September 28, 2016

Seattle home prices up 11.2% in July

U.S. home prices rose again in July, pulled up by strong gains in Portland and Seattle.

Released on Tuesday, the Standard & Poor's CoreLogic Case-Shiller 20-city home price index showed that prices rose 12.4 percent in Portland and 11.2 percent in Seattle. Denver followed at 9.4 percent.

Peter Orser, director of the UW's Runstad Center for Real Estate Studies, said it is not surprising that Portland and Seattle again lead the price index. Given the high levels of job growth and housing demand in the two cities, “It's normal.”

But Orser cautioned that there is a downside. “Anything over 10 percent is superheated in my mind. There's a good side and a bad side to all this. The [housing] supply is not keeping up with demand. The implication is, we're not building enough places to live.”

“Both the Seattle and Portland regions operate under growth management,” he said. At the same time, both metro hubs are what he calls “magnets,” meaning they have marquee employers like Amazon here and Nike in Portland, as well as new tech startups and creative concerns that attract millennial workers.

In the years ahead, said Orser, “I think we're looking about double digits for a while to come. Are we headed to a bubble? I don't think so.” But eventually, he said, “There will be a correction.”

Nationally, The Associated Press reports that the 20-city price index rose 5 percent in July from a year earlier after increasing 5.1 percent in June.

The latest report is further evidence that prices are being pushed higher by the limited inventory of homes on the market. That is hurting sales of both new and existing homes, despite buyer enthusiasm and historically low mortgage rates.

“With inventory still very tight, the pressure on home prices is all to the upside,” Ian Shepherdson, chief economist at Pantheon Macroeconomics, wrote in a research note.

The Commerce Department reported Monday that new home sales fell 7.6 percent in August. And the National Association of Realtors said last week that sales of existing homes slipped 0.9 percent in August. Inventory collapsed 10.1 percent from a year ago to 2.04 million homes.

Price gains were more modest outside the Northwest. They rose just 1.7 percent in New York, 3.7 percent in Chicago and 5.5 percent in Los Angeles.

The 20-city price index plunged after the housing bubble started to burst in 2006, plummeting by more than a third before hitting bottom in March 2012. Since then, prices are up 42.4 percent. But they remain 7.6 percent below the peak reached in July 2006.

This report contains material from The Associated Press.