The nation’s hottest housing market may be headed for a potential crash. According to CNBC, Washington state has seen a 4% increase in housing prices in the first quarter and more than 13% since 2017.
The Puget Sound area around Seattle is currently seeing the highest demand for inventory. Employers such as Boeing, Microsoft, and Amazon have employed up to 55,000 people in the area. The result has been a surge in population that local construction companies have struggled to keep up with.
“A good, healthy market in any area is probably four to six months of inventory,” said Jerry Martin, a Re/Max agent and president of Washington Realtors. “Within the last two or three months, we were in our primary markets with about two to three weeks of inventory.”
James Young, the director of the Washington Center for Real Estate Research at the University of Washington, says the housing market can continue to grow as long as the demand for property remains stable.
Real estate bubbles, Young said, happen when housing prices go up but there’s no longer a demand. But there are still issues to be mindful of such as a potential drop in demand and the impact of local policies on the job market.
This past May, the Seattle City Council approved of a head tax of $275 per employee at companies that made more than $20 million in revenue a year. The goal of the tax was to raise $47 million a year to help the city’s homeless population.
The homelessness problem in Seattle is one of the worst in the country. Like Los Angeles, the issue that increased with the city’s rising housing prices and increasing population.
But the Seattle City Council repealed the tax after Amazon said it would stop further growth in the city if the tax remained.
Interest rates are another cause for concern. Although a steady demand may keep the housing market from turning into a market bubble, the housing market could also face a wave of foreclosures.
According to Bankrate.com, the average 30-year fixed-rate mortgage in Washington was under 4% in 2017. The interest has now increased to 4.4%.
Up to 30% of a person’s income should go toward their rent or mortgage. Any percentage higher than that can pose a threat of foreclosure.
And that’s just the mortgage rate. Americans expect quality and durability from their furniture, too, which is why it’s the third most expensive thing a person will buy after a house and a vehicle.
If homeowners aren’t able to afford a home or the benefits that come with owning a home, they may leave the state to find a more affordable home elsewhere.
“Who knows what may happen government-wise, economy-wise or anything else,” said Martin. “I really wish I had a crystal ball.”