Our current low inventory has caused home prices to rise due to low supply and high demand. Per Northwest MLS data, from January 2023 to July 2024, median prices have increased from $1,100,000 to $1.425,000. That means Sammamish homeowners have Substantial equity.
Since mid-2022, many homeowners have not wanted to sell. A high percentage of our homeowners are sitting on substantial equity and have been staying in their homes because of the rapid mortgage rate increases from mid-2022 to the fall of 2023. Economists call this “the rate lock-in effect.” The rate lock-in effect refers to homeowners with mortgages less than the current interest rate.
Per FirstAmEcon, “there is a disincentive for existing homeowners to sell their homes because the mortgage rate that they have on their current loan is well below what mortgage rate they could get in the market today”. Nearly 90% of homeowners today are locked into rates below 6%. 60.3% of homeowners are at 4% or below. Many homeowners will still be rate locked in, even if rates fall to 6%. Rates are currently at 6.6 percent and predicted to be between 6% and 7.5% through the third quarter of 2024.
Because we’re seeing lower, more stable mortgage rates, some existing homeowners may decide to sell. With Sammamish homeowner equity at a historic high, some may choose to cash out, and for some of those equity-rich homeowners, moving and taking on a higher interest rate isn’t a big deal, especially if they’re moving to a less expensive home. Finally, 42% of owned homes are owned free and clear. Those free-and-clear homeowners may decide to move to transition to a different lifestyle, and that will have the effect of unlocking some much-needed supply for this year’s housing market. This will help ease our inventory shortage, which is good for buyers.
Washington housing legislation is encouraging more building of homes in the form of accessory dwelling units and adding more homes on lots that can support those homes. Sammamish neighborhoods with existing HOAs and zoning will not be affected by the state mandated increases in density throughout the state due to homeowner association bylaws. We will see some increase in housing availability through new construction.
So, with housing supply gradually increasing, what is happening with demand? The rate lock-in effect will lessen slightly this year as mortgage rates come down. If rates get below six, then more homeowners will become less attached to that very low rate they got a few years ago. Homeowners who choose to sell are also often buyers, so there should be an increase in sales activity.
Lower mortgage rates in 2024 will likely not be low enough to cause a lot of owners to sell. but, for those homeowners who do choose to sell, there will be an increase in available buyers. With every reduction in interest rates, the pool of buyers increases.
The bulge of millennials ready to purchase homes (called home formation) is the largest pool of buyers we have seen in U.S. history. Per Michael Smith with Guild Mortgage, there are 45 million millennials between the age of 26 and 35. Twenty-six is the average age a person moves out on their own, and thirty-five is the peak age for 1st time home buyers. As in the past, Sammamish will reflect this trend.
Plus, our growing, highly salaried population increases demand. According to the Puget Sound Regional Council (PSRC), the population in the region has been growing steadily. “The region added 52,000 people between 2021 and 2022, and in 8 out of the last 10 years, the region has grown by more than 50,000 people, which is in line with the PSRC Vision 2050 forecasts”.
The PSRC has projected that the population in the central Puget Sound region will reach nearly 6 million by 2050, which is a 42% increase from today”. This regional growth has a direct effect on Sammamish.
To summarize, the reasons it is a good time to sell in 2024 are high equity that owners may want to cash out, lower mortgage rates which increases affordability and the pool of buyers, the easing of the rate lock-in effect which causes owners to consider moving, our continuing increase in high salaried move in buyers and our pool of millennials ready to purchase homes.
Contact me at 206-200-1800 to find out if this is a good time for you, personally, to sell.
Karen McKnight, Keller Williams Eastside
As a 425 Magazine “Best in Business” award winner, ten year national Five Star Award winner, Managing Broker, Past President of Washington State Certified Residential Specialists, a GREEN Designee, Seniors Real Estate Specialist, Karen has built a noteworthy career and can help you upsize, downsize, or right size!
