King County Market Update
A snapshot of today’s market trends and our outlook for 2026
MARKET SUMMARY AS OF SEPTEMBER
King County Snapshot
The absorption rate, as measured by months of supply (rate of closed sales versus active inventory), for the single-family market got up to 2 4 months in September - a slight seller’s market and only 0 3 months away from the highest level since the recovery from the great recession - 2 7 months in September 2018. The 2025 median sale price is $1,050,000, up 3% year-over-year. The Seattle Metro market had 8% appreciation, whereas the Eastside saw 3%. Total active inventory is up 37% yearover-year, but still below pre-COVID levels, keeping our market tighter than most.
Fed Policy & Mortgage Rates
The Fed has begun an easing cycle, and the relationship (basis point spread) between the 10-year treasury yield and 30-year mortgage rate is normalizing - a sign investor confidence is improving. Rates briefly dipped to 6.13% in mid-September, triggering a 30% week-over-week surge in purchase application volume, illuminating eager demand
Inflation & Outlook
Latest Core CPI (3 1%) and Core PCE (2 9%) are still above the Fed’s target of 2% but moderatingnot accelerating out of control If you strip away the Fed’s lagging shelter cost data, what’s known as “harmonized CPI,” Core CPI would be closer 2 7% Meanwhile, the Trump administration’s economic team is actively pushing policies aimed at lowering Treasury yields a direct link to lower mortgage rates If successful, we’d see additional relief with mortgage rates, inevitably creating more demand
Expert Perspectives
Ali Wolf (Zonda): Lower rates could add millions of buyers back to the market.
Robert Dietz (NAHB): Housing starts are down 7% but expects strong demand if the 10-year Treasury falls to 4%.
Jared Franz (Capital Group): Inflation will be three and some change and won’t hit 2%.
Ivy Zelman: Weak Treasury demand may keep rates “higher for longer.”
Logan Mohtashami: Pending sales are already hitting multi-year highs. Inside the report: how these expert forecasts line up and conflict and what that means for 2026
Scenarios Ahead
The future could range from a pro-housing recovery to a soft landing, sticky inflation, or even a recession Inside the report: a scenario table that breaks down how prices, inventory, and affordability could shift under each path
I retained Aaron to list a home in North Bend based on recommendations from friends who retained him to sell their homes. In four decades of experience as a real estate investor and landlord I’ve experienced some good and some not-sogood brokers but Aaron is the 1st broker to exceed ALL of my expectations in a real estate transaction. I retained him to sell a home that needed some cosmetic updates before listing. Aaron generated a list of “updates to be done”, recommended a suitable contractor then worked with the contractor to ensure the update projects remained on-schedule and under-budget. The house was listed on the date we planned, was skillfully and comprehensively marketed and had the misfortune of coming onto the market on “Liberation Day”, the day that ruinous tariffs were announced by the President, erasing billions of dollars in stock market valuations, spiking interest rates and sending the VIX Index ( sometimes called “the economy’s fear gage” ) to a new record high. Despite these horrid macroeconomic conditions the home received multiple offers and was soon under contract. Aaron kept the close of the sale on schedule, brilliantly managing concerns from the buyer’s lender, the title company and the buyers. The sale closed as scheduled and for more than our asking price. While even a rookie broker can sell homes under perfect market and interest rates conditions the true test of real estate marketing professionals in getting homes sold under conditions of high interest rates, high buyer anxiety and panic in the stock and bond markets. When the “going got tough” in marketing my home the tough Aaron “got going” and kept the sale on schedule and shepherded the deal to a successful close.
In perfect conditions any broker could probably successfully sell your home. But if you want to move your property amid less-than-great conditions you couldn’t find a better broker than Aaron Lawrenson. His comprehensive understanding of all the minutiae than can potentially prevent a sale from closing and his management of that minutiae to closure is what distinguishes Aaron from others in his profession. I retained Aaron to manage a complex remodel-sale to completion and he kept all those complexities on-schedule, under-budget and CLOSED despite unprecedented market conditions that would send lesser brokers into retirement. His advice, communication and recommended contractors were all spot-on. If you want to sell a home in this market give him a call.
