000 in Snohomish County, down 2%.

The Seattle area housing market slowed significantly in the last year and a half, largely burdened by higher interest rates that discouraged many would-be buyers and sellers. Fewer buyers could afford monthly mortgage payments and many homeowners opted to hold on to their current mortgages with lower rates. That stalemate has kept a lid on sales activity while cushioning prices from dropping dramatically.

Mortgage rates finally began to fall slightly in recent weeks, which industry insiders hope could push more homeowners to list their homes and draw more buyers back to the market. The average rate on a 30-year mortgage was 6.6% in late December, the lowest since May.

But affording a home remains difficult for many buyers and a big influx of inventory hasn’t arrived yet. In line with a typical holiday season slowdown, the number of homes listed for sale in King County last month was the lowest of any month in 2023. But listings were also down 17% from December 2022, illustrating that supply is especially slim. New listings were also down in Snohomish County, though they ticked up in Kitsap County and were flat in Pierce County.

One key factor: the lack of move-up buyers, said Seattle Redfin agent David Palmer. “They would be selling their homes to first-time buyers. But with high rates, “we have a lot of first-time buyers [who] are on the sidelines.”

“It helps stall the market where we are right now,” Palmer said.

When Palmer listed a two-bedroom town home in the High Point neighborhood in the fall, the home sold right at its $625,000 list price, with the seller throwing in a $15,000 credit the buyer could use to cover closing costs or secure a lower interest rate. 

In a sign of the market’s new normal, Palmer said, “We got decent traffic and one solid offer that made sense for everyone involved. … Buyers are seeing more of that [and] a little less of the heartbreak of being one of 50 offers.” 

Even as the market cooled, condo prices climbed faster than single-family and townhome prices in December. The median King County condo sold for $537,000, up 15% from a year ago. In Seattle, the median condo sold for $585,000, up 14%. Compare that to the median single-family home price of $850,000, down 3%.

Several factors may be behind the trend, including first-time buyers seeking out more affordable options to offset high interest rates and accessory dwelling units in Seattle sold as condos. The units, increasingly popular among developers, are more like smaller single-family houses than condos in a multifamily building. 

Looking ahead in the new year, real estate economists expect mortgage rates to dip a bit but stay above 6%. While that could draw more sellers to the market and drive up sales, experts say affordability will remain a key challenge.