A limited supply of Yakima County homes and continued demand to buy them has kept home prices up, but the number of sales so far this year is down from 2021. And interest rates higher may be one of the reasons.
After falling below 3% for a 30-year fixed rate mortgage in 2021, interest rates on these mortgages have risen to 5-6% in recent months. Local realtors and mortgage officers agree that the higher rate makes it harder for first-time home buyers to meet monthly payments.
“First-time home buyers are feeling the pressure more than anyone,” said Travis Antles, broker and owner of Windermere Real Estate’s Yakima office.
“The slightly higher interest rates will definitely drive some people out of the market because of the size of the monthly payments,” added Mina Worthington, president and CEO of Solarity Credit Union at Yakima. “If the payment falls outside their budget at the new interest rate, it could potentially knock some buyers out of the market.”
But the reduction in the number of home sales in Yakima County, reflected in statistics released last week by local real estate analyst Kristi Wilbert in her newsletter, “Headwaters: The Source,” is primarily the result of supply limited housing, Antles said.
“We’ve seen historically low inventory over the past few years, and our inventory is still relatively low,” Antles said. “The (lower) sales volume reflects that.”
The number of residential sales fell by 4.1%
Wilbert’s statistics for the first seven months of 2022 show 1,735 residential real estate sales, compared to 1,809 homes sold in the same period of 2021. That’s down 4.1% and continues a year-to-year decline. the other from the sales trend that first appeared in April.
In fact, Wilbert reported that January through April 2022 was the first period with fewer residential homes sold in Yakima County compared to the previous year since December 2019.
A Yakima Association of Realtors price range report released Aug. 11 showed there were 464 active listings of single-family homes in Yakima County, with 72% (335 homes) listed at $300,000 or more. . Almost half of them (214 or 46%) were listed at $400,000 or more.
That produced a median home sale price of $375,000 for Yakima County through July 31 of this year, the Realtors Association reported.
These prices are reflected in Wilbert’s year-over-year residential sales revenue, which increased 7.3% from $566 million between January and July 2021 to $607 million in during these seven months of 2022.
And the average home price over that seven-month period (a different measure of the median price) was $349,707 in July 2022, up from $312,683 last year, an increase of 11.8%.
“It’s always a matter of supply and demand,” Windermere’s Antles said of selling prices and earnings.
Historical Interest Rate Trends
Solarity’s Worthington pointed to two factors regarding higher interest rates this summer: they’re relatively low compared to 10, 20, or even 40 years ago, and there are other types of loans besides mortgages. 30 year fixed rate.
“Almost everyone thinks of a mortgage in terms of a 30-year fixed rate mortgage. I think that’s the interest rate most people are looking at,” she said. “Most of the time people don’t know that there are other rates available that might be lower, and they might be on 10, 15 or 20 year loans. Or it could be adjustable rate mortgages, which have (fixed rates) for six or seven years, and they can be adjusted after that.
Borrowers could benefit from a potentially lower rate with an ARM loan, and Worthington said Solarity has seen a few more buyers choose this option. But the main difference between 3% and 5-6% interest rates is a reduction in refinancing.
“The reduction in volume we’re seeing is not so much in purchase transactions as it is in reduction in refinance transactions,” Worthington said. “If you have a fixed rate (mortgage) of 3% over 30 years, you don’t refinance.”
She pointed to the 3% or even sub-3% interest rates borrowers enjoyed last year as a historical anomaly.
“I’m old enough to know that a 30-year fixed rate of 5% isn’t bad,” Worthington said. “But we’ve gotten so used to rates being so low for so long that we’ve just gotten used to these really, really low interest rates.”
Antles agreed with that, recalling that 30-year mortgage rates ranged between 5 and 8% in the first decade of the 2000s, and were in the double digits for most of the 1980s.
“If you look at it historically, it’s still terribly reasonable to borrow money for a 30-year mortgage,” Antles said.
Financial advice for home buyers
Worthington advised Yakima County homebuyers that with the inventory of available homes remaining low, it’s worth making an offer now, with the understanding that a 30-year mortgage could be refinanced later.
“There’s this perception that there’s going to be a recession and prices are going to go down. I believe there might be buyers waiting for prices to drop due to an economic downturn. My advice would be that I don’t think that will happen,” Worthington said.
“I think the lack of inventory problem that we had nationally is not necessarily going to go away. We have more people wanting family homes than homes available for people,” she added. “I heard this cute little phrase that goes ‘date the rate, marry the house.’ If you find a home you want now and your interest rate is a bit higher than you might have liked, you can always refinance when rates come back down.
She understands that many remember the 2008 recession and how the housing crash was a big part of it, but thinks current economic conditions are different.
“This recession that we are potentially experiencing is a different type of recession. I don’t think we’re going to see a drop in property prices,” Worthington said. “(In the 2000s) they were buying at a certain price, and then we had a lot more inventory than we needed in the market, and people were without quotes on their homes. They had bought a house for more than it was worth.
“Locally, we haven’t seen this kind of thing. Locally, we didn’t see a housing decline in price easing until around 2010 or 2012. I think Yakima really lagged the 2008 recession by a few years.
According to statistics from the Federal Home Loan Mortgage Corporation (“Freddie Mac”), 30-year fixed mortgage interest rates were at or below 3% for most of 2021 before starting a steady rise in January. The average interest rate reached 5.52% in June before falling slightly to 5.41% in July, and Worthington believes this trend could continue.
“It’s hard when rates go up and suddenly it feels like a house is less affordable than it was before. It impacts the affordability of some borrowers,” she said. “But we’re seeing rates come down again, and potentially, if we actually get a full-fledged recession, the Federal Reserve will probably step in and cut rates again, and we’ll probably see the impact on mortgage rates. The year next.
“So if you find your dream home and can afford the payments, my advice is to buy it and refinance later,” Worthington added.