From shortly after the start of the pandemic until roughly May of 2022, house prices saw incredible gains across the country and here in Seattle. Homes were selling at record levels, often with multiple (sometimes dozens) of offers and for well above their listing prices. The median price of a single family home, in Seattle, in May of 2020 was $749,500. By April of 2022 it was up to $996,000. That is a 33% jump in just 2 years and that is not normal.
Seattle Median Sales Price
There were four primary factors driving these price gains:
1: Demographics:
Millennials, the largest generation in history is entering the housing market, many with high paying tech jobs.
2: Weak Supply:
Housing construction plummeted during the great recession and we have never recovered.
3: The Covid Migration:
Covid changed the how people worked, and thought about work. Many people rethought their priorities and moved from larger metropolitan cities to smaller cities or rural areas. While slowing, this migration continues today.
You can read more about the covid migration in these two articles.
New census data shows a huge spike in movement out of big metro areas during the pandemic
https://www.jchs.harvard.edu/blog/domestic-migration-drove-state-and-local-population-change-2021
4: Low Interest Rates:
As policy makers scrambled to minimize the economic impact of Covid, they pumped massive amounts of money into the economy through both stimulus packages and low interest rates. Rates were near, or below, 3% for much of the pandemic.
While each of these components is important by itself, it was likely the cumulative effect of all four working together that created the gains of the past two years. While it is clear that the picture has now changed, it is interesting to note that three of the four factors are still in effect today. I will explore the state of the current market, and what it will take to turn things back around in an upcoming post.