Luck of supply in current housing market cose robust increase in home prices. Median home price, according to National Association of Realtors increase up to $240,700 in the second quarter, up 4.9 percent from from the second quarter of last year. Without adequate building new houses, inventory seriously failing to keep up with market demand. Construction companies spasmodically try to fix the problem, but past real estate bubble, made it negative effect on the industry as well. Builders experience lack of workforce, despite increased pay. Another problem is financing, not many banks rushing to finance construction company, especially small ones. Also it seems like some cities take a course on slowing down on new construction permits issued. As result we have such a difference in new building permits in 2006 and 2016. According to public record city of Bellevue in 2006 issued 238 building permits, and just 99 in 2016. City of Bothell 322 permits in 2006 and just very shay 65 permits in 2016. Only city of Seattle strive to keep up with such high demand, so it was 482 new construction permits in 2006, and 403 in 2016. But bigger shocker is Unincorporated King County area. It was 1572 permit issued in 2006, and now bad news, just 349 in 2016. I’ve heard many times from general contractors that it’s tough to do business with King County, and that is the prove of that.
Do we want it or not but not enough supply driving home prices up.
Another mind boggling factor is index affordability. Despite slight increase in national median family income, $68,774 it’s not enough to keep up with much faster rising home prices. For a family to purchase single family home at national medium price with 5 percent down payment, they should should have an income of $52,255. Just a reminder that national median home price is $240,700, and it would be “Mission Impossible” to find a house at that price around Seattle area. In 2012 index affordability Seattle- Tacoma metro area was 151,7 in 2014 it get down to 129.9, and had still the same in 2015. With current trend it might get slightly down in 2016. Some might think that lower index of affordability will lead to slow down of price increase, but it’s not always true. If we take a look at San Francisco real estate market; their index affordability slide down to 72.6 in 2015, and it was 105.7 just 2012. San Francisco home prices stady was going up since 2012 and affordability didn’t slow it down. According to National Association of Realtors data median home sale price in San Francisco- Oakland metro area was 643,800 in 2013 and right now it’s 885,600, so it didn’t slow it down, despite if follow the logic it should. It rase more question then gives an answers, how is that people with not enough income still be able to buy property and somehow continue to push prices upward , but definitely we see right now is totally different real estate market with absolutely different driving engines, then in 2006.