Ratings agency finds Seattle-area real estate overvalued

(The Center Square) – Seattle and surrounding-area homes are near the top of the charts in real estate price increases, according to a new report by the credit ratings agency Fitch Ratings.

Fitch warns of overvaluation and unsustainable price increases, which could lead to a market correction with stagnation or falling prices.

The ratings agency found home prices were up nearly everywhere in the country, but more so in certain cities and metro areas.

“Home prices surged 19.7% year-over-year as of July 2021, the highest annual home appreciation in history,” the report said. “Phoenix (32.4%), San Diego (27.8%), and Seattle (25.5%) experienced the highest annual growth among 20 major metropolitan areas.”

Part of what may be driving the home price increase is the ongoing reshaping of Seattle’s downtown in a more residential direction, based on data from the Downtown Seattle Association (DSA), which showed the downtown’s economy has recovered from the COVID-19 pandemic.

Demand for hotel rooms was at 64% of its 2019 levels in November, domestic visitors were at 81% and visitors to Pike Place Market and the surrounding area were at 98%. The one persistent outlier is office workers, who are at 25% of 2019 levels.

DSA director of issues management James Sido told The Center Square in October “residential numbers in downtown (are) now at a record level.”

“Downtown Seattle residential growth is outpacing the city and the region,” a DSA press release said.

DSA cited data from CoStar and Esri to show “downtown apartment occupancy has already exceeded the previous record set in 2019, and total downtown population is now at a highwater mark of more than 98,000 residents. Population estimates from Esri for July 1 of 2020 and 2021 show a 4.4% annual increase for downtown Seattle, compared to 1.5% for the city and 1.1% for the Puget Sound region.”

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