The West Coast has had one of the hottest real estate markets in the country over the last five to eight years, with Denver, San Francisco, San Jose, Los Angeles, and Seattle led the way in home price appreciation.
However, the market has recently shifted and ultimately moved in the opposite direction with surging inventory, increased lending limits, and falling home prices, have triggered a possible housing market top.
The rapid deterioration in the housing industry is the most evident in King County, Washington, home to Seattle and the 13th-most populous region in the US. Home prices in the area have just recorded one of the most significant drops ever in the last six months.
King County’s median single-family home price plunged to $644,000 in November, all the way from $726,000 in early spring, according to a new report from Northwest Multiple Listing Service.
Mike Rosenberg, a Seattle Times real estate reporter, said Seattle home prices are falling at the fastest clip than anywhere in the country.
The plunge in prices equals about 11.3% over the last six months, and the last time a drop of this magnitude occurred, it was -14% during the housing bubble implosion of 2008.
Active inventory jumped 135% in the county from a year ago. The number of single-family homes more than doubled from 2017, rising from 1,879 to 4,020, while condos more than tripled, jumping from 355 active listings twelve months ago to October’s total of 1,221.
For condos, a sharp rise in inventory has sent prices lower by $61,000 from spring levels.
Sales have also collapsed, down 19% in the last 12 months. It was the second consecutive quarter that fewer people bought homes.
“It’s a little bit of a herd mentality,” Sabrina Booth, a Windermere broker in Seattle, told The Seattle Times, adding that “buyers were rushing to outdo each other by engaging in frantic bidding wars and signing away rights like inspection clauses. Now, they’re often taking their time, negotiating prices down and getting sellers to pay for fixes to their homes.”
“Sellers are now more receptive to that,” Booth said. “They’re not happy about it. They feel just a little bit disappointed, and they feel their house will be the exception to the rule. But when that doesn’t happen they tend to be realistic and understand that the market has changed a bit.”
Compared to a year ago, home prices are up 2.1% in King County, as it was the smallest increase in over four years.
Just a few short years ago, the average year-over-year growth was pushing more than 10%. That has since come to a screeching halt.
Home prices in several Seattle neighborhoods have just entered into negative territory versus a year ago. Among these were Southeast Seattle, Sodo/Beacon Hill, the Capitol Hill/Central Seattle area, Queen Anne/Magnolia, the Ballard/Green Lake area and downtown, said The Seattle TImes.
Also, East Bellevue, the Eastside area south of Interstate 90, Richmond Beach-Shoreline, Jovita-West Hill Auburn and Renton-Highlands & Kennydale are other places where prices have contracted on a year-over-year basis in November.
“When compared to the peak spring period, median prices have fallen more than $100,000 in the Capitol Hill/Central Seattle area, Queen Anne/Magnolia, Richmond Beach-Shoreline, the Eastside south of I-90, East Bellevue and Redmond-Carnation.
The median price of a home in November hit $760,000 in Seattle and $885,000 on the Eastside, both down about $70,000 to $75,000 from their spring highs,” said The Seattle Times.
The recent slowdown has done very little to correct the affordability crisis, making the area still one of the priciest places in the country. In other words, many millennials are still priced out of the market and will not enter until prices come down significantly lower.
Prices have climbed 109% since reaching a trough in 2012. That is down from a peak six-year rise of 136% achieved in May.
There is an overwhelming consensus among brokers that the slowdown is temporary and could be blamed on seasonal trends.
“In absolute dollar terms, although not percentage-wise, the $82,000 price drop in King County over the last six months is easily the most ever for any half-year span, a function of how high prices have gotten,” said The Seattle Times.
From October to November, prices decreased $27,000, which is not a seasonal trend, due to this time of year prices remain flat. So, it might be wishful thinking that realtors think declining prices are seasonal, but instead, the entire industry reversing.
The cool-down is also starting to spread to the rest of the Puget Sound region, Snohomish County, and Kitsap County — inventory is way up, and sales are down.
An American housing bust is fully underway.