SEATTLE – As the Seattle area continues its run as the nation’s hottest real estate market, it has now seen home prices surge upward for a full six years – with more growth in home values during the current boom than during past decade’s bubble.
Single-family home costs across the metro area grew 12.7 percent in February from a year earlier, the biggest increase in the nation for the 18th month in a row, according to the monthly Case-Shiller home price index, released last week. The report marked six years since home values bottomed out in February 2012. Since then, values have increased 85 percent – nearly triple the region’s historical average for a typical six-year span. Only San Francisco and Las Vegas had bigger gains during that period.
Even during the housing bubble last decade, prices didn’t rise this much. In the six years leading up to the peak of the bubble in 2007, Seattle-area prices grew a total of 73 percent before the bubble burst.
(During the bubble, home prices rocketed up quickly – fueled by lax and sometimes fraudulent mortgage lending that sowed the seeds for the Great Recession – but the peak surge only lasted a few years; this time, the growth has been steadier and keeps going and going.)
The recent boom locally has completely wiped out the effects of the recession on the housing market, when prices sank.
Local home values are now a bit higher than they were at the height of the bubble in 2007, even after accounting for inflation since then. In other words, if the recession had never happened and prices had just grown at the rate of inflation since 2007, homes would actually be cheaper now than they are today.
Only Denver and Dallas have had price growth greater than Seattle’s since the old 2007 high.
There are no clear signs that we’re in another bubble. At the least, the elements that created last decade’s housing collapse – like homebuyers getting mortgages they couldn’t afford and rampant subprime lending – aren’t present this time around. The number of people defaulting on their mortgages locally is minuscule, for instance, and lenders are only issuing mortgages to people with good credit scores and financial assets.
A recession or other unexpected development – like a collapse at Amazon a la the Boeing bust of the 1970s – could change that, of course.
But for now the real-estate market shows no signs of slowing down amid record low supply of homes for sale and strong demand for homeownership. The Case-Shiller report noted that the Seattle metro area had the biggest job growth in the past year among the 20 regions covered in the report.
Compared with a month prior, home values increased 1.7 percent, according to the Case-Shiller data. The last time prices went up that much in a month was last summer.
The month-over-month growth also led the country, and was quadruple the national increase.
Seattle’s home-price increase of 12.7 percent, compared with a year earlier, was similar to the last several months and was again more than double the national rate of 6.3 percent.
Las Vegas again had the second-biggest home-price jump, and continues to heat up, with prices up 11.6 percent. San Francisco was close behind, followed by Denver, Detroit and Los Angeles.
Seattle home costs have grown more than 10 percent, year-over-year, for 26 months in a row. That’s pushed the median cost of a single-family house to $820,000 in Seattle and $926,000 on the Eastside. Even more affordable areas have recently hit record prices: $485,000 in Snohomish County, $350,000 in Pierce County and $341,000 in Kitsap County.
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