Below is a noteworthy segment from CNBC Realty Check discussing the drop in home sales for the month of July 2013.
- Pending home sales dropped 1.3% in July.
- Home sales on the West Coast are down 4.9%.
- Mortgage rates have increased to their highest level since 2011.
- Jumbo borrowers could be affected by new regulations — loans over $625,000. See definition of “jumbo loan” here.
What does this all mean for home prices in Seattle?
Admittedly, we have been somewhat quiet on the blog due to: 1) a lack of free time at the office; and 2) the real estate market having been less interesting as of late.
All of the news has been positive, and as we’ve been preaching, this positive news is simply not warranted. We believe the increase in prices is primarily due to two factors that are likely unsustainable:
- Inventory of homes was extremely low by historical standards — down to 3,265 in March of 2013 (currently at 4,602 for King County single family homes). This is a near 50% increase in inventory in just six months.
- Interest rates were historically low (3.4% in May 2012), but have since rose to nearly 4.5% (see Bankrate.com). This is a massive drop in purchase power for the average consumer. For example, this would increase the payment for a $500,000 30-year fixed mortgage from $2,738/mo to $3,074/mo.
Accordingly, we are looking to see a decrease in sales and an increase in inventory, and another fall in prices for the intermediate future.
Have questions regarding the short sale process? Contact one of our Kirkland real estate attorneys.