Written by William Hillis, Research Editor & Publisher, RSIR
After 21 months with the highest residential price advances in the country, Seattle fell to second place in June 2018. For that month, the S&P CoreLogic Case Shiller Index showed Las Vegas, Nevada replacing Seattle in the number 1 position with a twelve-month increase of 13 percent. Seattle was the new runner-up at 12.81 percent price growth. Competing Pacific Coast gateway cities Los Angeles and San Francisco saw year-over-year home price increases of 7.42 percent and 10.66 percent, respectively. The monthly increases on the Index slowed to 0.73 percent for Seattle and 0.47 percent for San Francisco, and rose to 0.53 percent for Los Angeles and 0.6 percent for San Diego.
In his official analysis accompanying the June index release, David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices observed that “even as home prices keep climbing, we are seeing signs that growth is easing in the housing market. Sales of both new and existing homes are roughly flat over the last six months amidst news stories of an increase in the number of homes for sale in some markets. Rising mortgage rates—30-year fixed rate mortgages rose from 4 percent to 4.5 percent since January—and the rise in home prices are affecting housing affordability.
Blitzer recognized Las Vegas’s advance, naming it “among the fastest-growing U.S. cities based on both employment and population.” Yet to what extent are home prices in Las Vegas connected to economic fundamentals? Does Las Vegas compete with Seattle on the basis of employment and quality of life? For some buyers, perhaps. A more essential backstory to rising prices in Las Vegas is what happened there during the financial catastrophe that unfolded a decade ago.
A 2010 report by the State of Nevada’s Financial Inquiry Commission documented that in the aftermath of the subprime mortgage crisis, “Nevada home prices [fell] faster and further than in any other state”—i.e., according to Case Shiller, “[falling] 56.5 percent from the peak reached in August 2006,” reducing the June 2010 home price index to its “lowest in a decade. This put two out of three Nevada homes underwater on their mortgages, and elevated the number of Nevada home foreclosures” to “highest in the nation … nearly four times the national average.”[1]
While residential prices in Seattle also suffered under the financial crisis, nowhere else in the nation did they fall as far as in Las Vegas.
Today, Seattle’s annual home price increase has remained steady over the past three months at about 13 percent year over year. The current rate of 12.8 percent is actually 1.8 percentage points higher than when Seattle’s 21-month run began back in September 2016. During that time, monthly median residential prices in familiar King County communities increased substantially: by 20.5 percent in the city of Seattle, 29.3 percent in Redmond, 41.2 percent in Bellevue, and 56.7 percent in Kirkland.
For Seattle’s comparative performance on the Case-Shiller Index, see our chart of the Index trends below; and for more details, download the S&P Dow Jones Case-Shiller summary report. For details on the implications for homes in your neighborhood, contact a local RSIR broker for their latest analysis.
[1] Janet Rogers and Andrew Clinger, The Impact of the 2007-2010 Financial Crisis on the State of Nevada, Financial Crisis Inquiry Commission: Las Vegas, NV, 8 September 2010.