Seattle Home Prices Still Second-Fastest Rising Nationwide As Restrictions Remain

April 2020 saw a third straight month with residential home price increases in the Seattle metropolitan region leading those of all other cities in the U.S. except for Phoenix. The gains indicate that as foreseen in our recent monthly Case Shiller reports on the RSIR blog, prices have remained stable during the suppression of home sales due to our state’s COVID-19 orders. Unrest in the city of Seattle, whose neighborhood of Capitol Hill was the locus of the nationally reported CHAZ/CHOP occupation, was still a month away when these data were compiled. The Case Shiller index result is due in part to a reset of the supply-demand equilibrium for home sales, with the decrease in buyers more than offset by an historic shortage of new home listings. However, this market result should not be taken as giving free rein to prospective home sellers’ ambitions when pricing a home for sale. There is another reason for the index of residential prices to have risen, which we will explain further below in this Case Shiller report for April.  

The CoreLogic Case-Shiller Home Price Index[1] results published by S&P Dow Jones on June 30 showed a 12-month index increase of 7.3 percent for the Seattle MSA. This result was exceeded only by Phoenix, whose home prices were up by 8.8 percent during that period. (Of these two metropolitan regions, the dollar values of price increases were higher in Seattle, as the median price in the Seattle MSA was double that of the Phoenix MSA in April 2020.) It was last December when the Seattle index cut ahead of San Diego, the city with the second-fastest rising residential prices on the West Coast. Twelve-month growth in the April 2020 index for San Diego was 5.8 percent, compared with 4.3 percent for Portland, Oregon; 4.1 percent for Los Angeles; and 2.8 percent for San Francisco.

Craig J. Lazzara, Managing Director and Global Head of Index Investment Strategy at S&P Dow Jones Indices, spoke of the “remarkably stable” April home price data in the S&P Dow Jones press release. “The National Composite Index rose by 4.7percent in April 2020, with comparable growth in the 10- and 20-City Composites (up 3.4 percent and 4.0 percent, respectively). In all three cases, April’s year-over-year gains were ahead of March’s, continuing a trend of gently accelerating home prices that began last fall. Results in April continued to be broad-based. Prices rose in each of the 19 cities for which we have reported data, and price increases accelerated in 12 cities.”[2]

Seattle’s superior market performance was highlighted by Dean Jones, President and CEO of RSIR. “The region entered the second quarter of 2020 with the steepest trajectory of increases in the country. Looking ahead, we see market resilience as home buyers sidelined by the stay-home order are returning to the market much more quickly than would-be sellers. There is a growing imbalance of supply and demand, with pending sales increasing by more than nine percent year over year so far in June, even as new listings have declined by more than 50 percent compared with the prior year. Selling volumes were down following the stay-home order, but are now spiking. As we see it, the normally hot spring selling season got pushed back to summer.”

Correcting assumptions about prices

For as long as the COVID-19 restrictions remain in place, these will be comparatively difficult times to sell a home, and some caution should be exercised in pricing homes for sale.

How can home selling prices actually appear to advance during periods of adverse selling conditions? One way is if homes at the higher price segments are valued at high multiples, perhaps as much as two or three times the median price (as in certain neighborhoods in Seattle and on the Eastside); and if proportionally more of those homes are sold in a single reporting period. In this case, then even if those homes bear steep discounts, these outsized sales can drag the median and average selling prices higher in those areas. This can happen even as lower-segment prices are also falling.

Has this been a factor in Seattle MSA residential selling prices since the COVID-19 orders took effect? The charts below bear contrary indications for the median residential price since March. Chart B shows the year-over-year change in median selling prices for the Seattle MSA, as well as King County and the Eastside. In each of these regions, prices continued to rise in March and April; then, except on the Eastside, prices were lower in May before rebounding in June.

With an eye on the Seattle MSA line, see Chart C below. It shows the monthly changes year over year in the number of residential sales in that same region from March through June, but bracketed by selling price. Observe that the numbers of sales in all price brackets have fallen since March. Yet also note that those monthly declines were steeper in the higher price brackets during the month of May, when the median residential price in the Seattle MSA declined as shown in Chart B. This suggests that during that month, the median price shifted from more premium homes to a class of homes that would invariably have been priced lower.

For more details on the April 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 a local RSIR broker.  

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[1] Published by S&P Dow Jones, the Case Shiller Index surveys resales of residential homes in the Seattle metropolitan statistical area comprising King, Snohomish, and Pierce Counties (“Seattle MSA”). The index notably does not account for condominium sales.

[2] “Annual Home Price Gains Remained Steady in April According to S&P CoreLogic Case-Shiller Index,” S&P Dow Jones, New York, 30 June 2020.