The “T” and the “I” with Kyle Bergquist

Puget Sound Real Estate:  The “T” and the “I”

If you’ve been reading these updates for a while then you already know that higher employment and/or higher inflation generally mean higher mortgage interest rates – and that’s exactly what happened this past week.  According to Mortgage News Daily, the average 30 year mortgage interest rate climbed from 6.99% last Thursday (before the hotter than expected employment and inflation reports), to 7.37% today.  YIKES!  That .38% increase in mortgage interest rates translates into an additional $128.51 per month on a $500,000 30 year mortgage…in just a week! 

But for as much press as mortgage interest rates and housing prices get, there are two other components in a housing payment that also need some attention:  Property Taxes and Homeowners Insurance (The “T” and the second “I” in PITI – Principal, Interest, Taxes, and Homeowners Insurance).

“P” an “I” have been high and rising for a few years now.  Principal has been high because housing prices themselves are high, resulting in higher loan amounts; and Interest has been high as we battle to suppress high inflation coming out of the Pandemic.  But did you know that Taxes and Homeowners Insurance have also been skyrocketing?  On a personal level, since 2021 when we bought our house, our property taxes have increased 26.21%, and our homeowners insurance has increased 84.17%.  So even though we were lucky enough to lock down a low rate on our 30 year mortgage, our mortgage payment has increased every year as we’ve needed to accommodate higher taxes and homeowners insurance payments.  Quite annoying, but it appears we’re not alone.

According to a recent Wall Street Journal article, homeowners insurance premiums are soaring across America (along with car insurance premiums).  The simple reason why?  Unprecedented payouts in recent years due to natural disasters – To the tune of Hundreds of Billions.  All those payouts are weighing on bottom lines, and in many cases insurers are being forced to increase premiums just to stay in the black (and solvent). 

As far as property taxes go, did you know there were 16 cities in King County that saw their King County Assessed value fall while property taxes increased?  Say WHAAA?  Yeah, you might be one of them – Check out the chart below, or view your specific KC Assessor Property Detail here:  https://gismaps.kingcounty.gov/parcelviewer2/.  Not only that, there’s another 24 cities within King County whose property values fell, but relatively speaking the taxes barely budged!  The primary reason for this is voter approved measures kicking in and offsetting savings from lower property values. 

 Ok, so I guess we kinda shot ourselves in the foot on the whole property tax thing by approving a bunch of measures that increased our own taxes.  But did you know that out of the 50 most populous US cities, Seattle is number 5 for shooting ourselves in the foot?… I mean, we have the fifth highest property taxes in the nation?  Only the Bay area and Austin, Texas (which was surprising) have higher property taxes than Seattle does!

Take it Home

Even if you purchase a home with a 30 year fixed rate loan, your payment can still rise due to the “T” and the “I”.  Both the “T” and the “I” have flown under the radar in recent years, but as escrow accounts get rebalanced in the coming months (after making the first half of 2024 property tax payments due on April 30th), don’t be surprised to see your mortgage payment potentially rise, and to see Puget Sound rank as even more un-affordable as it was before. 

In other news – IT’S FRIDAY!!!    

SOURCE: Kyle Bergquist