We’ve long known that New York and California are home to some of the most expensive housing markets in America. But new data suggest that Washington State is moving up the ranks as well, and at a fast pace.
In fact, a recent report by CoreLogic showed that home prices in Washington State are rising faster than any other state in the nation, positioning it to be one of the most expensive housing markets in 2017.
Washington State Home Prices Soaring
According to data released by CoreLogic earlier this summer, home prices in Washington State rose by 10.6% in April, compared to the same time last year. That was the largest year-over-year increase of any state in the county, and for the third month in a row.
You’d have to go back a ways to find the last time Washington State topped this list. It happened during a three-month period at the end of 1989 and beginning of 1990.
We all know that Seattle’s housing market is red-hot right now. Home prices in the metro area rose by around 16% over the last year or so, according to Zillow. That’s miles above the national average of 5.4% during the same period. But it’s not just the Seattle area that’s seeing such tremendous price growth. It’s happening in other parts of the state as well.
As The Seattle Times reported earlier this year: “Across Washington [State], home prices are rising faster than in any state in the country — the first time that’s happened in a quarter-century.”
From Bellingham in the east to Spokane in the west, home prices in the state have risen to levels never seen before, not even during the housing bubble. As a result of these trends, Washington has steadily climbed the list of most expensive states in the country for house values, and is now ranked within the top five or six by some analysts.
Housing Demand High, Inventory Low
So what’s going on here? What is it about the Washington State housing market that’s causing home prices to skyrocket in such a manner? It’s a supply and demand story, as always.
Frank Nothaft, chief economist for real estate data provider CoreLogic, recently cited the state’s unique blend of urban and scenic outdoor activities as one of the big lures. Millennials, in particular, are drawn to what this area has to offer.
The state’s strong economy is equally attractive. According to the ADP Workforce Vitality Report, Washington led the nation for both employment and wage growth during the fourth quarter of 2015. In fact, no other state came close.
As a result of all this, housing demand has surged in recent years. But the state’s construction industry has been sluggish by comparison, and new-home construction hasn’t kept pace with demand.
Housing inventory is usually measured by the number of months worth of supply (homes for sale). Most economists consider a six-month supply to be a healthy and balanced housing market. But many cities across Washington State fall well below this level.
For instance, a recent report by the Northwest Multiple Listing Service showed the following inventory levels for July 2016:
- King County: 1.18 months of supply
- Pierce County: 1.88 months of supply
- Snohomish County: 1.30 months of supply
So the most populous areas of Washington State are all suffering from a shortage of home inventory. This comes at a time when housing demand is rising, due to population growth and economic improvements.
It’s Econ 101: Rising demand and limited supply puts upward pressure on prices.
Forecast for 2017: Any Relief in Sight?
Home prices in Washington State have risen steadily over the last few years — at least in most cities. And they are expected to continue rising into 2017, though possibly at a slower pace.
The economic team at Zillow recently published the following statement: “Washington home values have gone up 10.7% over the past year and Zillow predicts they will rise 5.9% within the next year.” So perhaps a cooling trend is on the way.
This mirrors the 12-month outlook for the nation as a whole. Many analysts seem to agree that home prices will level off a bit in 2017, in most parts of the country.
The bottom line: Home prices in Washington State might rise more slowly in 2017, compared to this year. But they’ll probably keep rising in most parts of the state — especially within the Seattle metro area. So Washington just might hold its position among most expensive states for housing.