Since mid-April, we saw rates jump another point and crest 6% in late June. This has caused a correction in price appreciation or what is called a deceleration in price growth. While we have come off the peak prices of the Spring of 2022, year-over-year price appreciation is still very strong, and long-term price growth is historical! In Snohomish County, prices are up 19% when you compare the last 12 months of price growth over the previous 12 months of price growth, we like to call this complete year-over-year price appreciation. In King County, prices are up 10%. These percentages are well above average and will end the year still well above the historic complete year-over-year average of 3-5% annually. This is the perfect illustration of a price correction due to market influencers such as inflation and interest rates. Here’s the good news,
It has been my goal to report to you accurate, real-time updates on the real estate market as we navigate the shift that started in May 2022. The two factors that have been the biggest contributors to this shift are inflation and interest rates. Inflation caused interest rates to rise by over 2-points over a 5-month period. When rates hit and then crested the 5% mark in mid-April is when we started to see sales slow and create downward pressure on prices.July inflation numbers were reported at 8.5%
which came off the June peak of 9.1% which has caused interest rates to start to stabilize
. Rates have come down off the peak in late June and have been hovering in the 5%. This has caused MTD August pending sales to increase over July indicating consumers becoming more comfortable with this new normal. In Snohomish County, pending sales are up 18%, and in King County up 16%. Also bear in mind there is a difference between short-term and long-term mortgage rates. Mortgage rates are dependent on long-term interest rates and home equity lines of credit, car loans and credit cards are dependent on short-term interest rates. There is a lot of talk in the news about rising rates and how they are being used to combat inflation. This has applied more towards short-term rates as the Fed would like consumers to slow their spending that utilizes short-term rates to temper inflation. In fact, the last increase in short-term rates actually caused long-term mortgage rates to lower. Below, you can check out a video released by Matthew Gardener, Windermere’s Chief Economist
addressing the rate of inflation, how it relates to interest rates, and where we are headed as we finish out 2022. This video was actually released a few weeks back and it is proven to be spot-on. We are fortunate at Windermere to have Matthew’s guidance. It is always my goal to help keep you well informed and empower strong decisions. Please reach out if you are curious about how today’s market relates to your real estate and financial goals.