Why Are Home Prices So High?
Mike Rosenberg of Seattle Times has launched “an occasional column that aims to take you deeper inside our housing market” by answering frequently asked reader questions that involve all things in Seattle real estate. He decided to kick things off with a question on many Washingtonians minds: “Why exactly are home prices skyrocketing so quickly here?”
According to Rosenberg, everything really boils down to two key factors: Inventory and Demand.
Though King County saw a rare increase in inventory in May 2018, the story over the past couple of years has revolved around a lack of homes available for sale. And though it’s easy to believe that homeowners would want to take advantage of the hot real estate market and sell, as “the average homeowner who sells today has owned the home for about 10 years and makes a 64 percent profit over what they originally paid,” people that want to stay in the area don’t want to turn around and become buyers in today’s highly competitive market.
As Rosenberg writes, “the supply of homes is only half of the sad equation—demand is rising, too.” Seattle’s population is growing rapidly: “since 2000, King County’s population has grown 26 percent” with jobs growing slightly faster at 28 percent. This means more and more residents are qualified to purchase homes and “competition has gotten steeper.” This is largely “driven by tech: The average person with a local computer or math job now makes $113,610, a 22 percent jump from 2000 adjusted for inflation.”
The result of competition has meant that many buyers are bidding on 3, 4, or even 5 homes before they win, and those that have lost out on a few deals feel desperation sink in and are willing to bid up quickly to secure their home.
Thus, at the end of the day, “the basic supply-and-demand issue is at the core of why home prices here have grown faster than anywhere else in the country since late 2016.”