For 14 straight months, Seattle has dominated the national real estate market as the hottest in the country. There are many factors that impact this rating, from average home prices to the level of demand in the market. Although Seattle remains a popular and expensive place for potential homeowners, there are some signs that this current number-one position could soon be claimed by another city, perhaps Las Vegas, Nevada, which currently holds the number-two spot.
Single-family homes around the Seattle area are in incredibly high demand. In fact, that demand extends well beyond the city proper, with King, Snohomish and Pierce counties all experiencing substantial price boosts. Looking at the average selling price of a home in any of these three counties in October of 2017 compared to the previous year shows a price increase of 12.7 percent. That's an impressive growth rate, especially when you look at the national average increase in home value over the same period, which, at 6.2 percent, was less than half of the growth rate in the Seattle region.
Low Supply and High Demand Combine for a Hot Market
In many major cities with rapid home value increases in the past, the expansion was part of a real estate bubble that eventually burst. This led homeowners to see a sudden decrease in home values, creating strain on the local economy. While there are signs that growth could slow in the Seattle real estate market, a collapse of prices is highly unlikely.
After all, there are a finite number of housing units within a reasonable commute of Seattle. When looking at Seattle proper, there's an even stricter limit. Even if prices increase and demand slows, homeowners could very well continue to see slow, gradual gains in property values across the region.
Expect the Local Market to Cool, Not Burst
It's quite possible that Seattle's current real estate market has passed its hottest point. Over the fall season of 2017, home price increases reached as high as 13.5 percent. The 12.7 percent from October is indicative of nearly a full percentage point drop. Thankfully for area homeowners, if the current market maintains most of its demand, prices will likely continue to grow at a double-digit rate for at least the first two quarters of 2018.
After all, the local economy is strong. There are great-paying jobs and powerful businesses all over the Seattle area, which bring many professionals into the region who need housing. There is also the issue of very limited new unit development. New development isn't keeping up with housing demand, and so area property owners often find their homes the subject of a bidding war when they go onto the market for sale.
The good news is that a slight cooling of home price increases could lead more Seattle homeowners to consider selling. While higher prices can incentivize sales, it can also leave would-be sellers nervous about the ability to find a new home after they sell. As the rate of price increases drops off slightly, more people may feel willing to wade out into the Seattle real estate market as sellers and, later, buyers.