Yesterday, we examined a common question on the minds of some residents across the state of Washington. Is the state experiencing a real estate bubble? While home prices have clearly risen at a pace that’s above average, several economists have said it’s not a bubble scenario.
But what about the Seattle metro area, in particular? Is Seattle currently in a housing market bubble, as of spring and summer 2018? Or will it move toward one in 2019? Again, the answer is no.
Five Experts: Seattle Is Not in a Housing Bubble
Several experts have weighed in on this subject, and the general consensus is the same. They say the Seattle-area real estate market is not in a bubble.
That’s largely due to strong economics fundamentals that were lacking during the last housing boom (fundamentals like high employment and sound lending practices.)
One of those expert sources is Matthew Gardner, a Seattle-area economist. He recently told HeraldNet.com and other local news sources that we’re not in a real estate bubble. He also said that the negative factors that contributed to the previous housing crisis are no longer present today.
“So we have limited supply, we have good demand, we have great credit and we’re not over-leveraged and the interest rates are staying low.” Gardner said. “Housing prospects across America look pretty good as far as I can see.”
He’s not alone in his positive assessment. The Herald also interviewed four other real estate market experts for a similar article, published on March 2018. They queried the following individuals:
- Todd Britsch, regional director of Metrostudy, based in Bothell
- Mike Pattison of Master Builders Association of King and Snohomish Counties
- James Young of the Runstad Center for Real Estate Studies at UW
- J. Lennox Scott, chairman and CEO of John L. Scott
When asked if the Seattle area is in a real estate bubble, all of these housing experts answered with some version of “no.” James Young, in particular, offered a good explanation of current conditions:
“A bubble is usually when prices get ahead of the fundamentals that influence the marketplace,” Young said. “For the Seattle area, we still have very high inward migration, extraordinary levels of job growth within high paying economic sectors, and record low interest rates.”
Short Supply: Biggest Hurdle for Home Buyers
So it seems there is general agreement that Seattle is not in a real estate bubble in 2018, and that one does not appear likely. Sure, we’ve seen rapidly rising home prices in the area. But that alone does not signify that a housing bubble is taking place.
Prices aren’t rising because of speculation. They’re rising because a lot of people want to live in the Seattle area, due to its strong economy and job market, its outdoor beauty, and other attractive features. And those who are using mortgage loans to buy a home are better qualified than in the past.
That being said, there are clearly some issues within the Seattle real estate market. Affordability is one of them. A lack of housing supply is another.
The supply-and-demand situation is a story of extremes, particularly on the supply side. Strong demand and chronically low inventory have put tremendous upward pressure on home prices in recent years. That’s why the metro area has experienced double-digit increase in house values — per year.
While price appreciation has slowed a bit, other challenges remain for home buyers in the Seattle area. Tight supply means that buyers will face a lot of competition from others who are seeking a property in the same area. Bidding wars and multiple-offer scenarios are a common occurrence in this market.
But at least it’s not a bubble!