The November Case-Shiller Home Price Index reported that for the tenth consecutive month, the Seattle metro area remained second in the nation in terms of residential price growth year after year after nationwide leader Phoenix. For the fourth month, San Diego remained in third place, outranking Tampa in August for the first time. In all three of these top cities, residential price indices rose year-over-year at rates between 12 and 14 percent. Over the same period, no other West Coast city has seen prices increase by more than 10 percent.

Craig J. Lazzara, S&P Dow Jones Indices Managing Director and Global Head of Index Investment Strategy, noted the shift reported by Realogic’s Sotheby’s International Realty (RSIR ) from urban locations to those further out, studiously avoiding the issue of whether these shifts were COVID-induced or rather an acceleration of trends that are already underway.

As COVID-related restrictions began to grapple with the economy last spring, their effect on housing prices was unclear. Price growth slowed in May and June before a steady upward rise began. The November report continues this acceleration in an imposing manner. The national composite last matched the 9.5% growth rate this month in February 2014, more than six and a half years ago. From the perspective of more than 30 years of S&P CoreLogic Case-Shiller data, November's 9.5 percent year-over-year change is close to the top decile of all monthly reports.

Recent data are consistent with the view that COVID has encouraged potential purchasers to move from urban apartments to suburban homes. This may represent a real secular shift in housing demand or represent an acceleration of moves that would still have taken place over the next few years. Future data will be required to address this issue.[2]

These remarks by Lazzara have been consistent with the trends we have observed in Realogic’s Sotheby’s International Realty (RSIR) for years. We first noted them in 2016, when 'proportional increases in annual sales volumes in Snohomish and even Skagit Counties began to exceed those in King County.'[3] We described these trends most recently in our October 2020 coverage of the Case-Shiller results. (“Home Price Growth In Seattle’s Satellite Metros Rockets Past That Of Jet City”).[4]

While inventories in King County may now seem particularly tight, they are still far more of a challenge for buyers shopping in the exurbs. Let's look at the January months in inventory over the past seven years for sixteen counties:

Table 1: Residential inventory months for sixteen counties (only January), 2014-211

King had the least months in stock until 2017 among all sixteen counties. Snohomish had the least in January, and in January after that. In 2019 and 2020, Pierce, Thurston, and Kitsap Counties have joined them. Island, Mason, and Grays Harbor Counties joined the other four in the first month of 2021 with fewer months of residential inventory than King County.

Next, let's look at the annual median selling prices in 2016 for each county, the year we first observed the spillover of demand in the exurbs, and each year through 2020, as well as the four-year compound annual growth rate (CAGR).

Table 2: Annual median selling prices for sixteen counties and their compound annual growth rates, 2016-2020

As quickly as prices rose in King County, ranked by the median selling price of the CAGR, those in the surrounding counties rose even more rapidly.

Nevertheless, as the numbers of both residential and condominium sales set record highs, January 2021 saw a few milestones set for home transaction volumes in King County and the city of Seattle (Charts C and D).

As shown above, the January 2021 sales volumes of condominium units have been at their highest levels, both in King County and in the City of Seattle, since the 2007 boom period (before the credit crisis and impending Great Recession clipped the sales trajectory). Consumers are likely to see condominiums increasingly as an affordable alternative to rising single-family and townhome costs, while many renters are taking advantage of historically low-interest rates.

“While the region is experiencing upward pressure on prices we know that supply and demand is not distributed equally and the market varies from neighborhood to neighborhood, by product categories and at different price points,” said Dean Jones, President and CEO of Realogics Sotheby’s International Realty.

Because developers are sharpening prices, offering unprecedented incentives, and competing with spiking resale inventory, Jones points to downtown Seattle condominiums as a specific opportunity.

“I think we’re witnessing an inflection point in downtown Seattle, which is noted for savvy homebuyers that know how to time the market,” adds Jones. “We’ll look back a few years from now and realize that was the opportunity for the most preferred properties.”

For more details on the November 2020 Case-Shiller Index results, download the S&P Dow Jones Case-Shiller summary report. For details on the market implications of our reports for homes in your neighborhood, contact me.

[1] Published by S&P Dow Jones, the Case Shiller Index surveys resales of residential homes in the Seattle MSA. The index notably does not account for condominium sales. “S&P CoreLogic Case-Shiller Index Shows Annual Home Price Gains Climbed to 9.5% in November,” S&P Dow Jones, New York, 26 January 2021.

[2] Ibid.

[3] Hillis, “Seattle Residential Prices Trend Higher, But Demand Shifts Are Imminent,” Realogic’s Sotheby’s International Realty (RSIR) blog, 5 October 2020.

[4] Hillis, Realogic’s Sotheby’s International Realty (RSIR) blog, 30 December 2020.