The Washington state housing market is the hottest in the country. Prices increased nearly 4 percent in the first quarter, according to the Federal Housing Finance Agency, the largest jump in the nation. They are up nearly 13 percent from one year ago. That compares to just under a 7 percent increase over last year nationwide. But inventory — the supply of homes on the market — has not come even close to meeting that demand.
The situation is especially critical in the Puget Sound area around Seattle, which has added nearly 55,000 jobs in the last year alone, thanks to hiring at big employers like Amazon, Microsoft and Boeing. Combine the resulting surge in population with a slow pace of construction and you get a classic crunch.
“A good, healthy market in any area is probably four to six months of inventory. Within the last two or three months, we were, in our primary markets, with about two to three weeks of inventory,” said Martin, a Re/Max agent and the president of Washington Realtors, which represents about half of the real estate brokers in the state.
Martin said the crunch has eased a bit in recent weeks with the start of the peak selling season. Still, like just about every real estate agent, buyer, seller, homeowner and renter in the region, he worries about where the market is headed next and how much longer the boom will last.
The demand for housing has hit nearly every sector — rental apartments, condominiums, as well as single-family homes. Seattle workers are being forced to look farther and farther from the city to find a place to live.
“It can’t continue. It just can’t continue, because where is the end?” he said.
An even bigger question is how the boom will end. Will it be a soft landing? Or is Washington setting itself up for a crash?
A real estate bubble ready to pop
James Young, director of the Washington Center for Real Estate Research at the University of Washington, said that as long as there is real demand for property, the market can continue to grow.
“A bubble happens when you have the prices going up without the demand going up,” he said. “You’ve still got demand going up in Washington, so I don’t see a huge issue here.”
In its quarterly report on the Washington housing market for the first three months of 2018, the center put statewide inventory at a little more than five weeks, which it called a “slight imbalance.” The report said around 113,000 units sold in the first quarter, a 5.1 percent increase from the same period a year ago.
But Young cautioned that the market can change quickly.
“If demand were to disappear tomorrow, there’s a lot of construction going on out there,” he said. “I’m not sure housing prices would crash or anything, but it’s one of those things that you always have to be mindful of.”