-John Biccum | Security Strategist at Microsoft
WHERE WE STAND LOCALLY - ABSORPTION
As of the end of Q3 2025, the King County single-family market remains a slight seller’s market bordering neutral, at 2 4 months of supply Meaning, based on the current rate of sales compared to total active listings, it would take 2 4 months to sell all supply on the market At 2 4 months, we’re nearing the decade high set in September 2018 - 2 7 months Statistically, anything under 3 months is considered a seller's market, but in our supply constrained market, like we saw in 2018, if the rate of sales gets into the 2.5-3-month range, our market really becomes neutral with a slight seller advantage.
King County Single-family Absorption - 2024 vs 2025
King County Single-family Absorption - 2014-2025
WHERE WE STAND LOCALLY - ABSORPTION
Although the Eastside and Seattle Metro markets saw declining absorption rates across the board since April, it’s clear the Seattle Metro outperformed the Eastside In other words, demand was clearly weaker for homes on the Eastside in Q2 and Q3 this year
Eastside Single-family Absorption
Seattle Metro Single-family Absorption
Months of Inventory 2024 Months of Inventory 2025
WHERE WE STAND LOCALLY - APPRECIATION
The annualized median sale price of a home in King County was $1,050,000 by the end of Q3, up 3% from the 2024's annualized median sale price The up and down after 2021, seems to be a reversion to the decade median appreciation of 9%, more than anything else The median sales price on the Eastside was $1 67m, up 3%, whereas the Seattle Metro market saw an 8% gain, resulting in a median sales price of $1.095m.
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King County Annual *Appreciation 2014-2025
Eastside & Seattle Metro Annual Appreciation 2014-2025
FED POLICY & MORTGAGE RATES
The Federal Reserve entered an easing cycle in September with a 25-basis point cut to the Fed’s fund rate, with projections for two more cuts in 2025 and one more in 2026 Current Fed monetary policy remains restrictive, with the real federal funds rate (nominal rate - inflation rate) at about 1 55% compared to the “neutral” range of 0 5%–1 5% The Fed is also continuing to reduce its balance sheet, which could keep longer-term yields and mortgage rates from falling as quickly as they did during COVID.
Since 2022, the spread between the 10-year Treasury yield and 30-year mortgage rate widened to 3% as the Fed’s rapid rate hikes, inflation uncertainty, and reduced MBS demand drove up risk premiums. Recently, that spread has begun to narrow as inflation cools, market volatility eases, and investor confidence and demand for mortgage-backed securities returns. The current spread as of writing this is 2.23%, so 23 basis points inflated compared to the historical spread of 150-200 basis points If this compression continues, we could see mortgage rates in the 5 5% to 6% range
We’re already seeing the impact of lower rates in the mortgage data Back in mid-September, after a very weak jobs report, the 30-year mortgage rate briefly fell to 6 13% according to Mortgage News Daily Purchase applications spiked by 29 7% in a single week, and refinance applications surged nearly 60% compared to the prior week Mike Fratantoni, MBA’s SVP and Chief Economist, explained:
“Homeowners responded swiftly, with refinance application volume jumping almost 60 percent compared to the prior week. Even as 30-year fixed rates reached their lowest level in almost a year, more borrowers, and particularly more refinance borrowers, opted for adjustable-rate loans, with the ARM share reaching its highest level since 2008. Notably, ARMs typically have initial fixed terms of five, seven, or ten years, so those loans do not pose the risk of early payment shock that pre-2008 ARMs did. Borrowers who do opt for an ARM are seeing rates about 75 basis points lower than for 30-year fixed rate loans. ”
6.13%
The average 30year mortgage rate in mid-September
3
The number of rate cuts projected by the Federal Reserve in the remainder of 2025 and early 2026 The week over week growth in purchase applications after mortgage rates hit 12month low in midSeptember +29.7%
FED POLICY & MORTGAGE RATES
18%
Year-over-year growth in purchase application volume provided by Mortgage Bankers Association
Beyond that momentary dip, the MBA Purchase Index overall is up 18% from a year ago, showing that buyers are steadily returning. For context, a 25 to 75 basis point drop in rates translates to roughly $151 to $446 less per month on the median-priced King County home Ali Wolf, Chief Economist for Zonda, recently put it this way:
“Moving from 7% to 6.5% mortgage rates puts 2.1 million more households in a position to buy. If rates were to fall to 6%, that number more than doubles, pricing in another 4.2 million households. While we don’t expect consumers to rush back to the market overnight due to lingering economic uncertainty, this is a clear step in the right direction.”
