The local real estate market set new home price records in many parts of the region in February. Prices here have grown faster than anywhere else in the country for the last 16 months in a row. Demand remains high and inventory very low. Brokers are hoping the normal seasonal increase in listings this spring will help give buyers some relief.
With home prices soaring on the Eastside, it’s not a matter of whether the median price will exceed a million dollar, but when. February brought the market very close to that milestone. The median price of a single-family home increased 14 percent to a record $950,000 on the Eastside, surpassing the previous peak recorded in December.
The red-hot job market in King County continues to outpace nearly every area in the nation. Well-paid workers looking to buy close to city centers have fueled a growing competition for a shrinking number of homes. That demand boosted the median price of a single-family home up 16 percent over a year ago to $649,950.
The median price of a single-family home in Seattle hit a new high of $777,000 in February, $20,000 more than the previous record set in January and up 14 percent from the same time last year. Despite the sharp increase in prices, multiple offers have become the norm for most properties. It remains to be seen if recent interest rate hikes will have a moderating effect on home values.
After several months of moderating growth, Snohomish County set a new record for home prices in February. The median price of a single-family homes jumped 18 percent to an all-time high of $485,000. Inventory is down from a year ago, with less than a month’s supply of homes available for sale.
If you are considering buying a home in today’s market, here are three things to consider:
Make sure you can afford the payments.
Choose a location that will appeal to you long-term.
Be committed to living there for a minimum of five to seven years.
With competition for homes growing and inventory shrinking, the real estate market in January was as hot as ever. Home prices were up by double digits as buyers chased severely limited inventory. The number of homes for sale hit a record low for the month of January, which should strongly favor sellers as we move into the prime spring selling season. The average home seller in our area now makes a 64 percent profit, the fourth-highest rate of any region in the country, according to ATTOM Data Solutions.
Home prices on the Eastside continue to climb. The median price of a single-family home was up 18 percent over last January to $938,000 — virtually unchanged from the record high set a month ago. West Bellevue, King County’s most expensive area, saw the median home price surge to a record high of $2.72 million. With less than a month of available inventory, prices aren’t expected to cool any time soon.
Single-family home prices in King County soared 20 percent over a year ago to $628,388, with double-digit increases recorded in every area of the county. Lack of inventory continues to fuel the market. There were 21 percent fewer homes for sale here as compared to a year ago, with inventory hitting a record low for the month of January. The region has now been the hottest housing market in the country for 15 months in a row.
An ongoing shortage of inventory combined with an economy that continues to add jobs has kept the Seattle housing market very competitive and increasingly expensive. Seattle’s median price hit a new record in January jumping 19 percent to $757,000. Despite the increase in prices, brokers are reporting open house traffic that can number in the hundreds of interested buyers.
Home price increases in Snohomish County were more moderate than those in King County. The median price of a single-family home grew 10 percent over a year ago to $450,000. That number is down from the high of last year, and reflects a more common seasonal slowdown.
The Washington State economy added 104,600 new jobs over the past 12 months. This impressive growth rate of 3.1% is well above the national rate of 1.4%. Interestingly, the slowdown we saw through most of the second half of the year reversed in the fall, and we actually saw more robust employment growth.
Growth continues to be broad-based, with expansion in all major job sectors other than aerospace due to a slowdown at Boeing.
With job creation, the state unemployment rate stands at 4.5%, essentially indicating that the state is close to full employment. Additionally, all counties contained within this report show unemployment rates below where they were a year ago.
I expect continued economic expansion in Washington State in 2018; however, we are likely to see a modest slowdown, which is to be expected at this stage in the business cycle.
Home Sales Activity
There were 22,325 home sales during the final quarter of 2017. This is an increase of 3.7% over the same period in 2016.
Jefferson County saw sales rise the fastest relative to fourth quarter of 2016, with an impressive increase of 22.8%. Six other counties saw double-digit gains in sales. A lack of listings impacted King and Skagit Counties, where sales fell.
