Current Market Trends

We’ve all heard the housing gloom and doom being splattered all over the news media like bugs on a windshield, but housing experts in the Seattle market say we’ve bottomed out and are starting to climb out of the housing slump. What conditions do we have here in the Seattle area that make it an excellent time to buy a home? Actually, we have several key advantages.

Key Advantages
First, mortgage rates are at near historic lows. We have data from Freddie Mac and BankRate.com's weekly surveys of mortgage lenders as a general indicator of the current mortgage market. The loan you may qualify for may or may not be at that percentage but both surveys are a good snapshot of rates. Compare the weekly survey rate to the chart of annual average rates for a fixed rate mortgage from Freddie Mac. As you can see, our recent low rates are more of the exception than the rule and, according to recent reports from the Federal Reserve, may go up in the next six months.

Second, economically we are one of the healthiest areas in the country. Our unemployment is low despite a small increase in the first quarter of 2008. Job growth is steady, companies are hiring new workers and the Seattle area is home to a diverse group of companies and industries. That increase in new jobs will bring more workers and their families into the greater Seattle area, and they’re all going to need a place to live.

Third, the Growth Management Act has helped prevent the overbuilding that has put many areas of the country in serious trouble. Yes, sales have slowed and sales prices are down in some areas. But it's important to note that while houses may be selling for a bit less, the homes themselves have not lost value, and as the number of available homes on the market decreases, sales prices will start to rise again.

Recent Changes to Conventional Loan Limits
One of the bright spots in the mortgage market this year is the increase in the loan limit for FHA, Fannie Mae and Freddie Mac loans. Prior to 2008, the limit for these loans was $417,000 or lower. The limits for Fannie Mae, Freddie Mac and FHA-underwritten loans have all temporarily increased to $567,500 for single-family homes. If you’re buying a condo or multifamily property, the loan limit can be even higher.

So what does this really mean? The bottom line is some mortgages that would have been considered jumbo loans (typically with higher interest rates, bigger down payments and tougher qualifications) are now conventional loans. Which means you have more options in terms of a house that you can afford. Always work closely with your lender to determine how big of a mortgage you qualify for and don’t overextend yourself. The loan limits will be reduced to their pre-2008 levels at the end of the year.

It's a Buyers Market
In the Seattle area, we now have about a six-month inventory of new homes available for sale. This compares to a year’s worth of inventory in Oregon, two years worth of inventory in Atlanta and a staggering four-year inventory in the hardest hit areas like California and Arizona. What this means is if you buy a home now and plan to stay in it for several years, that new home will increase in value and be a good investment.

These conditions make it a buyer’s market. Sellers are eager to deal and experts predict that buyers who wait, hoping for even lower prices, could end up paying more as interest rates rise. This is already starting to happen. If the house you purchase costs less but your interest rate is higher, the interest rate you pay could wipe out any potential savings from that lower sales price.

Given the fact that construction prices continue to rise along with the cost of all goods and services, home prices are not likely to go lower and will, in fact, start to rise again as demand grows. Plus, the new higher limits for FHA, Fannie Mae and Freddie Mac loans expire at the end of this year. So whether you’re a first-time homebuyer or you’re ready for a lifestyle change, this is a great time to buy a home!