Are we heading for a housing crash?

At the end of May there were 8,798 active listings on the NWMLS, up a whopping 59% from a year ago. The significant increase in the number of homes for sale has some speculating that the market is about to implode, but that is very unlikely,” stated Matthew Gardner, chief economist at Windermere Real Estate. “What’s more likely to occur is that the additional supply will lead us toward a more balanced market, which after years of such lopsided conditions, is much needed,” he added.

But let’s play devil’s advocate and assume we experience a 2008-style housing crash. If it does, the market will come back over time and home values in the Pacific Northwest will resume their climb. Here’s a chart of Pacific Northwest home values since 2008:

But maybe we just got lucky? Nope. This has happened before. See this chart from the mid-1970s to early 1990s.

Housing is a cycle. We have just experienced the top of our current cycle, which was fueled by historically low interest rates, which are now being right-sized. The fundamentals of the Puget Sound housing market remain strong. We have low unemployment, thousands of new high wage jobs moving into the area, and limited housing stock that is constrained by the Mountains and Puget Sound.

If you’re looking to draw a parallel, look to the Bay area, which has many of the same geographic constraints and has experienced the same type of explosive job growth. They are a decade or so ahead of the Puget Sound, but provide an excellent model of what is likely to come.

This is all good news if you’re a buyer. Housing prices have stabilized and inventory is more abundant, which means you won’t have to compete with five other families to buy something. You probably missed the top of the market if you are selling in the near term. However, if you put things in a historical context, this remains an incredible market to sell.

Contact me if I can help you make sense of the market, or if you need help buying or selling.