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When Rates and Inventory Fall, Housing Prices Rise

Mortgage interest rates just hit below 4% for the first time in 22 months.  Just eight months ago they were above 5%.  What does this translate to on a $500,000 loan?  $330.56 per month savings!  That’s almost $4,000 per year!

Take that difference one step further and apply that to borrower purchasing power:  $330.56 per month is equivalent to a loan amount of $69,325 at today’s 3.99% interest rate.  Thus, 2019’s slide in interest rates has increased borrower purchasing power by about 13.87%, which is helping to push Puget Sound’s median house price higher.

Also helping propel prices higher is the fact that inventory in Seattle (according to Altos Research) has actually been falling throughout June.  This means that in the month of June, buyers bought more homes than sellers could list.  On May 31st there were 1,518 single family residences for sale within Seattle city limits.  This past week, only 1,408 for sale.  In and of itself, a 7.25% reduction in overall inventory from our multi-year record high of inventory isn’t going to move the needle too much.  However, add on the 13.87% increase in borrower purchasing power, and we have a pretty good recipe for increasing home values.

The NWMLS reported earlier in June that King County housing prices as a whole are up 14.75% since January.  Zero-ing in on Seattle specific and we can see that prices are at their 2019 high of $785,000 median list price for a single family residence.  The last time we were in the upper $700s?  12 months ago.

Don’t Get Too Excited

Economic factors have set the stage for prices to appreciate in Puget Sound.  However, we’re entering the Summer buying season which is generally very different than Spring.  There’s higher overall inventory in Summer, and summer vacations start to play a role.

When asked about her thoughts on the market, Robin Sheridan from Compass Real Estate noted this June was unlike most others.  Kids’ were in school longer due to the snow days earlier in the year, equaling less June listings than normal (which the data supports).  Looking forward, Sheridan anticipates July to remain busy on both the buyer and seller side, but August will likely see things slow down across the board [as they normally do] until after Labor Day.

Interest and Mortgage Rates Check-In

Interest Rates

Per Bankrate.com, the 30 Year Mortgage interest rate fell to 3.99%, with .32 in discount and origination points. Rates are at 22-month lows.

Mortgage rates this week

The benchmark 30-year fixed-rate mortgage fell this week to 3.99% from 4.04%, according to Bankrate’s weekly survey of large lenders. The downward trend continues as rates slid from 4.70% a year ago and 4.27% from four weeks ago.  The 30-year fixed mortgages in this week’s survey had an average total of 0.32 discount and origination points.

As 30-year fixed-rate mortgages dropped to their lowest since September 13, 2017, nearly 6 million mortgage borrowers can benefit from refinancing into a lower rate — including some 950,000 people who got their mortgage last year, according to analytics firm Black Knight. The average monthly savings is about $271 per person, totaling approximately $1.6 billion per month. This is also good news for current homebuyers who want to save money on mortgage costs and lock in rates during the peak homebuying season.

Over the past 52 weeks, the 30-year fixed has averaged 4.63%. This week’s rate is 0.64% points lower than the 52-week average.

  • The 15-year fixed-rate mortgage fell to 3.34% from 3.38%.
  • The 5/1 adjustable-rate mortgage rose to 3.68% from 3.67%.
  • The 30-year fixed-rate jumbo mortgage fell to 4.07% from 4.11%.
  • At the current 30-year fixed rate, you’ll pay $476.84 each month for every $100,000 you borrow, down from $479.72 last week.
  • At the current 15-year fixed rate, you’ll pay $707.05 each month for every $100,000 you borrow, down from $709.00 last week.
  • At the current 5/1 ARM rate, you’ll pay $459.15 each month for every $100,000 you borrow, up from $458.59 last week.

Results of Bankrate.com’s weekly national survey of large lenders conducted June 19, 2019, and the effect on monthly payments for a $165,000 loan:

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The “Bankrate.com National Average,” or “national survey of large lenders,” is conducted weekly. The results of this survey are quoted in our weekly articles and national media outlets. To conduct the National Average survey, Bankrate obtains rate information from the 10 largest banks and thrifts in 10 large U.S. markets. In the Bankrate.com national survey, our Market Analysis team gathers rates and/or yields on banking deposits, loans, and mortgages. We’ve conducted this survey in the same manner for more than 30 years, and because it’s consistently done the way it is, it gives an accurate national apples-to-apples comparison.  https://www.bankrate.com/mortgages/analysis/

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These charts are Seattle Specific, but the Puget Sound Real Estate Market mirrors the Seattle market.


scott sheridan, scotty sheridan, scott sheridan jr, prmi, scott sheridan prmi,

Scott Sheridan is a Loan Officer with Primary Residential Mortgage, Inc.  Being in the mortgage industry for four years, Scott brings a fresh millennial flair to the industry. He is well-versed in the most modern, efficient, and convenient ways to get things done. Scott combines these skills with a genuine love of his work and recent experience in what is it like to be a first and second-time home buyer.  You can follow Scott’s weekly market updates on his PRMI Facebook Page.

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