The Seattle-area housing market, one of the least affordable in the country, could become even tougher this year as buyers continue to face higher costs and more competition for starter homes.
Along with the unexpected sunny weather of last month, the market saw more listings and sales across the region compared to the lows of last January, according to data released Wednesday by the Northwest Multiple Listing Service. Still, home prices increased or remained nearly flat across the Seattle area, and mortgage rates hovered close to 7%.
The picture was familiar to home shoppers who braved the market last year and an indicator that this year might not bring much relief.
“Interest rates are not likely to change much this year, but I fully expect prices to continue to go up,” said Steven Bourassa, director of the Washington Center for Real Estate Research.
“My expectation is affordability will worsen over the course of 2025 in King County,” Bourassa said.
In January, the median home price in King County was $855,000, a mere 0.6% increase from a year earlier. In Seattle, the price of single-family homes declined 1.3% over the year to $857,500.
Elsewhere in the region, the median single-family home sold for about $770,000 in Snohomish County, up 5.5% from a year ago; $569,950 in Pierce County, up 5.5%; and $549,257 in Kitsap County, down 0.13%.
King County condo prices have surged. The median Seattle condo sold for $689,975, up 28% from a year earlier. The median Eastside condo sold for $734,900, up 29% annually. Seattle condos include apartmentlike homes in multifamily buildings and detached accessory dwelling units that resemble small single-family homes and are typically more expensive than other condos.
Sales volumes increased 10.8% year over year across the region. Pending single-family sales climbed nearly 3% year over year in King County and 2% in Snohomish County.
Listings in King County also increased from last year’s near-historic lows.
Single-family listings were up nearly 50% in January compared to last year and there was a 63% jump in overall listings in the county.
Despite the activity, the market was tight. The NWMLS considers the market balanced when it would take four to six months to sell all the homes active in its inventory. In January, that measure was just over 2 ½ months.
“The biggest issue is the lack of inventory that’s driving prices of the homes up,” said Garrett Nelson, managing broker with Keller Williams and president of the Seattle King County Realtors.
“It makes it hard for people to compete for the homes that are available.”
Starter homes
First-time homebuyers looking for starter homes in the Seattle area remain locked out.
“It’s been tough, and it is getting tougher,” said Maray Borrego, a broker with Re/Max Metro Eastside. Borrego said she primarily works with first-time homebuyers, and many have been pushed farther out of Seattle and as far as Puyallup and rural Graham.
“People are having to drive now an hour to two hours just so they can try to afford maybe a $600,000, $550,000, home which is still a lot of money,” Borrego said.
Cynthia Diaz, 30, a first-time homebuyer and Borrego’s client, said she and her husband started house hunting in November. The couple recently offered the asking price for a three-bedroom home in Federal Way but were outbid on their offer of $530,000.
Diaz and her husband, a construction worker, have looked at homes in Auburn and Tacoma. More homes are for sale in her price range south of Federal Way, Diaz said, and she’s noticed that lower-priced homes farther south also tend to need fewer renovations. But she works as a preschool teacher in Federal Way and has family nearby who can babysit their 2-year-old daughter and 9-year-old son.
Diaz is also expecting a baby this spring. So, the couple continues to look for homes near Federal Way.
“If we were to move south, I don’t have anybody to watch my kids over there,” Diaz said. “So, either way, I would have to come all the way over here.”
Ongoing unaffordability
Seattle’s metro area had one of the nation’s least affordable housing markets last year, according to a report from Redfin last month.
A person earning $126,034, the area’s median income, needed to spend 54% of their income to buy a median-priced home, according to Redfin’s analysis. Markets where homebuyers are spending no more than 30% are thought to be affordable.
Several high-priced housing markets on the California coast, including San Francisco, San Jose and Los Angeles, were less affordable than Seattle.
Outside of California, however, only New York City homebuyers faced a greater home affordability challenge, Redfin’s Chief Economist Daryl Fairweather said.
Seattle “is definitely in the top tier of unaffordability,” Fairweather said.
In Seattle last year, a homebuyer needed to make an estimated monthly payment of $5,681 for a home priced at the area median of $831,457, Redfin said.
That calculation was based on a mortgage rate of 6.72%, which was the average last year through November. The company assumed a 15% down payment, interest, taxes and insurance.
Some competition may be receding.
Fairweather noted that highly paid tech workers, typically a major driver of competition in the Seattle-area housing market, are not seeing the same growth in their stock portfolios that would free up money for them to buy homes.
“The way that the market is right now with these interest rates being high and tech not looking as great as it did a couple of years ago, I think that we’ll see some more moderate growth in Seattle,” Fairweather said.
Home affordability is measured not just by the cost of homes but by comparing area incomes to home prices and other homeowners costs, such as the estimated monthly mortgage payment.
The Seattle area had the state’s highest home prices, but King County was not the least affordable county in Washington last year — San Juan County was, according to the Washington Center for Real Estate Research. San Juan has comparable median home prices to King but lower median wages, the center’s Bourassa said.
Still, King County’s housing market was deeply unaffordable last year for median-income earners and first-time homebuyers alike, Bourassa said.
He said home affordability took a hit when the sub-4% mortgage rates started rising in 2021. Rates for 30-year fixed mortgages were hovering around 7% last month and are expected to remain in the 6.5%-7% range this year, according to most housing forecasts.
The Federal Reserve cut the benchmark rate last year, but those moves haven’t brought down mortgage rates much. Last month, the Fed held rates steady, saying inflation remained “elevated.”
Higher mortgage rates have also caused a so-called “lock-in” effect where homeowners hold low-cost mortgages with rates under 4%.
Homebuyers are reluctant to sell and buy elsewhere, which would require taking out a more expensive mortgage. This scenario has played out across the country. It is also happening in King County and contributed to driving up home prices last year, Bourassa said.
Barriers to building are also contributing to a shortage of homes in King County. These include higher construction costs and the lack of development space on the western side of the county, Bourassa said.
In some areas, the demand for homes has been picking up, with listings getting multiple bidders again.
West Seattle-based mortgage broker Rob McAllister said his last three borrowers all got outbid for homes.
“There were more than 10 offers on all three of those,” he said. West Seattle, once a comparatively affordable area and option for first-time homebuyers, is no longer so.
“It’s pretty unaffordable for an entry-level buyer,” McAllister said. “Your average price in West Seattle is over $800,000 now.”
Seattle’s entry-level buyers with mortgage approvals are also often competing against home flippers and cash buyers.
Redfin’s Fairweather said Seattle has “done a decent job” adding apartments, condos and town houses but noted, “a lot of people are still looking for larger homes for families.”
“If you’re competing for a three-bedroom, single-family home in the city of Seattle, those are still in really high demand,” Fairweather said.