Washington home prices rose fastest in Skagit County

Fueled by bidding wars and a shortage of houses for sale, King County's single-family home prices shot up 15.43 percent last year, better than 1 percent a month.

With prices climbing so fast and so furiously, the county's homeowners can be forgiven if they assume they're leading the appreciation parade.

But they should think again.

While King County is indisputably Western Washington's economic driver, its home appreciation was only middling last year compared with surrounding counties.

Leading the pack was Skagit County, where single-family homes appreciated 26.93 percent, followed by Mason County at 24.55 percent and Thurston County at 23.31 percent. Granted, the base prices were lower in the counties that appreciated more, but for buyers there, that meant even greater sticker shock than King County buyers experienced.

Of 15 mostly Western Washington counties, King County ranked in the bottom third, according to the Northwest Multiple Listing Service, which recently released its annual analysis of home-sales data.

Sparsely populated Kittitas, Lewis and Grant counties were the only ones to post lower appreciation last year than King County. Numbers for Whatcom County were not available.

The MLS calculates that King County condominiums appreciated 7 percent last year. Within Seattle, condo prices rose 9.72 percent. By far, the majority of the Puget Sound region's condo sales are in King County, where about one in every four home sales is a condominium.

Glenn Crellin, director of the Washington Center for Real Estate Research at Washington State University, said there are two main reasons King County's 2005 appreciation lags behind many of its neighbors.

First, prices are so high near Seattle that many buyers are priced out, and that softens demand somewhat, Crellin said.

Last year, the median price of a single-family home in King County was $374,000. Even the county's median condo price — $214,000 — was more than the median house price in two-thirds of the surrounding counties. Median means half the properties sell for more, half for less.

Second, King County real estate has been hotter for longer.

"Your cycle is a bit more mature," said Crellin, which means homebuyers have had to absorb considerable price increases, and some of the heat is already past.

Indeed, 2004's 10.8 percent appreciation rate in King County was in the top third regionally. Compare that with Skagit County, 2005's appreciation leader. A year earlier its single-family home prices rose a meager 3.54 percent, which put it dead last for the region.

Last year's almost 27 percent price increase has left Skagit County buyers shell-shocked, said Tim Reichert, broker of Brown McMillen Real Estate in Burlington.

"It used to be in our market that if we saw $300,000 to $350,000 houses we thought, 'Wow,' " Reichert observed. "Now there are a lot of homes in the $400,000 to $600,000 price range. It's a real shift, and it's throughout the county."

But it's not deterring some buyers, particularly those from outside the county.

"They're willing to pay a high price because they're able to afford more here than where they came from," Reichert said. "We know there are a lot of people who live here and commute to Everett or even to Seattle. And for a lot of people, this area is desirable because it's a rural, small-town atmosphere with strong schools."

King County workers also are fueling strong housing sales, and thus appreciation, in Pierce, Snohomish, Kitsap and even Thurston counties. The reason is the same as in Skagit: Those counties offer greater affordability.

For example, even a year ago, King County buyers needed household incomes of $100,000 or more to afford a single-family house in most North Seattle or Eastside neighborhoods, according to a Seattle Times analysis. However, no neighborhoods in South Snohomish County required that much income.

With home costs and mortgage-interest rates rising, today's King County buyers are even more pinched. So it isn't lost on them that they'll get more house shopping farther out.

"They'll do the commute, God bless them, to save $100,000 on the purchase price," said Dick Beeson, the broker in Windermere/Paragon's Tacoma office. "We see that in Pierce all the time."

That demand is helping to drive up prices for Pierce County residents.

"Buyers in our county definitely are starting to feel priced out," said Beeson, who notes that new Pierce County homes are no longer available for less than $200,000.

Even areas outside King County's immediate orbit are experiencing high house prices.

San Juan County is the No. 1 case in point. Its houses increased 14.81 percent in price last year, slightly less than King County's. But more noteworthy is the median cost of a home there: $465,000 last year, or fully 24 percent higher than King County's median.

In actual dollars, the value of San Juan's median-priced detached home rose $60,000 last year — more than the county's estimated median annual household income of $48,758.

The King County median rose $50,000; Snohomish County, $47,000; and Pierce, $40,000.

As Crellin noted, many of San Juan County's houses are second homes.

"The incomes of the folks who own those properties are reported wherever their home counties are, so they're not counted in San Juan County. It's a resort community, the same sort of thing as Aspen and Vail, Colorado."

Second-home buyers there probably aren't feeling particularly pinched, Crellin said. However, San Juan "has become unaffordable to people who live there year around."

After studying all the factors that influence housing sales, Crellin thinks the market will cool this year compared with last. Higher interest rates are one factor. Less interest from investors hoping to buy houses and turn a quick profit is another, he explained.

That means fewer houses likely will be sold, and appreciation won't be as high. But Crellin doesn't believe that equates to a real-estate bubble bursting and prices falling.

Local demand will continue to be strong enough to ensure moderate price gains, he said.

Elizabeth Rhodes: erhodes@seattletimes.com