THE BUYER'S GUIDE TO OVERCOMING SEATTLE'S HOUSING SHORTAGE
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THE BUYER’S GUIDE TO OVERCOMING SEATTLE’S HOUSING SHORTAGE
Whether you’re a first-time buyer new to the region, or a lifelong resident
and seasoned homeowner, Seattle’s bustling housing market can be a
challenge to navigate. This guide gives potential buyers an overview of the
Seattle-area market, including the current state of inventory, the forecast
for 2019-2020, a rundown of the most and least affordable areas within the
Seattle Metro, and tips for buyers in one of the nation’s most competitive
housing markets.
TABLE OF
CONTENTS
Seattle Home Price Forecast Suggests Modest Decline Through 2020 1-4
Report: Seattle Housing Market Inventory Still Tight in 2019 5 -8
Seattle Real Estate Outlook for 2019 and Beyond 9 -11
Most Affordable Housing Markets in Seattle Metro Area 12-15
SEATTLE HOME PRICE FORECAST SUGGESTS
MODEST DECLINE THROUGH 2020
A recent forecast for Seattle home prices suggests that house-value decreases could be in the
low single digit range. One source predicts a decline of around 3.8% between now and May
2020. Due to limited inventory, competition among buyers remains high.
The Latest Home-Price Forecasts for Seattle
Home prices in the Seattle metro area have risen steadily in recent years, usually outpacing the
national average. House values in the city, and across much of Washington State, have risen
by double digits a few years back. But a recent Seattle home price forecast offered a different
picture, suggesting that house values could drop slightly over the course of the next 12 months.
According to this same source, house values have declined by 4.5% over the most recent 12
month period.
This month, the economists at Zillow predicted that home prices in Seattle would drop by 3.8%
between May 2019 and May 2020. That’s a big change from the double-digit annual gains seen
in previous years. But it’s a phenomenon predicted by basic economics. If an area experiences
larger than average gains, this tends to be counteracted by slow downs and declines.
1
Zillow’s forecast for Seattle home prices is quite a
bit lower than for the nation as a whole. The
company’s research team expects house values
nationwide to rise by 2.5% during the same 12-
month period mentioned above.
Of course, this is just one forecast. Other analysts
have predicted slower rates of decline. But the
general consensus appears to be that there will be
a small depreciation in the coming months.
There is evidence for this trend in other sources
beyond Zillow. Earlier this month in July 2019, the
Northwest Multiple Listing Service reported that
King County has seen a dip in year-over-year
prices, and that transactional activity was down.
This is contrasted with the experience of recent
previous years in which growth was phenomenal.
2
1
One of the Most Competitive Housing Markets
While the latest home price forecasts for Seattle suggest a
small drop in median values, the market itself is still pretty
hot. This is largely the result of limited inventory. There just
aren’t enough homes listed for sale in the area to satisfy
demand, and this continues to put upward pressure on
house values.
According to a recent news release from the real estate
brokerage Redfin, Tacoma is actually the hottest market in
the country right now, and this is mainly due to migration by
priced-out buyers from the Seattle market. Seattle's small
price declines are consistent with this southward search for
lower prices. But, Seattle is still a fairly competitive market.
To quote the Redfin report: “In Seattle, 13 percent of Redfin
offers for the four weeks ending on May 12, 2019 were part
of a bidding war, down from 71 percent a year ago.” So, the
bidding war percentage is down, but it's still considerable.
So buyers who are planning to enter the market in 2019
should be prepared to act quickly when the right house
comes along. Our Seattle home buying survival guide will
help you get ready.
3
DISCLAIMER:
This article contains Seattle home price forecasts for 2019 and 2020.
These predictions were offered by third parties not associated with our
company. We have presented them here as part of our educational
mission in support of homeowners and home buyers.
4
REPORT: SEATTLE HOUSING MARKET
INVENTORY STILL TIGHT IN 2019
We’ve written before about the tight inventory conditions in Seattle’s housing market. As we
noted, Seattle was one of the top three real estate trends we identified back in 2017. Now, a
new report reveals that the Seattle area has experienced a bit of inventory growth from Q1
2018 to Q1 2019. A report published In May 2019 by the real estate information company
Trulia included Seattle in a list of cities which had experienced substantial inventory increases.
Other cities which were also mentioned were Provo, Salt Lake City, and San Jose (CA), among
others. The number of homes for sale in Seattle increased by 40.6% between the 12 month
period referenced in the report (Q1 2018 to Q1 2019).
Largest Year-Over-Year Listing Increases, Q1 2018 – Q1 2019
Here are the five housing markets with the largest YOY increases in inventory from Q1 2018 to
Q1 2019. The percentages shown by each city indicate how inventory (the number of homes
for sale) has changed during this period.
