Soaring home prices confound experts
According to a new report from Veros Real Estate Solutions, a risk management and collateral valuation firm, Seattle is now among a handful of cities which rank as “strongest housing markets” in the nation.
Five cities lead the nation in the VeroFORECAST, with appreciation of 9 to 11 percent forecast for 2017. They are:
These real estate markets are described as “sizzling” by the report. These sizzling markets are characterized by low unemployment, growing populations and a low inventory of available housing.
In fact, eight of the top 10 real estate markets are located in Colorado, Washington, Idaho, and Oregon. Strikingly, 15 of the top 25 cities were confined to these four states, a pattern which is almost unprecedented.
"This type of concentration is a highly unique phenomenon," says Eric Fox, vice president of statistical and economic modeling at Veros. "In the 13 years that VeroFORECAST has been accurately producing forecasts we have never seen such strong geographic polarization.”
What’s behind Seattle’s double-digit housing appreciation? Our ranking as the nation’s leading economy is a key factor driving soaring housing values. High-paying tech jobs and a $15-per-hour minimum wage lured 86,230 new residents to Seattle from April 2015 to April 2016, according to GeekWire.com. That’s nearly 240 people moving to Seattle each day. The surging population has elevated Seattle to the nation’s 18th largest city.
Where will all these people live? Just 2,122 new building permits were issued in 2015 for single-family homes located in Seattle-Tacoma-Bellevue, according to data from Federal Reserve Bank of St. Louis.
Rental market activity has been more generous. In a Nov. 2015 article, the Puget Sound Business Journal reported that 22,000 apartment units were projected to open in the greater Seattle metro area in a two-year period — the highest level of production seen since 1991. But even with more than 11,000 new apartment units added to the housing inventory each year, new housing development is not keeping pace with population growth.
As a result, demand for housing will continue to out-pace supply. According to the Northwest Multiple Listing Service, Seattle home prices have risen 15.9 percent in just the past year and an astounding 74 percent over the last five years. Seattle’s median home price was a “devilish” $666,000 in July 2016, according to the Seattle Times, and still rising. Renters aren’t faring any better than homebuyers. A slew of recent reports show the Seattle area has some of the fastest rising rents, increasing 7 to 11 percent in the past year.
As we move into November, Seattle’s over-heated real estate market appears to be cooling slightly. That’s typical this time of year. Some members of the Northwest Multiple Listing Service report the shortage of listings is easing in some areas, reflecting a slower pace of sales and moderating home prices. I tend to believe this only a seasonal adjustment in the market, and brisk sales and a shortage of inventory will return in 2017.
On that note: Did you know the first quarter of the year is among the busiest for real estate sales? Make plans now if you intend to sell in 2017.
Ray Akers is a licensed Realtor for Lake & Co. Real Estate in Seattle. Send your questions to ray@akerscargill.com or call 206-722-4444.