Housing Market in Snohomish County: To rent or to buy?

So, here we are in July 2024, and Snohomish County’s housing market is buzzing. With a 46.2% jump in homes listed for sale compared to last year, you might think things would slow down, but it's a mixed bag. According to the latest numbers from the Northwest Multiple Listing Service (NWMLS), we’ve got just 1.37 months of inventory, meaning some areas are still hot, especially if the price is right. 

In other spots, we're seeing a bit of a lull. Homes in places like Lynnwood and Marysville are still selling quickly, often above asking price. But other areas might be sitting on the market a bit longer. This slowdown likely won't last, especially with mortgage rates on a downward trend.

 Mortgage Rates: The Big Question

Right now, the Federal Reserve has kept interest rates at 5.25% to 5.50%, which might sound high compared to those "free money" days we had a couple of years back. But here’s the scoop: rates are expected to dip a bit later this year if inflation behaves itself. 

Why You Might Want to Buy Now

Here’s the kicker: even with these rates, it might be smart to buy a house now. Here’s why:

1. *Home Prices Are Climbing*: Waiting for lower rates could mean paying a lot more for a home down the road. Think of it as buying your ice cream cone now before the price goes up.

2. *Refinancing Magic*: If rates do drop, you can always refinance your mortgage at the lower rate. It’s like getting a discount on your monthly payments and saving a bunch of cash in the long run.

Renting vs. Buying: The Long-Term Picture

Let's break down the cost of renting versus buying a home over 15 years to see which is the smarter move.

Renting

- *Average Rent in Snohomish County*: Depending on location the range for a 3 bedroom home (all property types including apartments) in Snohomish county is $3000 a month

- *Total Cost Over 15 Years*: $3000 x 12 months x 15 years = $540,000.

Buying

- *Average Home Price in Snohomish County*: We’ll use $650,000 for this example.

- *Mortgage Details*: Assuming a 20% down payment ($130,000) and a 6.5% interest rate on a 30-year mortgage, your monthly payment would be around $3,286 (including taxes and insurance).

- *Total Cost Over 15 Years*: $3,286 x 12 months x 15 years = $592,920.

However, part of that payment goes towards building equity. Let’s estimate that about 50% of your mortgage payments in the first 15 years go toward interest, so:

- *Interest Paid*: $592,920 x 50% = $296,460.

- *Principal Paid*: $296,460 (equity built).

Return on Investment

Over 15 years, you’ve built $296,460 in equity (excluding property appreciation). If your home appreciates at an average of 3% per year (a conservative estimate), your $650,000 home could be worth approximately $1,014,000 after 15 years.

So, your total wealth would be:

- *Home Value After 15 Years*: $1,014,000.

- *Remaining Mortgage Balance*: Let’s estimate around $411,000.

- *Net Equity*: $1,014,000 - $411,000 = $603,000.

Compare that to renting, where you have no property value and no equity built, just $504,000 spent on rent.

Looking Ahead

If mortgage rates start to come down, watch out—Snohomish County could see a rush of buyers like it’s Black Friday at the housing market store. Lower rates mean more people can afford homes, and that could crank up the competition again. So, if you buy now, you get to lock in today’s prices and, fingers crossed, a sweet deal when rates drop.

Not only will you be able to refinance at the possible lower rates, but because of the competitive market and low inventory created by low interest rates-your home equity/value will skyrocket. You will have bought a home at todays price, and still be able to take advantage of lower rates in the future. Take out the equity and lower your rate and keep your payment similar while having that cash in hand, or put it towards home upgrades, or just refinance and drop your payment- its up to you!

In a nutshell, Snohomish County’s housing market is still rocking and rolling. Prices are up, homes are hot, and the competition is fierce in popular neighborhoods. But if you jump in now, you might just ride the wave of future lower rates and get yourself a pretty sweet deal. Stay sharp, keep an eye on those rates, and who knows? You might just snag a home and save some cash in the process.