5
San Jose, CA: 55.4% The report also noted that significant increases to
inventory did not necessarily translate into greater
affordability. Many of these inventory gains were
reported in the most expensive markets. And so these
inventory gains may have improved conditions to some
Provo, UT: 53.3%
degree, but they didn't necessarily have an extremely
high impact.
According to the authors: “The 10 markets with the
Seattle, WA: 40.6% largest gains in inventory are also among the nation’s
most-expensive housing markets, including the San
Francisco Bay Area, Seattle, Los Angeles and San
Diego. But even in these markets, dramatic increases in
inventory – especially among starter homes – have yet
Salt Lake City, UT: 37.3% to stem the tide of declining affordability.”
Seattle’s real estate market inventory growth is notable,
but in some ways this is a counterbalance to reductions
in previous years. And the market will still be relatively
Ogden, UT: 31.7%
tight when compared with other markets. Buyers should
still expect a reasonably high level of competition,
despite the sizable increases to inventory seen during
the YOY period referenced in the Trulia report.
6
According to Trulia, Seattle has also seen As the report states: "... a closer look at local
an increase in its "starter home" inventory. inventory trends reveals that the markets with
The report states that the starter home the greatest growth in inventory are also
inventory increased by 14.4% during the markets where prices have rapidly risen to
YOY period from Q1 2018 to Q! 2019. The notoriously high levels and supply has been
median listing price for a starter home in severely constrained over the past few years.
Seattle was $309,000 (2019). This is good This rapid appreciation has caused affordability
news for first time home buyers in the to deteriorate more quickly in these areas, and
Seattle region who are looking for the nascent rise in inventory may actually reflect
something relatively more affordable. an exhaustion of demand in these communities,
However, the Trulia report cautions that more than it reflects a greater number of sellers
inventory gains don't necessarily mean a listing their homes."
less competitive market overall.
7
Tips for Buying a House in a Tight Market
Even with the gains seen recently, inventory is still tight in Seattle’s real
estate market, so home buyers need to bring their ‘A’ game.
Competition is high, especially for desirable properties in popular areas.
But there are things you can do to improve your chances for success.
● For starters, check out our Seattle home buyer’s survival guide. It
offers a wealth of tips for succeeding in this hot market. CONTACT US:
● Getting pre-approved for a mortgage loan before house hunting If you need a mortgage
will give you a leg up in the market. Sellers will be more likely to loan to buy a home in
accept your offer if it comes with a pre-approval letter. Seattle, please let us
know. We can help you
● Narrowing your home search will increase your efficiency, thereby prepare for this hot
improving your chances for finding a suitable property. Research housing market by getting
the market ahead of time, with an eye of recent sales prices. Limit pre-approved for a loan.
your search to the kinds of properties you can realistically afford, Contact our staff with any
based on your pre-approval and/or personal budget. Don’t waste mortgage-related
time shopping above your price range. questions you have.
● Quibbling with the seller over “nickels and dimes” or minor
inspection issues could cause the home to slip through your
fingers. You can bet there are other buyers waiting in the wings.
So when you find a realistically priced property that meets most of
your needs, seize the day!
8This is an update to the Seattle
real estate outlook we published
SEATTLE REAL ESTATE OUTLOOK back in 2017. It takes a fresh
FOR 2019 AND BEYOND look at housing market trends in
the Seattle metro area, with an
outlook through 2019 and
beyond.
A Real Estate Market to Watch in 2019
In early 2019, Zillow came out with a report which listed the top 10 hottest markets in the country.
Seattle was notably absent from the list. Zillow noted that Seattle's growth had slowed down
considerably, while other cities have shown impressive growth in median values during the most
recent 12 month period. Seattle is still a competitive market, but the recent drop in values is an
expected counterbalance to the explosive gains seen in previous years.
Seattle Growth Has Gone Flat According to Index
According to the most recent S&P/Case-Shiller Home Price Index, published on June 25, 2019,
Seattle experienced no growth whatsoever during the YOY period referenced in the publication,
April 2018 to April 2019 (the latest data available at the time of publication. This was the slowest
rate of growth among all metro areas included in the report; every other metro area reported at
least some amount of positive gain.
9The June 2019 Case-Shiller report stated: “Las Vegas,
Phoenix and Tampa reported the highest year-over-year
gains among the 20 cities. In April, Las Vegas led the way
with a 7.1% year-over-year price increase, followed by
Phoenix with a 6.0% increase, and Tampa with a 5.6%
increase. Nine of the 20 cities reported greater price
increases in the year ending April 2019 versus the year
ending March 2019.”
Seattle's situation was pointed out specifically in the
report. The report noted the contrast between Seattle's
double digit gains in prior years to the current rate. As it
stated: "Year-over-year price gains remain positive in
most cities, though at diminishing rates of change. Seattle
is a notable exception, where the YOY change has
decreased from 13.1% in April 2018 to 0.0% in April
2019."
