Seattle Market Update - Mortgage Rates, Market Trends, and One Seattle Update

Christian: [0:00] Hello, hello, and welcome to another episode of the Awesome in Seattle podcast. This is Christian Nossum with the Awesome Nossum Group at Wilson Realty Exchange, Inc, and today I'm joined by my awesome co-hosts, Mr. Varun Jain

Varun: [0:12] Hey, hey.

Christian: [0:13] And Miss Joanna Beecher.

Joanna: [0:14] Hello.

Christian: [0:16] These two are both amazing real estate agents, if I do say so myself, 'cause they are members here of the Awesome Nossum group. So thank you guys for joining me today. Today's episode is going to be a market update. It's gonna be somewhat quick, but the whole point of this is we get people, buyers and sellers, asking us all the time what's going on in the market, what's going on with the rates, what's going on with the One Seattle plan, and what we're seeing on the ground with home selling or sitting or whatever, and prices. Are prices dropping, going up? Like, all those things. These are questions people have all the time, and this is stuff that we get while we're waiting in line at the grocery store, while we're talking with past clients on the phone or text, or when we just run into people. So Joanna will start us off with what's happening with rates, then Varun's gonna dive into the One Seattle plan, and I'll share what we're seeing in the market right now, and then we'll each kinda weigh in with our own takeaways and what to expect next. So let's jump into rates. Joanna, what's going on?

Joanna: [1:15] All right. Well, when people ask about the market, the first question is usually, "But what are rates doing?" Mm-hmm. Yeah, everyone wants the lowest possible rate, you know? But in the Seattle market, waiting could actually backfire if you're waiting for that low rate, and let me talk you through a little bit why. So right now, the 30-year fixed rates in Washington are averaging about 6.44% for purchase loans, and that is down a bit from the peaks earlier this year, but still well above the ultra-low rates that a lot of people wanted to stick around from the previous years, you know, just a few years ago. So even if rates dip, they're unlikely to drop dramatically overnight. Mortgage rates tend to move on, you know, macro factors that we don't wanna get into right now 'cause it'll just bog us down. But they move on macro factors more than short-term Fed moves, right? So that's something big to know. Also, when rates fall, refinance demand tends to spike, and that, quote, good news often gets priced into home prices more quickly than borrowers expect. So yes, there may be a slight downward movement in rates, but you're still starting from a relatively high baseline. So the risk is that drop won't be enough to offset what you lose by delaying your home search, especially in a market that's shifting, right? So really quick, you find a home now for $800,000 and lock in a 6.44% 30-year mortgage. So if instead you were to wait six months thinking rates might drop to, say, like, 6%, there are some risks. Home prices may rise, and even a 2 to 5% appreciation in Seattle would add $16,000 or 40… $16,000 to $40,000 to your purchase price. It could also be fewer inventory advantages. Sellers may pull back listings in cooler months, or better properties will get snapped up first. And then also you lose time in a low rate mortgage. The principal balance is compounding daily. Every month you delay is interest you could have begun to pay at today's rate, right? So the result is even if rates dip modestly, the net cost of waiting with higher home price but lost time can outweigh the rate benefit. And you can't reliably time the market. A lot of people think that they can, like they're gonna wait till rates drop and then they'll jump in, but financial markets and real estate cycles rarely cooperate with that logic, right? Um, and if everyone's waiting, then you end up in a rush that when rates drop, everybody's gonna jump in. That creates competition, bidding pressure, all of that. And in Seattle's market especially, local factors like tech employment, supply constraints, zoning changes, migration often override your national signals. You might miss your ideal home or neighborhood while waiting, watching rate forecasts. So just a quick suggestion, suggestion, let's get you pre-approved now so you have your financing lined up. That puts you in the driver's seat. If rates dip, you can always refinance, but if your perfect home appears today, and it probably will, you'll be ready to pull the trigger. So we wanna move forward with smart decisions instead of sitting on the sidelines hoping for the perfect moment that may never come.

