The last time home prices locally rose this fast was 11 years ago, right before home values cratered — and now Seattle has joined a list of expensive areas getting less attractive for overseas buyers.
Seattle’s real-estate market, already the hottest in the country, is now seeing prices rise faster than at any point since the housing bubble last decade — and even some wealthy foreign buyers are apparently starting to get priced out.
Single-family-home prices across Greater Seattle rose 13.3 percent in May compared to a year ago, easily the most in the country for the ninth straight month, according to the monthly Case-Shiller home price index, released Tuesday.
It marks the most rapid housing-price increase here since 2006, when home values were rising at an unsustainably brisk pace — up to nearly 19 percent growth — before dropping during the recession. The previous high-water mark in the current boom came in fall 2013, when home values soared 13.2 percent.
Fastest-rising home prices compared with a year ago
1. Seattle +13.3%
2. Portland +8.9%
3. Denver +7.9%
4. Dallas +7.8%
5. Detroit +7.6%
Source: Case-Shiller home price index
The price hikes also surpass anything Seattle saw during the 1990s or early 2000s (Case-Shiller’s data began in 1990).
The market isn’t just hot by Seattle standards: No region in the country has had prices soar this fast in the past three years. The last metro area to get this heated was San Francisco, where home costs soared more than 20 percent in 2013 and 2014.
The next-hottest market in May was again Portland, with home prices increasing 8.9 percent from a year ago; nationally, growth was 5.6 percent.
For the past few years, a small but growing portion of homebuyers had been coming from overseas, especially from China — targeting mostly upscale homes, and often paying cash, sometimes sight unseen.
Interest soared last year, after British Columbia enacted a tax on foreign buyers in the Vancouver area. At one point after that tax took effect, Seattle was the No. 1 American city for inquiries from Chinese homebuyers, according to Juwai.com, which helps people in China buy homes abroad.
But now, a new annual survey from the National Association of Realtors shows foreign home sales across Washington state dropped to $1.55 billion for the year ending in March, down 24 percent, from $2.05 billion, in the previous year. Washington fell out of the top 10 states attracting foreign homebuyers.
What’s more, Juwai’s latest data show a 10 percent drop in inquiries from China for homes in Seattle, compared to a year ago. Buyers living in mainland China make up about one-third of overseas buyers in Washington, according to the Realtors group.
The drop in interest locally is especially striking because the Realtors group reported foreign home sales across the country are up significantly in the past year and have reached record levels.
But foreign buyers are increasingly concentrating their money in cheaper markets. The Realtors group said that in addition to Washington, other pricey states like California, New York and Illinois have seen decreases in foreign homebuyers this year, while the biggest increases were in more affordable states like Texas and Arizona.
Seattle-area home prices have roughly doubled in the last five years and have grown twice as fast as the national average since 2016, according to the Case-Shiller data. As a result, the region has lost some of its price advantage over other Pacific coast markets that attract a lot of overseas money, like Vancouver, San Francisco and Los Angeles.
Foreign homebuyers have themselves contributed to rising prices in some ZIP codes here: Real-estate agents say foreign buyers are more likely to pay cash and bid up homes than other buyers. They also tend to eye luxury homes. In some parts of West Bellevue and along the Lake Washington waterfront, Realtors have reported that half or more of their business now comes from foreign homebuyers.
Juwai’s data show 38 percent of Seattle buyers from China purchase the home primarily as an investment. Some of those buyers might also live in their new home or allow family members to live there, but in other cases, they sit empty.
In Seattle City Hall, some officials have kicked around an idea to tax vacant property or foreign home purchases, but haven’t proposed anything, and it’s not clear that such a plan would be legal. The tax idea has also become an issue in the Seattle mayoral race.
Overseas buyers may have an outsized impact, but they still make up a small portion of sales. Statewide, they accounted for less than 4 percent of purchase value last year, based on the Realtor group’s survey and overall sales data compiled by the Northwest Multiple Listing Service. But the ratio is higher in places like Bellevue, local realtors say.
In reality, the exact magnitude of foreign investment isn’t clear, since buyers don’t report their country of residence. The Realtors’ report relies on feedback from about 6,000 agents from around the country who responded to this year’s survey, while Juwai tracks search data on its website. And data are even harder to come by for vacant homes.