Summary: Many people may be concerned that Seattle may be in the midst of a housing bubble. Is it? And will it burst any time soon in 2019 or 2020? The evidence suggests that no bubble exists, especially as prices start to retreat.
Recently, 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 over the past few years – despite having slowed down over the last 12 months – 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 summer 2019? Or will it move toward one in 2020? Again, the answer is no.
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.)
The national Case-Shiller housing price index recently showed that the Greater Seattle Area experienced a rather cool housing market over the past few months compared to other markets across the country.
The index shows that home prices in Seattle peaked last June 2018, but have steadily retreated since then. According to real estate database company Zillow, prices in Seattle have plummeted from a whopping $752,000 in June 2018 to $712,600.
And while that price is still rather hefty, especially when compared to most other centers across the US, it’s a far cry from where things were just a year ago.
While many may have assumed that a bubble was building and was doomed to burst over the past few years, such is not the case.
The negative factors that contributed to the previous housing crisis are no longer present today. Mortgage rates – while steadily increasing – are still relatively low. Demand is not as high as it was a few months ago, and inventory is keeping up.
James Young of the Runstad Center for Real Estate Studies at UW says:
“A bubble is usually when prices get ahead of the fundamentals that influence the marketplace. 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.”
Supply May Have Improved, But Prices Still High in Seattle
So it seems there is general agreement that Seattle is not in a real estate bubble in 2019, and that one does not appear likely. Sure, we’ve seen rapidly rising home prices in the area from 2012 to mid-2018. But that alone does not signify that a housing bubble is taking place.
Prices did not rise because of speculation. They rose 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. But a lack of housing supply – while once a major issue – may no longer be as much of a problem today as it once was.
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 – over the past few years (excluding June 2018 to July 2019).
But even though price appreciation has slowed a bit, other challenges remain for home buyers in the Seattle area. Even though prices have decreased over the last 12 months, they’re still pretty expensive for the average homebuyer, especially when compared to the national average price of a home.
But at least it’s not a bubble!