Another key consideration which will directly impact the trajectory of mortgage rates is the Trump administration’s ongoing efforts to bring yields down on long-term treasury yields. Scott Bessent, Secretary of the United States Department of the Treasury, has a “3-3-3” framework targeting 3% growth, 3% inflation, and 3% long-term Treasury yields. Scott’s also pushing to relax strict banking rules that require big banks to hold a 5% cash "safety cushion" against even ultra-safe U.S. government bonds (Treasuries), which he argues ties up billions that could be used for loans to businesses and families, boosting private-sector growth without adding much risk.
The plan, proposed June 27, 2025, by the Federal Reserve, FDIC, and OCC, would halve that cushion to 3 5–4 5% for major banks and adjust related loss-handling rules, freeing up about $13 billion in capital to make lending easier As of October 1, 2025, it's in the final review stage after public comments closed in early September; banking groups want it live by January 1, 2026, but it could take until mid-2026 depending on politics Bessent's influence may speed it up
The big win for mortgages: Banks buying more Treasuries would push bond yields down, potentially dropping 30-year fixed rates by 20–70 basis points (0.20–0.70%).
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INFLATION AND OUTLOOK
Core CPI and the Fed’s preferred inflation measure, the Core PCE Index, remain above the 2% target but have continued to moderate from their peaks This helps explain why the Fed appears more focused on signs of labor market weakness than on runaway inflation risks at this stage of the cycle Jared Franz of Capital Group — a firm managing more than $3 trillion in assets - had this to say in an interview with Mark Zandi, Chief Economist at Moody’s Analytics: “Now, am I worried that we're going to get some type of 1970s hyperinflation or something like that? No. My base case has been three and some change heading into year end. That’s really what I have in my base case, even beyond 2026 and into 2027, that we don’t really breach below the 2% target but we’re in this 2 to 2.5% regime for a while.” His view echoes a growing consensus: inflation may stay above 2%, but not at levels that threaten financial stability.
3.1%
August Core CPI (all items less food & energy)
2.7%
Harmonized Core CPI (all items less food, energy & shelter)
2.9%
August Core PCE (less food & energy)
Core Consumer Price Index (Core CPI) Harmonized Core CPI
Inflation Target
INFLATION AND OUTLOOK
Real-time rent data provides another important perspective According to Apartment List, which tracks national rental prices in real time, “Rent prices nationally are down 0.8% compared to one year ago. After gradually dipping further negative for five straight months, year-over-year growth ticked up slightly this month.” This is in contrast to the Fed’s shelter inflation measure, which lags behind and still makes up a large portion, 35%, of core CPI. The Fed’s rent data is surveyed every 6 months per unit, the information inherently reflects conditions from up to half a year prior, and processing adds further delay.
Since September 2022, the Fed’s shelter cost numbers have been, on average, 560 basis points inflated compared to actual real-time rents. This is why it makes more sense to pay attention to harmonized core inflation data (all items less food, energy & shelter). This also reiterates that the Fed’s policy is still quite restrictive considering real underlying inflation data.
