We are watching the big-picture movements of U.S. financial markets and what’s happening with housing here in Puget Sound, and change is certainly in the air. When recent news came that the Consumer Price Index reached a 40-year high of 8.5%, and the Producer Price Index soared at 11.2%, inflation compelled the Fed to slow the economy with some policy changes that made borrowing money a little pricier.  When borrowing is cheap, it’s easy to spend, and by bumping the Federal Funds Rate, borrowing gets more expensive, in turn curbing spending.

It’s always fascinating that in times of inflation or during “good” economic news, it’s actually less favorable for mortgage interest rates. Conversely, with deflation or bad economic news, mortgage rates skew better for borrowers. As of June 9, 2022, the current average 30-year fixed-mortgage rate is 5.54%, increasing 8 basis points from a week ago (Bankrate.com). Overall, though, rates are stabilizing more than they have since the beginning of the year. As the stock market continues to hover in bear territory, investors steer toward more stable (low risk and return) bond and Treasury markets. A recent decline in Treasury yields should, theoretically, nudge down mortgage interest rates (or, at least, temper their skyrocketing).

Here in Puget Sound, we are still in a hot market, relatively insulated from real estate trends in other U.S. regions, although a slight shift is afoot. Between April and May, it became clear in Puget Sound home sales don’t have the same raging velocity as this time last year. Fewer home shoppers are out there cutthroat-buying compared to 2021. Median home prices between April and May show a leveling out throughout Puget Sound region, but year-over-year price increases measured by percentages appeared to hit a new high with the median price on last month’s 9,374 closed sales, soaring 30% from a year ago.

Key housing market indicators tracked by Northwest Multiple Listing Service show both highs and lows. In a June 7 market update, Northwest MLS director Robb Wasser, branch manager at Windermere Real Estate/East in Bellevue, noted the number of active listings for single-family homes dropped from April to May for the first time in at least 20 years. The month-to-month decline was small, but compared to 12 months ago, May’s inventory is down 46.6%, the NWMLS reports. Northwest MLS data show prices on the 8,011 single-family home sales (excluding condos) that closed last month sold for 107.3% of the asking price. In the 4-county Puget Sound region (King, Snohomish, Pierce and Kitsap), the figure was 108.6%, while in King County it was 109.5%. Things are still clearly, relatively hot.

In her statement to the NWMLS, Meredith Hansen, owner/designated broker at Keller Williams Greater Seattle and member of NWMLS Board of Directors said, “Everything is about breaking records this past year, with record-breaking housing prices, record-breaking low inventory, and record-breaking consumer savings rates during the pandemic; all this equals a very strong, chaotic market that may not slow down for the next year.”

If home mortgage interest rates level off or even decrease in the coming months, this could turn up the heat again on sales velocity and set the tone for another run of fiercely competitive buying. Inventories are still low across all housing types in Puget Sound, but at the moment there’s a little more elbow room for competing bids. We’re optimistic that the market will strike a balance, and we look forward to learning about your real estate opportunities. What will you fund next?

If you’re seeking quality commercial real estate investments throughout the Pacific Northwest, we’re here to help. Juniper Capital provides private real estate financing, including hard money loans for commercial, construction, multifamily residential opportunities and more. If you would like more information on this topic, call us today.