For the second straight month, Seattle home prices grew faster than any other major metro region in the country.
That’s according to data from the S&P CoreLogic Case-Shiller National Index, a leading indicator of home price gains. According to the October report, Seattle experienced a 10.7 percent year-over-year price increase, followed by Portland at 10.3 percent and Denver at 8.4 percent.
Seattle home prices grew 11 percent in September, earning the region the title of the nation’s hottest housing market for the first time in years.
Seattle’s growth, nearly double the national increase, is driven largely by the booming technology industry. The region’s tech giants like Amazon and Microsoft have been aggressively hiring in recent years, drawing large numbers of high-paid tech workers who can afford more expensive homes.
There are also now more than 80 engineering centers in the Seattle area operated by big tech corporations, like Facebook, Alibaba, eBay and others. These companies have set up shop in the Northwest to mine the region’s pool of tech talent. This kind of employment growth is a key factor in driving up home prices.
“Cities that have stable or better yet growing employment tend to do well and, for most of this year, the Pacific Northwest region is consistently very popular,” said David Blitzer, Managing Director and Chairman of the Index Committee. “One month Seattle is ahead of Portland and the next month it reverses.”
Does this kind of growth portend a bubble bursting? Not exactly, says Blitzer. But it’s not sustainable.
“I don’t think price gains of eight, 10, 12 percent at annual rates can be sustained over the long haul,” he said. “If a bubble means all of the sudden it’s going to crash down, no I don’t think it’s a bubble. But to have home prices go up — the last 12 months in our data 10.7 percent a year — to have them go up at that rate for several years means they’re growing much faster than inflation, so home prices are looking bigger and bigger compared to just about anything else. They’re growing much faster than incomes, which is clearly a key factor.”
The S&P Case-Shiller Index reported a 5.6 percent increase in national home prices between Oct. 2015 and 2016. That’s up 5.4 percent from September’s year-over-year prices, despite a typical cooling period in the housing market during holidays.
The national index saw a 0.2 percent increase between September and October. When adjusted for the typical seasonal lull in the market, the S&P CoreLogic Case-Shiller Index reported a 0.9 percent month-over-month increase.
Right now, national home values are growing faster than incomes and inflation. Blitzer expects that price growth to slow a bit in 2017.
“Price increases are going to slow down and revert back to something that’s comparable to the way the overall economy is growing, which is probably about three, four percent,” he said. “A whole lot lower than 10.7. So I’m not predicting a crash but if somebody thinks their home is going to appreciate by 11 percent a year for the next 15 years, I’m not going to take that bet.”