Starter home sales in Seattle drop 36%, largest of any US metro area
Aug 9, 2023, 5:13 AM | Updated: 6:54 am
(Photo from KIRO 7)
(Photo from KIRO 7)
A new analysis by Seattle-based Redfin is confirming what many have already suspected, it’s getting tougher for many Americans to purchase a starter home.
In Seattle, sales of “starter homes” have dropped 36.5% compared to this time last year — the biggest drop of any large metro area in the country.
“There’s still quite a lot of demand for homes in Seattle, but not much inventory,” Redfin Chief Economist Daryl Fairweather told KIRO Newsradio, who claimed there aren’t a lot of traditional starter homes for sale right now. “Very few new listings coming onto the market.”
Fairweather said homeowners are reluctant to sell, especially if they locked in lower mortgage rates before the federal reserve started a series of interest rate hikes to rein in inflation.
But inflation has led to the second big challenge for house hunters, the increased cost of buying a home. Would-be buyers have to factor in those higher interest rates on top of Seattle’s already high home prices.
“Starter homes in Seattle go for over $500,000,” Fairweather said.
In order to afford the median-priced Seattle home (approximately $535,000), the Redfin analysis found an annual income of nearly $142,000 to make the monthly mortgage payment, but census data showed Seattle’s median household income falls short of that mark at just $110,000.
But Fairweather stated it’s worth searching for and buying your first home with a couple of caveats.
“The most important consideration is: Is there a home within your budget that you can see yourself living in for five years?” Fairweather asked. “If you stay in the home for five years, you’re going to end up in a better position than if you had rented because, in the long run, rents go up.”
If an owner sells the purchased home sooner, Fairweather said it’s possible the homeowner doesn’t get all their money back from the investment. San Francisco, Austin, and Phoenix are the only U.S. metro areas where starter-home buyers need less income than they did a year ago, according to Redfin.
Bellevue-based real estate broker, Nelya Calev says a number of factors stand in the way of first-time home buyers. Calev thinks interest rates are rising and sellers aren’t adjusting for the increased cost of inflation.
“I think in the Seattle area we have a little bit more cash circulating so it’s not affecting as many people,” said Calev. “They can afford to put more down to offset their payments.”
Calev’s colleague, broker Peter Maragh does not see a near future with interest rates returning to pandemic lows of three percent.
“Honestly, I think we’re going to be fluctuating from maybe low 4 ½ to 8,” said Maragh.
