Home prices in the Pacific Northwest in the second quarter were the fastest growing in the country, according to Fitch Ratings’ Q2 report on sustainable home prices. The growth, in fact, has been so fast that properties in major Pacific Northwest cities like Seattle and Portland are now considered overvalued on par with those in California’s Bay Area.
“Portland home prices have risen at the fastest clip of any nation since second-quarter 2014, at 22 percent,” the report stated. “Much of the increase can be explained by underlying economic drivers. Meanwhile, Seattle is not far behind with home prices rising 19 percent during the same timeframe.”
As a result, Fitch estimated, home prices in these cities to be 5 to 15 percent overpriced. This rivals San Francisco, which had a two-year gain of 21 percent leading up to the start of 2016 (and a 69 percent growth since 2012). The hottest market at the beginning of this year, San Francisco has since cooled considerably. The market has grown 11 percent since a year ago and is considered 5 to 10 percent overvalued for Q2.
“The recent rate of home price growth in the Pacific Northwest is hard to rationalize,” said Grant Bailey, managing director at Fitch. “Foreign investors and spillover from tech employees priced out of San Francisco are likely playing a role in the run-up, though to what degree is hard to ascertain.”
Bailey said that the rocketlike growth of home prices in the Pacific Northwest is causing some familiar issues, mainly stretching affordability for local businesses and employees. Due to this, Fitch reported, the escalation won’t last long.
“The current growth rates in the Northwest are unsustainable,” the report stated. “The recent slowdowns in Vancouver and San Francisco likely indicate that a significant slowdown in the Northwest is coming.”