Christian: [4:19] Yeah, I mean, I'd jump in too. Like, a lot of people are, we hear this, we hear it less and less thankfully now than we did, but we hear people often say, "Well, I'm just gonna wait until rates drop back down to the 3s like they were during COVID." And we always kind of chuckle like Joanna just did. And we're like, "Well, that's probably never gonna happen, and hopefully that's also never gonna happen." Because- Yeah, we don't

Joanna: [4:41] want that … Speaker: no, the reason that happened was because of COVID, because the government was spending so much money on mortgage-backed securities, artificially deflating interest rates so that people would buy houses to keep the economy afloat. Like, that's what was happening. It was all artificial. It's coming to roost now, 'cause now we have inflation worries and stuff like that. But we're most likely never gonna see interest rates that start with the number three again in our entire life. Probably not even a four. Uh, maybe a five at some point, f- maybe the high 5s or mid 5s. That's probably about the lowest we're ever gonna see again in our life. So if you're currently at a 6.4, whatever Joanna said is the current rate, which those change by the minute. Like, we could look it up tomorrow and it's gonna be 6.25 or maybe it's gonna be 6.55. Like, you just don't know. Um- But rates, they are on the way down. They are, they are in the trajectory of going down. They just go slowly. And the other big thing to take away here too, the Fed funds rate, the one that the president always talks about wanting to lower, that does not directly influence mortgage rates. So anytime you ever see the mortgage ra- or you see that the Fed funds rate is being knocked down by a quarter point or a half point or whatever it is, that does not directly influence mortgage interest rates. They're, they're different things. So if you need a good lender to help you figure out the best timing for buying, we definitely have recommendations that we can share with you. These guys and gals, their whole job is to pay attention to the market, and once you're under contract, they will guide you when to lock in your interest rate so that you get that lowest rate possible. Because like I said, they go up and down throughout the day every single day, and if there's some report, jobs report or whatever report coming out that your lender thinks is going to potentially influence interest rates in a positive for you, they're gonna recommend waiting. And so it's, yeah, it's, it's kind of a funny market right now. They're, they're slightly heading down. They're definitely lower than they were at the beginning of the year. They were in the sevens. Uh, now they're, you know, they were a couple of weeks ago down to six point two five, now they're slightly up a little bit. Uh, but in general, they're, they're slowly heading down with rates. Varun, let's talk about the updated One Seattle plan

Varun: [7:19] Yeah. So the One Seattle plan, uh, before we go into kind of the, what the update was, just a quick, uh, overview. It is Seattle's roadmap on how it wants to grow over the next 20 years and beyond. And what did happen was the state passed two laws, the House Bill 1110 and 1337, uh, which, uh, essentially forced every city in the state to revisit their zoning. And here's kinda what Seattle passed as of July 1 of this year. Four units on almost all city lots. Lot coverage, which is how much of the lot can be occupied by structures or buildings, went from mostly 35% to a blanket 50% on all lots. Height, uh, limits were increased to allow for a third story, which was not the case. Previously, it was, uh, usually a two-story limitation, especially for accessory dwelling units. And the floor area ratio was also increased, which is how much square footage you can build on a given lot across all floors. That allows you to build more units. Uh, parking requirements were eased, and then setbacks were reduced on a sliding scale to allow for more unit, uh, more units on a particular lot. There were certain things that did not make the cut, which was original proposal that came out in 2024 called for one unit for every 1,250 square foot of a lot, which… And with no upper limits. So if you had a large lot, like 10,000 square feet, you could go up to, like 8 to 10 units on it. Uh, there was also a proposal of upzoning, uh, a bunch of different neighborhoods from what is called neighborhood residential to low-rise or mid-rise, which adds a lot more density and different kind of building structures to that particular lot. That did not make the cut for July 1. And then also a 10-foot setback in the front and the back, which also did not make the cut. Right now, the setback is a sliding scale. You can get your 10-foot, uh, setback if you build three or more units. But if you're under that, your, uh, setback is 15 feet. That being said, w- this is what was passed on July 1. The One Seattle plan did get a phase one update on October 1st. There was a lot of hope on Getting a bunch of things that did not make the cut through this time, but the city, the city council could not agree on a lot of the changes. So what they ended up passing was removing requirements on parking in certain use cases, some tighter tree protection requirements that were passed in October, and that's about it. They couldn't get through the other proposals, uh, because they couldn't get to consensus, and all of that was punted to 2026. We have a separate episode on the One Seattle plan which goes deeper into not only just this, but other factors that kind of got lumped into with One Seattle plan, like utilities and other kind of i- issues that could impact your particular site. So if you're an investor looking to really optimize a lot, then I would highly recommend listening to that particular episode.

