King County home prices drop for the first time since May 2020

King County home prices tumbled 7% in February, the first year-over-year drop since the once-sizzling housing market began to see cooling prices.

The February price drop in King Country, the first since May 2020, reflects the new realities of the broader Seattle-area housing market. Fewer people are buying homes and fewer homeowners are listing their houses and condos for sale than a year ago, according to February data released by the Northwest Multiple Listing Service on Monday.

“It’s a total 180,” said Seattle Redfin agent Sarah Rollinger. “Sellers last year were eager to get on the market … and buyers were willing to spend extra money knowing that their monthly payment would be so much more affordable.”

King County joins other nearby counties that have seen monthly price drops for months. In February, the median King County home sold for $800,000, down about 7% year over year, according to the listing service. Within King County, prices fell most on the Eastside, where the median single-family home sold for about $1.3 million, down 21% from a year ago.

The median Snohomish County home sold for $690,560, down about 7%. The median Kitsap County home sold for $499,995, down 5%. The median Pierce County home sold for $529,900, down 1%.

Condo prices are following a similar trend. The median King County condo sold for $468,500 in February, down 12% from last year.

Wait and see

Facing those lower prices, would-be sellers are holding off and fewer homes are hitting the market.

The number of new listings in King County last month was down 35% from the same time a year ago. That was the eighth month of year-over-year declines in new listings and the biggest year-over-year drop since May 2020.

In February, listings were down nationwide, but the Seattle metro area saw one of the biggest declines in new listings in the country, according to Redfin.

Sellers are “holding on to last year’s prices,” Rollinger said. “They find out that they can’t necessarily get the price that their neighbor got last year. They think maybe it’s not the best time to sell.”

Last year, Rollinger consulted with four potential sellers in February. This year: just one.

The biggest difference is the increase in mortgage rates. Higher rates can sideline buyers by increasing monthly mortgage payments and reducing their buying power, in turn creating less competition for homes.

Mortgage rates averaged 6.3% in February, several points higher than last February but down slightly from the 7% peak in November, according to Freddie Mac.

Some sellers are waiting to see if rates dip and the market picks back up. Others want to make sure their jobs are safe before making a move. Tech companies have cut about 4,500 jobs in Washington.  

Others see a financial upside to becoming a landlord instead of selling, especially if they have an extremely low interest rate on their current property, said Coldwell Banker Bain agent Cyrus Fiene.

Fiene said he advises his clients: If you have a low interest rate, “you should hold on to that property if you can and rent it out.”

Homeowners who choose to list are watching their homes sit on the market longer. Houses and condos in the Seattle area spent a median of 36 days on the market in January, a month longer than last year, according to the most recent available Zillow data. More than twice as many King County homes were still waiting for a buyer at the end of this February than in February 2022, according to the NWMLS data.

Even so, the best listings can still draw a crowd of offers. More King County buyers purchased homes in February than January, although that was still fewer pending sales than this time last year, according to the listing service. 

To attract buyers, sellers are taking on more home improvement projects, such as painting, upgrading carpets or replacing light fixtures and faucets, before they hit the market.

Saving up the down payment for an $800,000 home at a 6% interest rate is “already hard enough” for buyers without adding on the cost to replace a home’s roof or repair its foundation, Fiene said. “With rates where they are right now, buyers need something a little more turnkey.”