For 2026, Robert Dietz, Chief Economist at the National Association of Home Builders anticipates a rebound, stating "the expectation is 2026 is going to be better... with the Fed easing and mortgage rates now below 6 and a half%, we're going to get an incremental increase in demand" as sidelined buyers return Dietz expects one more Fed rate cut by year-end ("we're guaranteed one more whether it's November or December," with a possible third), and highlights the 10-year Treasury yield at 4 1%: "if that number could come down to four, we’d be looking at mortgage rates getting closer to six," potentially unlocking "disproportionate amount of demand. ”
INFLATION AND OUTLOOK
Not all experts believe easing alone will solve affordability challenges Ivy Zelman, founder of Zelman & Associates and one of the most respected housing analysts in the country known for calling the mid-2000s housing bubble before it burst has a more cautious view She explains: “We’re less optimistic that it really helps improve affordability at the long end, especially given the deficit and the expectation that tariffs could lead to inflation. It could be stubbornly higher for longer even if the Fed is cutting, and couple that with auctions that aren’t really being met with strong demand — whether it’s foreign buyers or just people wanting to reduce their exposure to U.S. Treasuries.”
On the other hand, forward-looking housing data is already showing strength. Logan Mohtashami, Lead Analyst for HousingWire and a closely followed housing market data specialist, recently observed: “Not only has housing demand, the forward-looking data, started to pick up, our weekly pending sales data just hit a multi-year high, our year-over-year growth in purchase applications for the calendar week hit a year-over-year high… This kind of all started in mid-June when we started to say, you know, it looks like things are starting to change.”
PRICE EXPECTATIONS
Our price expectation for King County in 2026 depends on what happens with monetary and fiscal policy (we broke down future scenarios on the next page), but we believe the most probable outcome is a gradual improvement, as rates decline, which would result in a 5-7% annual price appreciation or so If we see a pivot to a more pro-housing easing cycle, we expect annual appreciation to rebound closer to 9%. How does this compare to national prices?
The most recent Fannie Mae Home Price Expectations Survey (HPES), which polled over 100 economists and housing experts in May 2025, projects 2.4% price growth in 2026 for the US housing market. Out of all the panelists, 83.5% expect appreciation, 13.4% expect depreciation, and 3.1% expect prices to be flat.
If the Fed continues down the gradual easing path and inflation stays manageable around “three and some change,” coupled with the Trump administration’s fiscal agenda, we wouldn’t be surprised to see expectations become more bullish in the upcoming HPES survey
Home Price Expectation Survey
FUTURE MARKET SCENARIOS
Our most probable outcome for the King County real estate market in 2026 is consistent demand increase with the potential for demand improvement to accelerate in the second half of 2026 Why? We’re in a monetary easing cycle with the Fed, a new Fed chairman will be appointed by Trump in May 2026, the spread between the 10-year yield and the 30-year mortgage is normalizing driving rates down, and we have a presidential administration implementing fiscal policies to increase demand for US treasuries, easing mortgage rates further if they’re successful. With this backdrop, we expect sellers to re-gain some of the leverage they lost since April 2025, and price appreciation to be 5-7%, closer to the decade median of 9%.
as the Fed eases more and investors move to bonds for
SELLER & BUYER IMPACTS
Scenario Impacts
Recovery & pro-housing
Soft landing
Inflation accelerates
Sellers will gain a lot more leverage as demand picks up, appreciation rates will rise, and 2025 built-up inventory will get quickly absorbed.
Sellers will gain leverage as rates gradually improve and demand picks up. In some markets, there will continue to be opportunity for Buyers. That said, if mortgage rates continue to ease in Q4 2025 and 2026, competition will consistently increase, which could offset lower rates.
Buyers would have an advantage so long as they’re comfortable with higher rates Buyers would have more negotiation leverage due to less competition which could help to offset higher rates.
In a recession or black swan event Buyers would have
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Client Testimonials
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“Sheila and Aaron, thank you very much for your professional and effective assistance in selling our home of 35 years in Bellevue. We could not have had the result we did without your diligence and professionalism Your knowledge of the market and your talent in marketing homes like ours showed in the fact that the house sold in less than 2 weeks and for close to the list price We couldn't be happier with your service and dedicated help At our age we are not likely to be owning a home again, but we will certainly recommend you to our friends ” - Ted and Ann Watts
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