Market Journal: The Frozen Middle of Early 2023

We are sitting in the middle of a massive housing freeze right now in early 2023. The logic is simple: if you bought or refinanced a home a couple of years ago, you likely have a mortgage rate near three percent. Selling that home to buy another one means you have to trade that rate for one that is more than double, which completely wrecks the math for most families.

This has created a frozen middle in the housing market where inventory has dried up to almost nothing. To track how this dynamic is playing out across our state over time, you can follow my log in the market updates archive.

The Lock-In Effect in Skagit County

Up here in Skagit County, the lack of active listings is hitting buyers hard. We do not have the massive high-rise condo developments of Seattle to absorb demand, so our market relies heavily on traditional single-family homes and rural properties. When local homeowners decide to stay put to keep their low rates, the entire pipeline of available properties grinds to a halt.

In Mount Vernon, this inventory squeeze means that the few homes that do hit the market are getting a lot of attention, even with higher borrowing costs. Buyers are looking at older mid-century homes near downtown or farmhouses on the outskirts, but they have to be incredibly strategic with their financing to make the monthly payment work.

FHA Loans as a Survival Tool

With prices remaining sticky due to low supply, buyers need programs that do not demand massive cash reserves. This is where FHA loans are stepping up to save deals. Because FHA guidelines (which are subject to change, so you should always verify current terms) allow a down payment as low as 3.5 percent and feature more forgiving credit score requirements, they are helping first-time buyers get a foot in the door.

Another major benefit of this program is the seller concession limit. FHA guidelines allow sellers to contribute up to six percent of the purchase price toward your closing costs, which can be used to buy down your interest rate. You can estimate your monthly payment using my online tool, and make sure to adjust the interest rate and seller credit inputs to see how a temporary or permanent buydown cuts your out-of-pocket costs.

Surviving the Frozen Market

Buyers who are active right now have a surprising amount of bargaining power with the few sellers who actually need to move. If a seller is listing a home in this environment, it is usually because of a major life change like a job relocation, a divorce, or an estate sale. They cannot afford to sit on the market forever, which means they are willing to talk.

To make an offer work right now, you need to know exactly what to look for and what to ask. Here is how you should approach a purchase in this environment:

• Look for properties that have been sitting on the market for more than three weeks.
• Ask your real estate agent to negotiate for seller-paid rate buydowns instead of just demanding price cuts.
• Keep your inspection contingency intact so you do not get stuck with hidden repair bills.
• Get fully pre-approved before you write an offer so the seller knows your financing is rock-solid.
• Compare different loan programs to see if government-backed options offer a better rate sheet for your credit profile.

Questions I get about this

Why are sellers willing to negotiate if inventory is so low?

While overall inventory is incredibly thin, the buyers who are still active are highly sensitive to rates. If a seller has to sell right now, they cannot just rely on bidding wars like they did a year ago, so they have to offer concessions like paying for your closing costs to attract a qualified buyer.

Can I use an FHA loan to buy a fixer-upper in Mount Vernon?

Yes, but you have to be careful about the condition of the home because FHA appraisals have strict safety and soundness standards. If a property has peeling paint, roof issues, or structural damage, the seller will have to fix those problems before the loan can close, or you will need to look at specific FHA renovation programs.

Dom's take, written January 11, 2023

Helping buyers structure affordable payments has become incredibly difficult this winter. Nobody wants to give up the three percent mortgage they currently have, which means our local inventory is exceptionally tight and every single transaction requires extreme creativity. The upside is that the sellers who truly have to move are finally paying attention to what a buyer needs, which is a massive shift from the take-it-or-leave-it attitude we saw over the last two years.

If you are trying to buy right now, do not let the high interest rates scare you away from negotiating. You have to focus on the purchase price and the terms you can secure today, because you can always look to refinance when the market shifts. The key is making sure the monthly payment is something you can comfortably afford right now without relying on a future rate drop that nobody can guarantee.

What I'd say now (August 2026)

Looking back at those winter months of 2023, I was right about the lock-in effect holding back the market, but the thaw took longer and looked much different than many expected. We saw a slow, uneven recovery across Washington counties where rates eased in fits and starts, and local pricing knowledge became far more important than any national real estate headlines.

Today, real buyer bargaining power has returned to the market as inventory rebuilt and days on market stretched out. Concessions have become a normal part of the transaction rather than a rare exception, giving buyers the room to inspect, negotiate, and walk away if the deal is not right. If you were sitting on the sidelines back then, the market has normalized into a space where financing structure, points, and program choice drive your payment much more than the listing price does.

Talk it through with me

Whether you are looking at homes in Skagit County or planning your next move somewhere else, let's look at your options together. You can connect with me directly to go over your numbers, run a five-minute pre-approval, and see how our average fifteen-day closing process can give you a competitive edge when you find the right property.