The "R" word and housing ; The Greater Seattle Housing Market Update, March 2025

And welcome to the latest edition of the Greater Seattle Housing Market Update. As always, to skip the analysis and go right to the stats,  click here. For a more detailed look at everything going on in our crazy world, continue below!

Tariffs, interest rates, job losses, recession talk, etc. 2025 is sure coming in hot with lots of market moving news! It's been challenging trying to keep track of it all.

Tariffs - Simply put, tariffs are a tax imposed on foreign imports. The Trump administration states that the US has been "ripped off" with unfair trade imbalances and these tariffs, most notably those applied to Mexico, Canada, and China, are designed to even out the playing field, ultimately (hopefully in their eyes) bringing more jobs back to the states. Of course, these countries retaliate with tariffs of their own on US imports so we'll see what, if any, impact this barrage of tariffs will have.

The tariff on Canadian lumber looks to have the largest potential impact on real estate. Obviously, lumber is crucial to the construction of homes so if the price of that goes up, it ultimately gets passed onto the buyer. Remember during the pandemic when supply chains were constrained and the price of lumber skyrocketed? It was more than double the cost of what it is now. In the Seattle area, we are not a big new construction market so I don't see the potential impact of the lumber really doing anything to impact our prices locally. 

Layoffs - Perhaps the policies creating the biggest waves of the new (but old?) administration is the layoffs and its impact on employment. Of course these are most specifically tied to federal agencies, but we've seen more layoffs in the private sector too. Locally, Redfin, Microsoft, Starbucks, and Blue Origin have all announced layoffs this year. I'm sure there have been many others, but these have been the most publicized. 

For anybody worried about layoffs at the FHA level, and how that may impact your ability to buy a home (if pursuing FHA financing), see my comments in the Seattle Times article here. 

Recession - The "R" word, as I call it. This is one of those words that really brings with it a more negative connotation than what I think it deserves. Plainly put, economic recessions are normal. They're part of the financial circle of life. The severity of each recession can vary, but in general, they don't last too long, and with the exception of the Great Financial Crisis of 2007-8, are pretty positive for the real estate market. 

We know the FED has been using every ounce of strength possible to keep inflation low, hoping to reach a 2% target. While they haven't hit their target, they've succeeded in preventing inflation from ramping up again, which would trigger additional rate increases. However, for anybody who follows Housing Wire's lead analyst Logan Mothashami (total rock star of a housing analysis, BTW), you'll know that he's identified the FED's playbook, which is to favor labor readings over inflation readings. In other words, he understands that, at this point, the FED is paying more attention to the labor market and justifying their monetary policy there more than inflation readings. This is important because if the unemployment number starts to tick up, the FED will be pressured to lower rates. Will the layoffs at the federal level be the match that starts this wild fire?

If we're thrust into a recession because of job losses, this is where real estate can really take off.

Interest rates - At times of economic contraction, FED policies attempt to encourage lending by lowering their FED funds rate. We know their rate isn't directly tied to mortgage rates, but if investors (specifically bond traders) get increasingly concerned with the outlook on the US economy, that will trigger investments away from stocks and into bonds. Those of us with a 401k, or anybody who invests in the stock market, can attribute to how terrible their portfolio has performed YTD. Yet what's bad for the stock market can often be good for mortgage rates. That's the inverse relationship to watch out for. Special hint, track the 10-year treasury bond if you want to track the instrument most closely tied to the 30 year mortgage. 

The chart above highlights the relationship between US home values during recessions. Notice that the only time values really declined in a recession was during the GFC. A recession that was entirely created by the housing market so it made sense that values would tumble! We'd have to go back to the Great Depression to see the last time housing values tanked so badly. Both of those events were once in a generation type of nuclear financial disasters so the best thing any of us can do is to disassociate the word "recession" with any thoughts, feelings, or anything we remember at all about the GFC. Again, recessions are normal in a financial life cycle. And in regard to housing, historically pretty positive for home values.

What to watch out for - I suspect things will continue to be very volatile as the Trump administration works to secure their footing in regard to their campaign promises. Financial markets do not like unpredictability so watching how each of these variables affect one another, plus the influence they have over the stock market, bond market, housing market, etc will keep us all on our toes.

Bottom line, don't let any of this distract you. Home buying and selling is all about time "in" the market, not "timing" the market. People overwhelmingly buy and sell real estate to support changes in lifestyles, regardless of what's happening economically. Oddly, whatever event(s) bring about declining mortgage rates could be the kick in the pants the housing market has been lacking. Most people don't realize this, but the housing industry has been in a recession of it's own for almost 3 years now (not that I'm complaining). In fact, it's been the worst housing recession in 30 years, from a sales number standpoint! Lower rates could jumpstart the market in spite of the larger economy turning negative. 

Onto the stats:

Seattle - The median sale price for a Seattle single family home in February 2025 was $965,000. That is up 4% YoY and up massively MoM from $857,000. Inventory is still up 27.8% YoY, but the months of inventory statistic has decreased MoM to 1.82 months from 2.6 in January.

Eastside - The median sale price for a single family home on the eastside in February 2025 was $1,685,000. That is up 14.6% YoY, but down MoM from $1,709,000. Inventory is up a whopping 61.9% YoY and the months of inventory slightly declined to 2.13 months from 2.22.

King County - The median sale price for a single family home in King County in February 2025 was $915,000. That is flat YoY (up by just $500) and up massively MoM from $855,000. Inventory is still up YoY by 37.2%, but the months of inventory dropped to 1.82 months from 2.14 in January.

Enjoy March Madness, the blooming cherry blossoms, St. Patty's Day, daylight savings time, etc!

Onward!