King County home prices grew 8.3 percent in December compared with a year ago, still among the highest in the nation but the slowest growth of any month in 2016.
Last year was the priciest year ever for Seattle-area real estate, although home-price gains have started to slow slightly and most experts think the biggest increases might be behind us.
Yet there is already an ominous sign heading into the new year: a record low number of houses for sale, which could heat up competition for homes even more.
King County had only about 1,600 single-family houses on the market in December, the fewest since records began in 2000, according to data released Thursday by the Northwest Multiple Listing Service. The vast majority of those are in the suburbs.
The number of homes for sale has now dropped in five of the last six years, and the total decline has been massive. At the end of 2010, the county had 7,400 houses on the market — four times more homes than are available today.
“It’s still going to remain very slim pickings,” said Mike Grady, president and chief operating officer of Coldwell Banker Bain. “I’d like to tell you we’ve reached rock bottom, but I can’t.”
Unlike the rental market, which is seeing a historic boom of new apartment units, there are virtually no new single-family homes getting built in Seattle, and few in the suburbs, as the region becomes denser.
That leaves an ever-rising population to compete over the same stock of houses — already, about three-fourths of homes in the region attract bidding wars, driving prices higher. But now, the situation has worsened as many would-be home sellers are holding onto their houses because they fear they’ll blow their profits having to buy an expensive new home.
And the homes that do go on the market typically get snapped up quickly. Grady’s daughter, a broker at his firm, sold an older house in south Bellevue a couple of weeks ago that was listed for $625,000. It got 23 offers in 24 hours, and sold for $825,000.
“And that’s a stereotypical story of what happens,” he said. “It’s gone in a nanosecond.”
That’s because the demand for homes remains so strong: The Puget Sound region had more homes sold in 2016 than in any other year, surpassing the old record from 2005, according to John L. Scott Real Estate.
Competition for homes is lowest in the winter, however, and there is still plenty of time for inventory to rebound before homebuying season heats back up.
Forecast for 2017
Because local economic growth is expected to slow somewhat next year, home-price increases might not be as steep as last year.
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Most local market watchers expect home prices to rise about 7 to 8 percent this year, instead of last year’s 10 to 12 percent. Those estimates, made late last year, generally depend on the number of homes for sale rebounding from current historic lows, however.
Home prices are already rising faster in the Seattle metro area than in any other large region in the country, according to the Case-Shiller home price index. And Zillow on Thursday said it expects Greater Seattle to have the third-fastest home-price growth in the country in 2017, just behind Stockton, Calif., and Orlando, Fla., and slightly ahead of Portland.
Still, the rise in home prices has slowed since the explosive gains seen last spring.
In December, King County home costs rose 8.3 percent compared with a year prior, the slowest annual growth of any month in 2016, the new data shows. The $550,000 median home price was unchanged from the prior two months.
The story in Seattle was mixed: The median price of $635,000 was the highest since the summer. But home prices in the city rose just 5.8 percent from a year prior, down from double-digit growth earlier in the year.
“Even with the job growth and the income growth, at some point, it can’t continue. Something bends at some point,” said Mark Gray, the Washington-area president for Shea Homes. “There’s a natural tendency for (housing-price growth) to slow, but not greatly. We’ll continue to see this market be near the top of the list across the country.”
In Kitsap County, home values were up 5 percent compared with a year ago, standing now at nearly $284,000.
But prices increased faster in Snohomish County (up 11.7 percent vs. a year ago, to a median price of about $400,000) and in Pierce County (up 12.9 percent to $285,000).
For condos, the cost escalation continues to outpace that of single-family homes, as buyers search for more-affordable options. King County condos cost $314,000, or 12.2 percent more than a year ago, the 12th straight month of double-digit price increases.
While Seattle is pretty much tapped out for new single-family-home sites, Gray forecasts a rise in new house construction in the suburbs across the greater Puget Sound region in 2017. That could help with the low supply of housing in outlying areas.
Rising mortgage rates
Another big factor for the housing market is rising mortgage rates, which mean many new buyers should see their total costs soar even more.
Even if home prices rise “only” 8 percent next year, as some experts predict, the average buyer’s total costs over a 30-year mortgage would soar 15 percent compared with a year ago because of the recent increase in interest rates.
Put another way: Because of the higher interest rates, the average buyer now must cut their home purchase price by $37,000 to still afford the overall mortgage, according to George Moorhead, the designated broker at Bentley Properties.
But after a surge in home sales in November, which brokers attributed to the rush to avoid interest rates rising even higher, sales activity slowed in December to levels that were only moderately above what the market saw at this time last year.