It probably won’t come as a surprise to those who are house hunting in the Pacific Northwest that homes have become extremely difficult to afford.
Prices of homes, especially in the Northwest, continue to soar while incomes fail to keep up. At the end of July 2017, 46% of the top 50 housing markets were considered “overvalued” according to the financial data experts at CoreLogic.
So, what’s to blame? A record-low supply of homes for sale keeps driving prices upward. So much so, that the supply at the end of July 2017, was 9% lower compared to July 2016 and has been shrinking steadily for nearly three years, according to the National Association of Realtors.
“Home prices in July continued to rise at a solid pace with no signs of slowing down,” said Frank Martell, president and CEO of CoreLogic. “The combination of steadily rising purchase demand along with very tight inventory of unsold homes should keep upward pressure on home prices for the remainder of this year. While mortgage interest rates remain low, affordability cracks are emerging.”
As expected, appreciation has been the strongest in the Pacific Northwest, where the tech industry has migrated and continued to boom, thanks to Northern California (Silicon Valley) housing becoming too expensive.” The sharp increase in prices in Washington State has been especially striking, with home price growth accelerating by 3% since the beginning of this year,” said Frank Nothaft, chief economist at CoreLogic.
Even Las Vegas, where homes lost more than half their value during the housing crash of 2008, is now considered overvalued. Washington, D.C. and Miami, among others, are also on the list.
Home sales have been declining throughout the summer, as demand far outweighs supply and affordability diminishes. Even the Realtors’ chief economist, Lawrence Yun, gave a pessimistic prediction, stating, “sales in coming months will not break out unless supply miraculously improves. This seems unlikely given the inadequate pace of housing starts in recent months and the lack of interest from real estate investors looking to sell.”
Yet, buyer demand continues to soar. In fact, Redfin, the Northwest real estate brokerage, reported 35% more requests for home tours in July of this year, compared to July of 2016. It also, however, reported that the number of offers dropped 11%. “Buyer demand has been stronger so far in 2017 than last year, but the combination of low inventory and rising home prices is taking its toll heading into the fall,” said Nela Richardson, chief economist at Redfin. “Sellers are still in control of the market, but their advantage is narrowing as buyers are becoming less willing or able to chase escalating prices.”
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