The year 2016 is one for the record books. Home values saw double-digit appreciation in 2016, with the median home price in King County up 14.6 percent, according to the Northwest Multiple Listing Service. It’s not just Seattle that’s experiencing soaring home prices. All across Washington, home prices are rising faster than in any state in the country. Washington has zoomed up the list of priciest states in the nation, and now sits in the top five overall, according to CoreLogic.com. 

Seattle’s population is exploding, with the highest growth rate in a century. According to Geekwire.com, Seattle and surrounding counties added 86,320 new residents between April 2015 and 2016.

From Curbed.com: “Since 2000, the Seattle-Tacoma-Bellevue area has added 700,000 people. Considering that Seattle's population is only about 666,000, we've effectively added another Seattle to the Seattle area”.

Is it any wonder traffic is congested and housing is becoming more and more expensive?

The Seattle economy is effervescent. The unemployment rate is 4 percent, below the national average, with a job growth rate of 1.69 percent. Future job growth over the next 10 years is forecast at more than 39 percent, according to bestplaces.net.

Wage growth and job growth, combined, make Washington state number one in the nation, outpacing every other state, according to the ADP Workforce Vitality Report. Wages in the Puget Sound region are 24.5 percent higher than the national average, according an article in SeattleBusinessMag.com. 

Amidst all the record-setting positive news, there is reason for caution on horizon. The latest jobs estimates suggest the economy may be slowing down.

What concerns us is the fact that three of the five key industries appear to be applying the brakes”, according to Seattlebusinessmag.com. “Aerospace and information (including software) contributed 2,000 jobs during the three-month period, but construction, wholesale and retail trade, as well as professional and business services, which have a combined workforce of 689,800, added nothing.”

The pace of home appreciation is also slowing, according to the NWMLS. Metrostudy’s second quarter 2016 survey of the Seattle housing market shows that the first signs of the slowdown have begun to show up: slowing job growth along with a dramatic change in migration numbers.

“The state’s in-migration has hit negative numbers for the first time in over four years,” said Todd Britsch, Regional Director of Metrostudy’s Seattle region.

Anecdotally, I’m seeing fewer bidding wars. More surprising, I’m noting a number of price reductions on listed homes. Demand for homes is less today, during winter, than it was in 2016. Zillow.com is forecasting Seattle home price appreciation in 2017 will be 8.1 percent, compared to 16.7 percent over the last 12 months. Veros Real Estate Solutions has released their forecast for 2017, and Seattle home prices are forecast to rise 11.2 percent in 2017. So, while home prices will rise in 2017, the pace is slowing, and the factors of supply and demand will moderate toward a healthier balance.

The wild card in 2017, if I’m being honest, is President Donald Trump.  To research this article I Googled “Trump impact on real estate future” and 4,040,000 search results were returned in 0.28 seconds. To say Americans are concerned about the next president would be an understatement.

Jonathan Smoke, chief economist at Realtor.com, pointed to Trump’s business background as an indicator of what could be in store for the housing market.

“If you are rooting for the economy to improve, you would hope that his background as a business person, as a real estate developer, would pave the way for more growth, more development and that would be a net beneficial for real estate,” Smoke said.

What effect the Trump presidency has on the housing market may vary depending on where you live, says Ralph McLaughlin, chief economist at Trulia. “Because home buyers in economically healthy blue states are more likely to be rattled by the election outcome and concerned about the future of the economy, they might put off making a large purchase such as a home, causing a drag on the market”.

In November, Fed Chair Janet Yellen signaled that the Fed is moving closer to raising interest rates.  Rising interest rates have been forecast since 2009, but it’s looking increasing likely that we’re finally going to see rates rise to 5 percent or more in 2017, and stay there.

There are other factors that may influence the housing market in 2017, such as the future of Fannie Mae and Freddie Mac.  Will Trump expand access to mortgages? Will Dodd-Frank be replaced? Will Trump kill trade agreements like NAFTA, impacting exporting states like Washington? Will President Trump be distracted by issues like building a wall on the border and getting rid of Obamacare, and lose sight of real estate?

Trump made a lot of promises during the campaign. It is unclear how many of them he’ll be able to keep. Until he and his advisers provide more clarity on his intentions, the housing sector, like everyone else, will have to take a wait-and-see approach. While there is underlying strength in the Seattle real estate market, it is the outside influences that could have the greatest impact on local real estate in 2017. 

I want to thank all my readers for your comments and support in 2016.  I wish you good health and prosperity in 2017.