SEATTLE -- We're no longer No. 1....
Seattle used to be tops in the nation the past three years when it came to home value growth, but as home value growth rates slow across much of the nation, we've dropped to No. 12, according to Zillow. The Emerald City also had the greatest slowdown in value growth over the past year.
In 2017, Seattle home prices were appreciating at more than 14 percent per year, but this year it's dropped to 9 percent, says Zillow senior economist Aaron Terrazas. Historically, the rate of annual appreciation in the Seattle area is 5.5 percent.
Terrazas says there are two factors contributing to the easing of the local housing market.
As rental rates climbed around the city, "we had a lot of young adults who had been renting and sought to buy over the past two years," Terrazas said, adding that it put additional buyers into the mix, driving up home prices.
But Terrazas says that wave of millennial home shoppers is starting to run its course. In addition, there are fewer buyers who can afford the higher home prices.
In turn, as renters turned into home buyers, the rental markets have slowed as well with Seattle among the top cities showing the greatest slowdown in rent appreciations.
"Rental appreciation in Seattle is about 0.3 percent --or about $10 a month, compared to 5 percent a year ago," Terrazas said. "And that means there is less pressure for renters to buy. At same time, mortgage rates are rising and we're seeing changes in the tax deductions for homeowners, that means those buyers out there are a bit more limited in their price point."
But before buyers get too giddy, Terrazas says he still thinks Seattle is a ways off from calling it a buyer's market.
"It's still a seller's market," he said. "But perhaps there will be fewer houses with multiple offers; going a little less over asking price," though he added this is mainly for homes at or over $800,000, and will remain a pronounced issue for homes listed at more affordable price points.
"I'd say this is more of a normalization (of the market)," he said. "The past 2-3 years have really been very fast moving... now we're starting to come back down to a more normal pace of sales."
Terrazas said even with the slight slowdown, Seattle is still a very healthy market.
"(Nine percent annual home value growth) is still 3 times the typical annual growth of salaries and wages," he said. "So it's still a seller's market, just less dramatically so from a year ago."