My clients have been asking me lately what is causing the huge inventory challenges that we are seeing right now in our real estate market. The number of homes for sale in Seattle and the surrounding area is not only historically low for this time of year, but the demand for this housing is causing prices to escalate rapidly, harkening back to the last housing surge we had before the housing market crashed. There is fear about Seattle developing a bubble. However, it is important to note that the conditions that caused the increases back in 2006-2007 are different than what causing this high demand today.
Back in 2005-2007, a good portion of the housing demand was caused by the ease of obtaining a loan. Not so today. Not only are lending standards much more stringent, but increases in population are one of the key driving factors in the demand for housing. Let’s take a look at what is happening in Washington and Seattle.
The new data provided by the Washington State Office of Financial Management (OFM) will come out in just a few days (June 30th). However, last year’s data released June 30th, 2014 showed that Washington State’s population increased by 85,800 between 2013-2014 (a 1.25% gain) which was the largest one-year increase since 2008.
OFM also indicated that migration from other states was the largest component of this increase (49,200 people net). Natural increases (birth minus death) accounted for the rest of the increase.
Additionally, 75% of the state’s population increase impacted the five largest metropolitan counties: Clark, King, Pierce, Snohomish, and Spokane due to the economic opportunities in those areas.
What is interesting is OFM also reported that 31,000 new housing units were added across the state. Even if you averaged two people per household, there is still a shortage of about 20,000 units. And that is just due to population!
Now let’s take a closer look at Seattle. Between 2010-2014, Seattle’s population grew by 31,840 people. In that same period, 14,823 housing units were added. Again, if we estimate two people per unit, that still gives us about a 2,000 shortage just within Seattle.
I am not concerned about a housing bubble right now. The demand we are seeing is a natural component of a strong economy and increases in population. However, if you have concerns, I would be happy to talk with you about those. Give me a call at (206) 226-5300 or send an email to firstname.lastname@example.org.