Christian: [10:27] Yep. Yeah, and that one will, uh, this will be an update as well, a much deeper dive into this update, and that will be getting released here in just a couple weeks. Let's move into what we're actually seeing out there in the market. So what we're seeing is kind of a mixed bag. It's kinda odd. Some price ranges, some neighborhoods, homes are still moving quick, especially if they're updated and priced right. But we're also seeing certain h- homes sitting long, particularly if they need a lot of work or they're overpriced. So it's really a mixed bag right now. Uh, that said, the right house in the right location at the right price is still getting a lot of attention. Still sometimes seeing multiple offers where, you know, buyers are waiving contingencies, and it's selling for over the asking price. But then there's other places that are just sitting there, and those overpriced homes tend to sit for a couple months, and sometimes sellers are just digging in their heels saying, "I'm not selling for less than what I'm asking right now." And that just means that most of the time the house never sells. Um- Yeah … we're, we're starting to see that. Right, Joanna?

Joanna: [11:31] I agree. I agree with that. I was about to chime in and say I think the most important thing right now is pricing, and I think it's a lot of sellers misjudging what the market is actually doing in this area, and they are grasping to what their neighbors got or grasping to the market that, you know, they bought in, uh, if it was in the early '10s even. You know, it's like they, they really, they were planning on certain equity being built that maybe isn't actually happening right now for certain types of homes. And those are just, those are hard facts for sellers to, you know- Come to grips with, but I think the main thing to come away with here is pricing is so, so important right now, that sellers, if they wanna see their listings move, you have to be open to hearing what's actually happening in the market.

Christian: [12:24] Yep. Yep. And that, you know, lean on your, your real estate broker, your real estate agent to- 100% … to help you. 'Cause I mean, it's not, some agents out there, doesn't make any sense to me, but some of them try to, quote-unquote, buy your listing, meaning buy your business by saying that you, or that they can sell your house for way more than the market says you can. But the market- Right … never lies. The market is- No … what the market is. So we're not the ones as agents that, or brokers technically, that, that really set the price necessarily. It's the market that sets the price, and we're just reading the market to help you understand what that price is. So-

Joanna: [13:05] Yeah Finding someone you can trust is really important Yeah Um, and that means maybe hearing a hard truth from someone. But if, if you're hearing exactly what you wanna hear, I wouldn't, uh, trust that-

Christian: [13:17] Exactly … Joanna: honestly. Yeah. And I also wanna point out something too that I'm seeing more often, and you guys chime in and tell me your thoughts on this. But in my opinion, the reason why homes that need more work are sitting on the market right now is because most buyers are using a lot of their saved up cash for their down payment, and they don't have, they don't have a lot of extra cash in their pocket after they use that down payment to update the house. In fact, I'm seeing buyers that are willing to pay a premium for a house that's already been updated, not just only because they like the look of it, but because they don't have that extra cash on hand to update the house to the condition that they could buy it in already. They don't have the skills to update it themselves. They don't have the time to manage a remodel, nor do they know who to hire to do the remodel work if they did have the time and the money. So-

Joanna: [14:11] I agree with you.

Christian: [14:11] Yeah. So I'm actually seeing a lot of houses, the houses that are selling quickly are usually the ones that are updated and don't need a lot of work done. And-

Joanna: [14:22] Even as, yeah, even as someone, myself, who is looking at homes right now and who have a lot of resources at hand, you and Varun being two of the main resources I have who know what they're doing as far as flips and, you know, building daddies go, I still, when looking at homes, because, you know, yes, like most of my savings is going into my down payment, I don't wanna do a lot of fixing. Mm-hmm. Even though that is partially a dream of mine, is to be able to start flipping. As, as a home that I wanna buy, I just… You feel more confident in something that is already mostly done, right? And that's fixed into the price.

Varun: [15:00] Yeah. Yeah. The homes that are selling are the ones that have the fewest ob- objections right now.

Christian: [15:05] What, uh, Joanna, what are some of the buyer and sellita- seller takeaways that you got for the market right now?

