Why Rising Housing Costs in Seattle, Portland, and San Jose Should Be Nationally Concerning
What Does This West Coast Trend Signal to Other Major Cities?
Home prices have been climbing over the past year, but nowhere have they increased like they have in Seattle, Portland and San Jose. In fact, many experts are predicting that the massive spike in housing costs in these areas could be of some concern for the national housing market in the near future. We’re talking about the very real possibility of having the worst real estate market slowdown in years.
Sales Are Dropping Off as Home Values Rise
In June 2018, the U.S. housing market experienced its third straight month of down sales. New home purchases were at their slowest pace in eight months. The combination has resulted in home inventory seeing growth for the first time in years. As home values continue to rise, more and more home buyers are moving to the sidelines, waiting for a period where the prices will stall, or at least slow down to the point that they don’t outpace income growth.
Sagging buyer activity is already hitting the three cities mentioned earlier, and it’s not a pretty sight. In just a year’s time, inventory in San Jose rose 12%. In Portland, inventory rose by 32%, while in Seattle there was a 24% rise in inventory.
It’s a Tough Time to Be a Seller
This type of market is tough on sellers because the competition just isn’t there. Buyers are waiting longer to purchase their homes because they know the market will auto-correct itself, it’s just a matter of when. But in the meantime, for sellers, it means fewer and lower-priced bids. Many may even find themselves being forced to accept bids well below their asking prices, especially if they are in a position where they need to sell.
Is It Still a Good Time to Buy a Home?
According to a survey conducted by the University of Michigan, 65% of Americans believe it’s still a good time to buy a home. While that number may seem acceptable, the truth is it’s the lowest it has been since 2008, a time when the economy was in recession.
Two of the factors that benefit the housing market include a healthy labor market and a growing economy. There’s a chance that due to these factors, the market may see a stabilization of housing prices before the market reaches crisis-level.
California Is Bust, But Alabama Rolls On?
Market trends signal that while home purchases in states like California, Washington, and Oregon are dropping, they’re rising in more affordable parts of the country, like Alabama. Affordability is one of the market’s largest hurdles now. With many Americans being priced out of the market in these areas, they have no choice but to look elsewhere. But what happens when increased buyer activity sparks home values to spike in these areas?
Ultimately, if builders don’t flood a market already heavy with inventory with new construction, then the serious risk of a slowdown may be able to be averted. After all, the last thing this country needs is another housing crisis.