Written by William Hillis
In a typical year for Puget Sound region home selling, most area markets will have passed their peaks by August. Activity would be winding down gradually, with the year’s largest price increases having already been recorded. In the past 12 years of Case Shiller Home Price Index records, August results have been mixed, but more often lower than July, with the monthly change up six times since 2008 to seven times lower. Yet amid the chaos of the 2020 home selling market—with COVID-19 restrictions imposed in March, then progressively relaxed through the summer—prices continued to climb. Increasing their ascent, by summer’s end they drove the Index to the highest August monthly gain in its history. Meanwhile, Seattle spent a seventh month with the second-fastest rising index results in the country, with 8.5 percent growth year-over-year to 9.9 percent for Phoenix.
Among the CoreLogic Case-Shiller Home Price Index
[1] results published by S&P Dow Jones on October 27, Seattle was not alone in showing a sharp increase in August. Each of this region’s West Coast peer metros substantially increased their year over year gains from July: to +6.2 percent from +5.0 percent in Portland; to +6.8 percent from +5.3 percent in Los Angeles; to +4.1 percent from +2.8 percent in San Francisco; and notably, to +7.6 percent from +5.4 percent in San Diego (Charts A and B). Seattle’s own 8.5 percent yearly increase was up from 7.0 percent in July—with higher absolute residential price increases than the nationwide leader, Phoenix, due to a median home price twice as high as that Southwestern city. The salient 1.14-percent monthly gain from July was more than twice the steepest previous August increase: 0.54 percent in 2013, when Seattle’s regional home selling markets picked up steam as they emerged from the Subprime Bust.
Craig J. Lazzara, Managing Director and Global Head of Index Investment Strategy at S&P Dow Jones Indices described the “trend of accelerating increases” on the Index:
We speculated last month that the accelerating trend might have resumed, and August’s results easily bear that interpretation. The last time that the National Composite matched August’s 5.7 percent growth rate was 25 months ago, in July 2018. If future reports continue in this vein, we may soon be able to conclude that the COVID-related deceleration is behind us.
Phoenix’s 9.9 percent increase topped the league table for August; this is the 15th consecutive month in which Phoenix home prices rose more than those of any other city. Seattle (8.5 percent) once again took the silver medal, with San Diego (7.6) in third place.
[2]
Market naysayers get their comeuppance
When COVID-19 restrictions were first ordered by the Governor’s office, they were first expected to be temporary, to be relieved in late April. Coming as they did in the spring selling season, when many sellers were expected to list their homes, some adverse impact on the markets was expected. Yet other observers speculated that demand would simply be pushed back to the summer. As the months wore on and the restrictions remained, pressure mounted on the Governor’s office to soften the restrictions; and eventually that result was obtained. It now appears that despite some selling activity having been impeded into the summer months, those like Dean Jones, President and CEO of Realogics Sotheby’s International Realty who argued for a V-shaped recovery were correct.
“From a housing perspective, the Seattle Metro Area was in fact, first in and first out of the COVID-era impact,” said Jones. “To suggest hindsight is 2020 takes on a new meaning this year.”Jones notes his brokers improvised quickly to meet the new restrictions, and the market slowdown that immediately followed the March 23 “stay-home, stay-safe” order was quickly followed by a rush of would-be buyers exploiting a bounce in the stock market, historically low interest rates, and a sense that “this too shall pass.”
Looking ahead, the Central Puget Sound region including King, Snohomish, Pierce, and Kitsap counties may very well continue on a robust trajectory with median home prices rising through the year end. Notwithstanding the spring slowdown, the four-county region has already experienced a six-percent pending sales increase year-to-date as of October 30, 2020 while total active listings are trending 34 percent lower than last year.
Outsized selling volumes are squeezing inventories
So vigorous was the selling through the summer of 2020 that by the end of the third quarter in September, residential selling volume in King, Pierce, and Snohomish Counties had already eclipsed the annual total for 2015, and was well on the way to matching or exceeding the volumes seen in more recent years. (See the selling volume trend through the 2020 year to date in Chart D.) This ebullient selling activity put pressure on inventories that already had been drawn down by years of red-hot residential markets and now faced the psychological barriers to listing posed by COVID-19.
As a result, months in residential inventory tightened to historically low levels: less than a month from June through September, a time of year when they would normally rise (Chart E). Under these conditions, residential prices in the region can be expected to further increase, along with selling volumes and the number of transactions.
For more details on the August 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.