Joanna: [15:10] Um, well, for buyers- I think it's an opportunity, and you're not always competing with, like, 10 other offers anymore. And if you're prepped with a good lender and you're ready to move, you can really, like, jump on awesome deals and negotiate things like inspection timelines or closing costs that would've been really tough a few years ago if, like, at… They wouldn't have even been a, a thought, actually- No, not at all … a few years ago. Yeah. The way I talk to my buyers now to prep them on offers is, like, so different than what I was saying, like, three years ago. I'm talking about how we're gonna negotiate, you know, just what I talked about. Like, let's get an inspection in there. Let's see about some closing costs being covered. Let's talk about seller credits. There are things now that I had to tell people, "Just forget those even exist" a few years ago. So, I mean, for buyers, it's a great time to be prepped and to just get out there and hop on deals. I think there are plenty of deals to be had if you're ready. And then as far as sellers, we kinda just talked about it, but your strategy's gonna be pricing. It's all about pricing. Understanding what you have and how to price it correctly is so huge because, as we just said, if you're priced too high, your home is gonna sit, and you don't wanna chase the, you don't wanna chase the buyers with lowering your price point. That diminishes any power that you have when it comes to negotiations. And when you align with the current market and present your home well, you still can probably get some really strong results. I think also one of the main takeaways when it comes to buyers or sellers, or buyers and sellers, is you have to work with someone who you trust and understands the market, and that is not gonna lead you astray. I think those are, that's just the most important thing that you can take away from this.

Christian: [17:00] I'll also add in too, like as a seller, like we said earlier, a lot of buyers are more willing to pay for a updated house, and sometimes as a seller, you don't have the funds or the ability to do that. We do have programs available where we can help you actually afford the funds and help you hire the workers to get the work done before you list your house, and it doesn't even have to have cash out of pocket. It'll be taken out of your proceeds at the sale, at the end of the process. So if that is something that you are interested in and you didn't know that was an option, just reach out to us and we can explain that to you further.

Varun: [17:36] Yeah.

Christian: [17:37] Varun, do you have anything you wanna add to that, or do you just wanna go into what's next?

Varun: [17:41] Yeah, so one last thing I'd add is from the seller standpoint, I have seen a couple of examples where a different strategy that is being used in pricing is pricing the listing very competitively, pretty much under market, forcing that bidding war, getting multiple offers in, and driving the price up. Again, it's a risky strategy, but I've seen a couple of examples of that working. But again, as Joanna mentioned, work with someone who knows the market, who knows how to price it for that particular neighborhood, uh, whether you wanna go aggressive or you wanna kind of make sure you're priced just right for the market. That is something you need to decide with your agent.

Christian: [18:16] Yeah. Yeah. All right. So as we look ahead, I mean, seasonality really does matter. Fall, which we're heading into, typically slows down, and then in the winter it definitely slows down. That's when we have the least number of homes available for sale. Um, but there's definitely some motivated buyers out there that are still very active at that time of year. So if you are a buyer, although you're gonna have fewer homes to choose from, you could potentially get a deal because you're not competing with very many buyers once the once the rainy season and the gray sets in in Seattle, uh, not a lot of people want to, to really do anything. That said, the big wildcard will be rates. You know, as they do start to tick down, we tend to see a surge of buyer demand tick up. So over the long run, with the One Seattle plan, once that takes more shape too, we're gonna see some shifts in, in what's available in different neighborhoods. And, you know, as a buyer, you're gonna be seeing a lot more smaller ADUs or D-A-DUs, DADUs, for sale. They're not always necessarily, quote unquote, affordable, like cheap, but they're nicer than some of the townhomes or things like that out there. So I think that kinda wraps it up. Again, the biggest takeaways are rates are on the way down. They're continuing to slowly tick down as the year goes on, and I think that's gonna be kind of the forecast, and that's what we're hearing as the forecast for the next year. They're gonna slowly, slowly trickle down a little bit at a time. The One Seattle plan is somewhat set in stone, but there's also going to be some potentially big updates, um, neighborhood-wise in 2026 at some point, once the city gets their act together. And overall, the market is a little bit mixed, with some homes selling super quick and others just sitting. So that's kind of the market update. Uh, thank you, Joanna and Varun, for your insights. Again, if you found this helpful, be sure to subscribe and share it with anyone else that's curious about the Seattle real estate market. If you haven't already been, you probably should come to one of our free Beers and Home Buying classes. They are posted every single month on our website, beersandhomebuying.com (opens in a new tab). They're free. They're only about an hour-ish, and there's free beer and sometimes food. We hold them in different neighborhoods all around the Puget Sound. Uh, thank you for joining us. We'll see you next time.

Joanna: [20:40] Bye.

Christian: [20:41] Bye.

Varun: [20:41] Bye.