Seattle’s housing market started the new year with a milestone: Housing prices here have been growing at the second-fastest rate in the nation for a full year.
For the 12th month in a row, only Phoenix outpaced the Seattle area for year-over-year home price growth in January, according to the S&P CoreLogic Case-Shiller Home Price Index released Tuesday. The index measures price growth in 20 metro areas, reports a three-month rolling average of home prices and lags by two months. The data reflects prices across the Seattle metro area, including parts of King, Pierce and Snohomish counties.
Seattle-area home prices were up 14.3% in January, compared to a year earlier. That was slightly slower than growth in Phoenix, where prices jumped 15.8%, and just barely faster than San Diego, where prices were up 14.2%.
Across the country, prices are climbing faster than they have in more than a decade. The nationwide 11.2% year-over-year increase in January was the highest recorded since nearly 15 years ago, in February 2006, according to Craig Lazzara, managing director and global head of index investment strategy at S&P Dow Jones Indices.
A “collision between robust demand and rock-bottom inventory” is driving prices up, Zillow senior economist Jeff Tucker said in a statement.
Seattle prices zoomed up faster at the start of this year than at the peak of 2018’s brutal spring housing market, when prices were up 13.5% in May 2018 compared with the previous year, according to the index.
The index continues to show that prices are rising most steeply on the most affordable homes in the Puget Sound region. The cost for homes under $496,165, the least expensive one-third of homes sold, was up roughly 17% year-over-year in January compared to about 13% for the top third, homes over $741,250.
Across King, Pierce and Snohomish counties, Pierce County continues to see the most dramatic price hikes, according to separate January data provided by Zillow. Prices were up 19.2% in Parkland compared to last year, 17.5% in Tacoma and 16.9% in Spanaway.
Pricier areas like Seattle and Mercer Island saw slower growth. The cost of homes was up 8.7% in Seattle and 7.2% in Mercer Island, according to Zillow. Other outlying towns, like Bothell, Kent and Lynnwood, were in the middle of the pack, with prices up about 13%.
Across the country, the increasingly unaffordable market “will discourage some potential home buyers from entering the market,” said CoreLogic Deputy Chief Economist Selma Hepp in a statement.
But that could also “take some wind out of its sails, slowing the home price growth rate by about a half by the end of 2021,” Hepp predicted. “The biggest concern remains the lack of for-sale homes. Potential sellers may be discouraged by their inability to find a new home and subsequently choose to not list their own home – leading to a vicious cycle of declining for-sale homes.”