Written by William Hillis, Research Editor & Broker, RSIR
Monthly price growth has been slowing, but not among Seattle condos
We might be seeing the equivalent of an end zone dance for Puget Sound home prices. Yet according to the August results of the CoreLogic Case Shiller index, continued slackening in the monthly rate of growth is far from cutting Seattle’s year-long lead nationwide, and Seattle condominium prices have sustained their upward momentum.
With a 12-month increase of 13.2 percent, home prices in Seattle have now outpaced those in major U.S. cities across the country for an entire year. The West Coast runner-up is San Diego, at 7.8 percent, trailing 8.6 percent for Las Vegas, which was in second-place nationwide.
Seattle’s enormous lead remains even as the monthly rate of growth has steadily slowed in recent months, from 2.63 percent in April 2017, to 0.66 percent in July, and now 0.18 percent in August. Among Pacific Coast gateways, San Francisco fared worse, turning negative to -0.11 percent. Meanwhile, prices in Los Angeles as well as San Diego rose more sharply in the month, by 0.85 percent and 0.34 percent, respectively.
The Case Shiller index is based on data from the Seattle Metropolitan Statistical Area (MSA) comprising not only the city of Seattle, but Bellevue and Everett as well. Given the job growth at the center of Seattle, we might expect to find even stronger growth there, especially among condominium sales; and statistics from the Northwest Multiple Listings Service bear this out. Within Seattle city limits from August 2016 to August 2017, the median selling price of a condo rose monthly at a compound average growth rate of 2.3%, and by 31.4% year over year. Downtown, these rates were even higher: +2.6% and +36.8%, respectively, as illustrated in Charts A and B.
Despite the run-up in Seattle home prices, Seattle is still more affordable relative to local incomes that any of these peer metros. Real estate analyst Mark Hanson observes, “Most of the largest U.S. cities are completely unaffordable to the typical, end-user, shelter-buyer with 10 percent down payment.” In Seattle, Hanson reports the difference between household income and the income needed to buy a median-priced house as about 18 percent. But the other Pacific Coast gateways comprised three of the four least affordable U.S. cities, where that difference was 49 percent for San Diego, 52 percent for San Francisco, and 55 percent for L.A.
Should the trend since April continue on the back side of the peak home-buying season, it is possible that Seattle’s monthly home price trend could actually turn negative. This would be welcome relief for the region’s prospective buyers. For months, some have been forced to price shop all over Puget Sound as far north as Skagit County, soaking up supply and driving cumulative days on market down to a week almost everywhere.
David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices indicates that this prospect may be in the offing. “Home prices will not rise forever. Measures of affordability are beginning to slide, indicating that the pool of buyers is shrinking. The Federal Reserve is pushing short term interest rates upward and mortgage rates are likely to follow over time, removing a key factor supporting rising home prices.”[1]
For Seattle’s performance on the Case-Shiller Index, see the chart below; and for more details, download Case Shiller’s summary report.
[1] “The S&P CoreLogic Case-Shiller National Home Price NSA index reaches new high as momentum continues,” S&P Dow-Jones Indices press release, 31 October 2017.