What to Expect
Electronic
The real estateapplications
outlook for Seattle in 2019 and beyond can
be summed with a single sentence: Home prices will
most likely decline through the end of this year, but at a
slower pace than what we saw during 2018.
10The economists at Zillow, for example, recently put forth a projection of deterioration for the Seattle
real estate market. They expect house prices in the area to drop by around 3.8% between May 2019
and May 2020. This rate of decline is a bit lower than what we saw last year, when prices dropped
by 4.5%. Over the last couple of decades, home prices in the U.S. have risen by around 3% per year
on average. So Zillow's outlook shows Seattle to be quite a bit down by comparison, but things must
be viewed in context. Seattle showed huge gains in previous years, and so current trends are
balancing out those abnormal gains of yesteryear.
Population Growth Begins to Slow Down a Bit
Population growth has a lot do with all of this. Seattle is a great city that attracts new residents from
all over the country. This brings more home buyers into the real estate market, boosting demand and
prices. Population growth contributed to the huge increases we saw before, but things are slowing
down now to create a more balanced situation.
What's more, population growth has actually slowed recently as well. According to a recent Seattle
Times article published in April 2019, Seattle's recent population statistics show a slowing down of
growth in the King County area. To quote the article: "Population data released Thursday by the
Census Bureau shows that, for the first time this decade, more people left King County than moved
here from within the U.S." Of course, international migration complicates this picture. But, in general,
population growth has slowed, and this is in part a response to the housing situation in King County.
11MOST AFFORDABLE HOUSING MARKETS
IN SEATTLE METRO AREA
There is still good news for first-time buyers who may be intimidated by Seattle’s rising median
housing price: There are pockets of relative affordability in the area. A report from the chief
economist at Zillow back in 2017 highlighted the five most affordable cities in the Seattle
metropolitan area, relative to the median income. These data are from 2017, mind you, but this
information will still be useful for buyers today. If you're needing to look beyond Seattle proper for
price reasons, you should consider one of these other areas.
Most Affordable Cities in the Seattle Area
Though high demand and limited inventory have forced home buyers to compete fiercely, especially
in the more sought-after areas, there are more affordable options for people who want to buy a
home in the Seattle metro area. The key is to be willing to look just outside of the city itself.
The chief economist for Zillow prepared a report in February 2017 for Seattle NBC affiliate King 5
News. It listed five of the most affordable cities and housing markets in the Seattle area, based on
the percentage of income that goes toward housing costs in each area.
12ZILLOW’S ECONOMIC RESEARCH
team looked at the median income for various cities in the Puget
Sound area, and compared that to median home values.
13In the city of Seattle, at the time of
When this article was published, in February 2017, the
this reesearch people were
median home price in Marysville, Washington was
spending about 25% of their income
$308,000. In Seattle, it was $604,000 at the same time.
on housing. Here are five more
That goes to show how much more affordable housing
affordable cities in the metro area,
becomes when you drive a little further north (in this case).
along with the percentage of
With a median home price of around $244,000, Tacoma is
income needed to cover mortgage
another affordable option for those who want to live in the
and housing costs:
area but have concerns about the financial feasibility. The
other three cities above came in somewhere between
Marysville: 16.2% $300,000 and $350,000.
The Most Expensive Housing Markets
Tacoma: 17.4% On the other end of the spectrum, the least affordable city in
the Seattle area was Bellevue, Washington. People there
spend nearly 30% of their income to cover their mortgage
and housing-related expenses. In Bellevue, the median
Auburn: 17.8% home price was $638,900. The median income in that city is
$98,804.
Other cities that were more expensive relative to income
Kent: 19.5% included Seattle (of course), Everett, Renton, and Kirkland.
“Seattle is certainly a very hot housing market right now,”
said Dr. Svenja Gudell, Chief Economist for Zillow. “We’re
seeing a lot of demand, a lot of newcomers to the area and
Federal Way: 20.1% as that continues, we’ll see even more of these outlying
communities start to heat up a bit and get more expensive.”
14FINAL THOUGHTS
FOR BUYERS
Because Seattle is a wonderful and vibrant place to live, expect competition for the house of
your dreams. Sammamish Mortgage has over 25 years of experience helping home buyers
navigate this market, and we would love to help you get into your perfect Seattle-area home.
Give us a call at 800-304-6803 to get started with an expert today. We offer highly competitive
rates on a variety of loan products. Please contact us with any questions you have, or to receive
a rate quote.
PLEASE CONTACT US TODAY
WITH ANY QUESTIONS YOU
HAVE, OR TO APPLY FOR THE
VA LOAN PROGRAM.
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