Real Estate: Home prices stopped a slow skid in July
After five months of slowly declining monthly median home sale prices in the Gig Harbor and Fox Island communities, the median home price was flat from June to July at $819,995, according to data from the Northwest Multiple Listing Service (NWMLS). Home prices, which include single-family homes and condos located between the Purdy and Narrows Bridges, peaked in late 2022 before falling 3.5 percent by July but are only down 1.3 percent from a year ago.
Although Gig Harbor has experienced a modest decline in the median sale price, what is remarkable is that it hasn’t been more severe given the doubling of interest rates over the past year. The monthly payment for a $820,000 house with 20 percent down just one year ago was roughly $2,800 per month, excluding taxes and insurance. Today at 7 percent interest rates, that payment has jumped to $4,400 per month. Given mortgage rate headwinds, the Gig Harbor market has proven to be resilient and robust.
Why prices are rising
Two of the market fundamentals that impact the trajectory of the median sale price — months of supply and the total number of homes for sale — also saw an about-face in July, with both being more favorable to rising home prices.
Months of housing supply, or the number of months it would take the current inventory to sell given the current sales pace, fell to 1.7 months (a record low for any July prior to the pandemic), down from 1.8 months of inventory the month prior. While it is a small decline, it is significant because it is a reversal of the upward trend we have experienced for the past 18 months.
The total number of condos and single-family homes fell for the second consecutive month, down four percent from June and 6.3 percent since peaking in May 2023. Falling supply is hitting single-family homes in the $750,000-$1 million price range the hardest, down 11.1 percent from June and 17.9 percent since peaking in March 2023.
The median number of days on the market was flat from June to July at 16 days, again pausing an upward trend. This means that half the homes took less than 16 days to sell in the greater Gig Harbor area, while half took more than 16 days to sell.
That being said, the number of days on the market is dependent on the home. Homes in demand, when there is little supply, will almost always sell faster than homes with unique qualities that don’t appeal to a large swath of buyers.
National housing market outlook
Economists and housing research firms are divided on the trajectory of home prices over the next year. While current mortgage rates are undoubtedly impacting affordability, which would normally put downward pressure on home prices, the number of homes for sale is historically low in many areas, including Gig Harbor. That typically puts upward pressure on prices.
Recent national forecasts:
- Zillow: Up 6.3% from June 2023 – June 2024
- Corelogic: Up 4.3% from June 2023 – June 2024
- Realtor.com: Down 0.6% from July 2023 – December 2023
Should mortgage rates ease, as most economists predict will happen in the coming year, demand for homes will rise. But with so few homes for sale nationally and in the greater Gig Harbor area, the increase in demand will likely cause home prices to rise, which will again impact affordability.
Buy now or buy later
In some ways, the market today is more friendly to buyers in Gig Harbor than it was a little more than a year ago– fewer bidding wars, price escalations, and waived contingencies have been noted–but that is because a large number of buyers are on the sidelines waiting for rates to trickle lower.
Once mortgage rates come down a bit, the number of buyers will rise, and so will the competition for homes. This may translate into buyers having to bring more cash, and potentially mortgage debt, to the table in the event that competition escalates the price above what it appraises for.
My advice? If buyers can find a home they love and can afford now, do it. While we did see a dip in prices during the first half of the year, we’ve seen prices flatten out, and key data points trend toward prices rising again. When mortgage rates decline, today’s buyers can refinance to save on their monthly payment, and tomorrow’s buyers who waited for the rates to fall may have to miss out on the one they love.