Summary: Washington has long been a hot state in terms of housing, and prices have risen considerably over the years. But what will the outlook be for the housing market in Washington for the remainder of 2019 and into 2020?
We’ve long known that New York and California are home to some of the most expensive housing markets in America. But new data suggests that Washington State is moving up the ranks as well, and at a fast pace.
In fact, a recent article in Business Insider revealed that Washington State is in the top 10 most expensive markets in the country.
Washington State Home Prices Still Increasing Soaring
According to data released by Zillow, home prices in Washington State rose by 4.8% compared to the same time last year, which is just about in line with the average rate of increase for homes across the US of 5.1% over the past year.
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 has been red-hot for a while now. Yet while home prices have just about doubled since 2012, the rate of increase has cooled in this particular market.
Although Seattle has traditionally been the sizzling market in Washington State, other markets nearby are hot right now, including Tacoma, which has seen an increase in home values of 8.4% over the past year. And according to Zillow, home prices will rise another 3.9% over the next year. As of August 2019, the median price of homes in Tacoma is $310,000.
From Bellingham in the east to Spokane in the west, home prices in the state have risen over the past year, and are expected to increase by another 2% over the next 12 months. 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 seven 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.
That said, inventory appears to be picking up some slack and is not as tight as it once was in Washington State. However, it still needs more catching up to do to keep up with demand in the state.
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 2020: 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 2020, 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.
The bottom line: Home prices in Washington State might rise more slowly in 202, 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.
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