Economist: Puget Sound region housing market appreciation ‘unsustainable’

When even PVC pipe is expensive in building or remodeling a home, the Puget Sound region’s housing market is bleak for non-millionaire hopeful buyers.

In February, the Northwest Multiple Listing Service’s latest report noted that new listings increased 40% month-over-month. Median home prices continue to climb, 14% in King County year-over-year with percentage increases higher in Snohomish and Pierce counties. Bidding wars among prospective purchasers are buoyed by low mortgage rates, below 3% on a 30-year mortgage, “unheard of in the last 50 years,” Matthew Gardner, Windermere’s chief economist, told KIRO Newsradio.

‘No relief in sight’ for hyper-competitive Puget Sound housing market

“Is the pace of appreciation we’ve seen sustainable? Absolutely not. We went through a very weird couple of years. [Before], the 30-year mortgage has been around, in the long term, over 7.5%. A lot of that is because of the Federal Reserve buying mortgage-backed securities as we move through COVID-19.”

“Well, that’s starting to stop now,” Gardner continued. “And because of that, we are already seeing mortgage rates, in the last eight weeks, jump by almost a full percentage point. And that unto itself, without a doubt, can take some of the heat off the market.”

Despite that, house prices are steadily climbing in the short term. Median sell price month-over-month January to February went up in King County by 10.7%.

“So much for everyone saying that we’re all going to Yakima because of work from home, disappear off to wherever. That is clearly not the case yet,” Gardner said.

Gardner offered some advice for prospective new buyers: “No one should be overextending themselves. Don’t get into these bidding wars. Be comfortable with the debt you’re taking on.”

“But more importantly, if you’re going to be buying somewhere, that’s great, but expect to live there for quite some time,” he added. “Don’t think that you can buy it today and in six months’ time sell it and double your money. … That is one of the things that could get a household into problems.”

Renters, too, are squeezed by the rising cost of real estate in the Puget Sound region. The eviction moratorium, according to Gardner, helped incentivize landlords to sell. That, in combination with rising demand for rentals when otherwise prospective buyers are priced out, has resulted in “significant increases in rent pretty much across the board.”

“Ultimately, that will lead to rents going even higher for the few remaining units that are out there,” Gardner noted.

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