Housing inventory was down by 16.2% when compared to the fourth quarter of 2016, and down by 17.3% from last quarter. This isn’t terribly surprising since we typically see a slowdown as we enter the winter months. Pending home sales rose by 4.1% over the third quarter of 2017, suggesting that closings in the first quarter of 2018 should be robust.
The takeaway from this data is that listings remain at very low levels and, unfortunately, I don’t expect to see substantial increases in 2018. The region is likely to remain somewhat starved for inventory for the foreseeable future.
Because of low inventory in the fall of 2017, price growth was well above long-term averages across Western Washington. Year-over-year, average prices rose 12% to $466,726.
Economic vitality in the region is leading to a demand for housing that far exceeds supply. Given the relative lack of newly constructed homes—something that is unlikely to change any time soon—there will continue to be pressure on the resale market. This means home prices will rise at above-average rates in 2018.
Compared to the same period a year ago, price growth was most pronounced in Lewis County, where home prices were 18.8% higher than a year ago. Eleven additional counties experienced double-digit price growth as well.
Mortgage rates in the fourth quarter rose very modestly, but remained below the four percent barrier. Although I anticipate rates will rise in 2018, the pace will be modest. My current forecast predicts an average 30-year rate of 4.4% in 2018—still remarkably low when compared to historic averages.
Days on Market
The average number of days it took to sell a home in the fourth quarter dropped by eight days, compared to the same quarter of 2016.
King County continues to be the tightest market in Western Washington, with homes taking an average of 21 days to sell. Every county in the region saw the length of time it took to sell a home either drop or remain static relative to the same period a year ago.
Last quarter, it took an average of 50 days to sell a home. This is down from 58 days in the fourth quarter of 2016, but up by 7 days from the third quarter of 2017.
As mentioned earlier in this report, I expect inventory levels to rise modestly, which should lead to an increase in the average time it takes to sell a house. That said, with homes selling in less than two months on average, the market is nowhere near balanced.
This speedometer reflects the state of the region’s housing market using housing inventory, price gains, home sales, interest rates, and larger economic factors. For the fourth quarter of 2017, I have left the needle at the same point as third quarter. Price growth remains robust even as sales activity slowed. 2018 is setting itself up to be another very good year for housing.
Matthew Gardner is the Chief Economist for Windermere Real Estate, specializing in residential market analysis, commercial/industrial market analysis, financial analysis, and land use and regional economics. He is the former Principal of Gardner Economics, and has more than 30 years of professional experience both in the U.S. and U.K.
2017 closed out the year with historically low inventory and record-breaking price gains. A strong local economy and brisk population growth has helped fuel a steep discrepancy between supply and demand. As long as this imbalance remains, 2018 is on track to remain a very strong seller’s market.
Defying the usual winter slow-down in home prices, December broke new records on the Eastside. The median price of a single-family home soared 17 percent over a year ago to $938,240 – an all-time high for the region. Appreciation in higher-end areas, like West Bellevue and Mercer Island, topped 20 percent. Homeowners, especially those considering downsizing, may want to take advantage of the sharp increase in equity.
King County recorded the lowest inventory since records began in 2000, and demand just keeps rising. As a result, the price of a single-family home jumped 15.5 percent over the same time last year to $635,000. Those looking buy a condo as a more affordable option were out of luck. The median price tag of $402,000 is a relative bargain when compared to a single-family home, but there are only about 200 condos on the market, another record low.
While below the high point last summer, the median price of a home in Seattle jumped 14 percent year over year to $725,000. Supply and demand is again the culprit. There are just two weeks of available inventory on the market. Not only are homes here selling quickly, but fewer people are putting their homes up for sale. Most economists are predicting a moderate slowdown in cost increases here in 2018, with prices still rising but not as sharply as they did in 2017.
Prices in Snohomish County continue to rise at a rapid pace. The median price of a single-family home here grew 12.5 percent from a year ago to $449,950. With less than a month of available inventory, prices are projected to remain high.