Home prices climbing fastest in region’s most affordable spots
Despite a slowdown in sales over the past 12 months, home prices in King and Snohomish counties have risen — but by dramatically different amounts in different areas.
Seattle Times business reporter
National reports this week suggested the housing market was showing signs of weakness — but it all depends on where you live.
In the first quarter, the average price of single-family homes sold in King and Snohomish counties increased between 2 and 27 percent from a year ago, depending on the area, according to data from the Northwest Multiple Listing Service (MLS).
While average 12-month price appreciation in King County slowed to 11 percent at the end of March — from almost 15 percent a year ago — some lower-priced areas have seen average prices jump more than 20 percent annually.
They include affordable suburbs like Shoreline, Federal Way, Maple Valley and Burien.
For many neighborhoods devastated five years ago by an epidemic of foreclosures, the rebound in prices is long overdue. But for first-time homebuyers, the rapid run-up in prices, combined with rising interest rates, could be putting homeownership further out of reach.
“Most of King County, and particularly the city of Seattle, is not affordable for the median income earner,” said Stan Humphries, Zillow’s chief economist.
Despite a sharp slowdown in sales, during the first quarter all but one area in King County saw average prices appreciate on an annual basis.
The areas that experienced the most growth in average selling price were in Richmond Beach/Shoreline, Dash Point/Federal Way, Sodo/Beacon Hill, Des Moines/Redondo and Black Diamond/Maple Valley, according to the MLS data.
Homes sold in Enumclaw, Renton-Benson Hill, Skyway and Kent had the least annual gain — less than 5 percent. Vashon Island’s average price dropped 5 percent over the year, but there weren’t enough sales for that figure to be meaningful.
The average price of condominiums sold in the Belltown/Downtown Seattle area was $653,627 in the first quarter, down from $694,266 in the same three-month period a year earlier. But in Central Seattle, the other major condo submarket, the average price in the first quarter was up 14 percent over the year before to $356,957.
King County’s housing market appeared to gain momentum, despite a slowdown in sales: 17 out of 30 areas saw stronger annual price gains than in the same three-month period a year ago.
But in Snohomish County, where sales slowed even more than in King County, price gains accelerated in only two out of six areas — which local real-estate brokers blamed on a plunge in the number of listings.
“Prices are up and inventory is down,” said Bob Maple, managing broker of the John L. Scott office in Everett. “There’s just not enough homes for our buyers.”
The lower tier of the housing market in King, Snohomish and Pierce counties outpaced the middle and upper tiers in annual appreciation in February, as it has since March 2013, according to data from S&P/Dow Jones Indices published earlier this week.
The lower tier gained 18 percent annually, compared with 14 percent for the middle tier and 11 percent for the upper tier.
“First-time homebuyers are out there in force trying to get something,” said Abby Santos, a managing broker at a Windermere office in Federal Way. “I just listed one in Pacific for $250,000. We had an above-full-price offer the same day, and multiple offers stacking up.”
The double-digit price growth is still occurring in more affluent areas, too: For example, average prices of homes sold in Redmond, Newcastle and Kirkland during the first quarter were up between 13 and 18 percent over the year.
Below the bubble
Lower-priced areas, while seeing the strongest upsurge in prices, have a long way to go to reach their previous peaks during the housing bubble. The median price of homes sold in the first quarter in Kent, Burien and Enumclaw was still about 30 percent below its peak during the bubble years; Skyway’s median price is still almost 40 percent below its peak.
A few of the higher-priced areas have broken through: At the end of last year, Central Seattle — which includes Capitol Hill and Eastlake — was the first area in King County to surpass its peak during the housing bubble.
Three more higher-priced areas appeared to be on track to equal or surpass their previous peaks if they sustain this first-quarter’s price levels:
In Queen Anne/Magnolia, the median price was $700,000, well above the median price of $675,000 in 2007.
In the Redmond/Carnation area, the median price was $634,990, surpassing the last peak median price of $616,000 peak in 2008.
And in Seattle’s Ballard/Green Lake/Greenwood area, the median price was $499,000, just shy of the median $500,000 price set in 2007.
“What I’m seeing is confidence increasing in our upper-end buyers and also the fact they may be getting their homes sold,” Santos said.
Assessing the figures
Some real-estate experts caution that the annual gain in home prices based on sales may be a poor gauge of the true appreciation rate because the mix of houses selling in each period could vary significantly: For example, if there are more low-priced homes sold during one year and more high-priced homes sold the following year, the gain in median price will be inflated.
The Zillow Home Value Index, which attempts to correct for this bias, still found that median home values in the Seattle metro area were up 10.3 percent annually in March. Zillow says monthly appreciation has slowed steadily since last July to just 0.3 percent in March.
The price gains are eating away at the affordability of homes.
At the end of last year, only 38 percent of homes in the Seattle metro area were affordable for a home shopper earning the median household income of $67,944, assuming a 20 percent down payment and a 30-year fixed-rate mortgage, Zillow estimates.
About 75 percent of homes in Federal Way’s 98023 ZIP code were considered affordable.
By contrast, fewer homes are affordable in the region’s big job centers — Seattle, Bellevue and Redmond. In Seattle’s 98117 ZIP code, for example, just 3 percent of homes were affordable; in Bellevue’s 98005 ZIP code, 18 percent of homes were.
At year’s end, homebuyers in the Seattle area were spending about 21 percent of their income on the mortgage.
“Unfortunately that’s illusory because it’s the mortgage rate, not the underlying home price,” that is making homes still relatively affordable by historical standards, Humphries said. “It can be taken away rather quickly.”
Homes locally were far less affordable in mid-2006 during the bubble, when the mortgage payment for a median-value home was more than 35 percent of median income.
To reach those levels again, interest rates would have to zoom past 8 percent, Humphries said.
If you can afford to buy a home, it could be a smart move.
Based on first-quarter data, Zillow estimates homebuyers can break even in two years on a home purchase in King County; that is, they’ll pay more as a renter than a homeowner if they plan to live in the home for longer than two years. In Seattle, it’s 2.5 years.
Sanjay Bhatt: 206-464-3103 or email@example.com. On Twitter @sbhatt