Written by William Hillis, Research Editor & Publisher, RSIR
The word is out that Seattle residential prices were again lower in June 2019, according to the Case Shiller Home Price Index published by S&P Dow Jones. As reported by the Seattle Times, the Seattle Metropolitan Statistical Area (“Seattle MSA”) was alone among the cities tracked by Case Shiller to have seen such a decline in some years—a decline that is now into a second straight month. In this report, we will briefly look at some parallel market developments in the counties and areas covered by the index. We will also consider the trajectory of this new trend and the overall effects on home buyers and sellers so that both are better prepared upon entering this fluid market.
Let’s begin with the remarks of Philip Murphy, Managing Director and Global Head of Index Governance at S&P Dow Jones Indices:
With three of the bottom five cities (Seattle, San Francisco, and San Diego), much of the west coast is challenged to sustain year-over-year [YOY] gains. For the second month in a row, however, only Seattle experienced outright decline with [a] YOY price change of -1.3 percent. … While housing has clearly cooled off from 2018, home price gains in most cities remain positive in low single digits. Therefore, it is likely that current rates of change will generally be sustained barring an economic downturn. 
We are certain that the “current rates of change” to which Mr. Murphy refers are those shallow rates of change among cities other than Seattle, and it currently appears that Seattle’s rate of price decline will moderate. As shown in Charts A and B, this moderation is already underway, with the year-over-year reduction only one-tenth of one percent lower in June than in May.
In the 2019 Q2 data, there were signals that those buyers who over the past two years had been discouraged by prices escalating out of sight have begun to find opportunities in some markets.
Inventories are not signaling a bust
Residential inventories appeared to confirm this with a peak-season downturn in July. (See Chart C. As previously described, the Case Shiller index is a measure of residential [i.e., single-family] resold home prices in King, Snohomish, and Pierce Counties. The regular index excludes condominium sales as well as new construction.) However, as the Case Shiller report is issued two months after its subject data are recorded, it did not factor in tentative August residential selling data in the Seattle MSA, King County, and on the Eastside. These data pointed to a modest upturn in median selling prices among these regions. Time will tell if this is the inflection point that RSIR has been predicting.
Supply has been constrained by the dearth of new listings. These were steeply lower year over year, by 9.7 percent in June and 8.7 percent in July. Chart D shows inventory with new listings omitted. Lower inventory will favor sellers upon pricing their homes for sale.
Buyer behavior is resilient
RSIR research into quarterly home price elasticity since 2018 shows that with effect from the year-end, buyers at different price levels among counties and cities within and beyond the Seattle MSA have begun to adapt to the changing price trend in different ways. Some buyers have reverted to a “value for money” perspective, holding out for homes that are attractively priced. Yet others have become more speculative, preferring to buy in areas where prices are still trending higher.
Among the cities and towns seeing renewed speculation among buyers were Renton in King County and Bainbridge Island in Kitsap County. Residential selling prices and transactions both rose counter to the trend in these cities. Mercer Island and Redmond saw similar speculation at and above the 50th-percentile residential price. Further north, Skagit County sellers likewise benefited from speculative purchases in the second quarter.
No market distress in sight
The Seattle MSA is far from seeing the kind of market distress that set in with price shocks a decade ago. Bank-owned and real-estate-owned selling transactions are very near the lows set in 2018. Short of a global recession, this metric is unlikely to change and would take many months to do so. We point this out to demonstrate how few there have been: 37 for July 2019, or 88 percent fewer than in the same month four years ago.
Global uncertainty lures new buyers to Seattle
Shifting political winds in the Eurozone and the U.K., as well as in China and her Special Administrative Zone of Hong Kong raise the prospects for another wave of inbound buyers to Seattle and the Puget Sound region. Seattle’s superior ownership environment in comparison with neighboring Vancouver BC is now well-established due to the latter’s rising hostility toward and taxation of foreign buyers. The unrest that began in Hong Kong in June is still being digested by overseas markets, but RSIR will be watching these events and reporting any forthcoming effects on local residential purchases.
Dean Jones, owner and CEO of Realogics SIR, was upbeat about the current direction of the index results. “Consumers need to remember that these S&P Case-Shiller reports are a broad-brush measurement across a tri-county area and that individual neighborhoods, product types and price points can exhibit very different trends compared with the macro market. For instance, we’ve noted an inflection point in some of the most preferred markets yet again, such as in downtown Seattle condominiums and in Mercer Island and West Bellevue.”
For more details on the June 2019 Case-Shiller Index results, download the S&P Dow Jones Case-Shiller summary report. For a copy of our 2018/2019 Market Report, along with details on the implications for homes in your neighborhood, contact a local RSIR broker. Waterfront home buyers and sellers: see our 15-month 2019 waterfront report at RSIRWaterfront.com.
 “Phoenix Replaces Las Vegas as Top City in Annual Gains According to S&P CoreLogic Case-Shiller Index,” S&P Dow Jones Indices, New York, 27 August 2019.