Like a star player rallying for the win at crunch time, Seattle’s property market manages to rack up modest gains in the last quarter of the year. This is according to an October 2018 report published by the Northwest Multiple Listing Service (MLS) – a property listing service that covers the entire Seattle metro area along with the rest of the Pacific Northwest. As of October 4, 2018, “A new report from Northwest MLS shows double-digit increases in inventory in several of the 23 counties it serves, led by a 78 percent year-over-year gain in King County.”
This positive trend is something to look forward to, but the market remains constrained as housing analyst report the supply to be 4 to 6 months well below the balanced market. However, analysts remain confident that the Seattle housing market’s outlook remains sunny, despite its drab weather. Silicon Valley expansion has done a lot to boost the property market as well. With more than 80 companies around the world setting up outposts in Seattle, the consistent growth of the tech ecosystem has brought new opportunities to the area driving the growth of the market.
● Home buyers have more inventory to choose from
● Demand exceeds supply
● Seattle led the nation in home prices increases for nearly two years – but this has recently changed
● Median rent is at approx. $2,000 per month for the whole metro
● Growing population and rising income could be a factor
● West Coast properties are hot and Seattle and Las Vegas are predicted to be the next hottest markets.
● Single-family homes make up 63.63% of the inventory
● Condominiums and townhomes contribute 26.74%
● The rest are multi-family homes, mobile homes, and land for sale
● Average annual home appreciation is at 4.30%, making Seattle among the top 10% locations in the country with rising home appreciation rates
● Tech giants are influencing the real estate market
● Businesses are making an exodus from California to Seattle to take advantage of a growing skilled labor market, better business regulations, and lower income tax.
● Google expanded its Seattle campus – It is adding a 12 story office building with 23,000 square feet of retail space, bringing its campus size to a massive 930,000 square feet.
● Facebook is on a hiring spree within the area – their virtual reality division, Oculus, is rapidly growing and jobs are being generated by this expansion.
● Two of the fastest growing startups, Rover (an online marketplace for people to buy and sell pet care services) and Outreach (makers of Sales Engagement Platform software), have acquired new venture deals from their most recent round of funding and are establishing new leases in the area.
● Seattle still remains a prolific rental market due to its large student population
● Construction boom results in more competition.
● Rental growth has stalled due to an unprecedented rise in construction projects and a historic number of apartment openings over the past few years.
● Landlords are having difficulties filling out vacancies and have resulted in giving away perks to entice tenants.
Key infrastructure to watch:
● A $392 million, thirty-eight story 2+U tower, several blocks east of Pike Place Market
● Google’s 322,000 square foot campus expansion with the first two blocks to be completed next year and a third block reported being ready in 2021.
● Facebook’s $246 million projects of two structures called the Arbor Blocks. They are six stories each and total 384,000 square feet, along with 4,100 square feet of retail.
What’s in store for investors in Seattle?
Both brokers and buyers have had difficulty buying and selling in the Seattle Market after six years of steep price growth have pushed prices to steeply rising unaffordable levels. However, in the past 3 months alone, market prices have decreased by 3.3%.
Now, the average house costs $750,000 – this is down $80,000 from the record highs set earlier this year.
The increase in construction projects around the metro could be causing the freeze in the growth of the rental market. A lot of apartments are sitting empty around the metro. This is especially true for the more expensive units which are getting a lot less interest compared to more affordable units (as is always the case). There’s a slow rent growth trending all over the nation, and Seattle is no exception.
Seattle has a vast rental market. In fact, over half of the population rent instead of own. This might be due to the fact that Seattle is slowly becoming tech central. More and more tech giants are expanding and setting up offices in the area luring more Millennials into the housing market. And they prefer to rent rather than own, to afford the freedom to move around. The tech industry has locked down and grown roots in Seattle and is spurring expansions, new business, and job generation. This results to an influx of employees with high paying jobs that drive the demand for rental properties in Seattle.
Seattle has more than a dozen four-year colleges that contribute to a strong rental market. Landlords can cater to students but are still able to rent out their properties to employed young adults after these students move out.
According to Windermere Chief Economist Matthew Gardner, the Seattle housing market will remain strong. This is due, in no small part, to younger buyers entering the market. He says “Buyers today are overqualified. They’re putting down larger down payments, and they’re not defaulting on their mortgages.”
Meanwhile, established homeowners are looking to downsize but are staying put due to lack of affordable options. This trend has led to reduced property turnovers, restricting the tight supply, which eventually leads to affordability.
Still, home prices are expected to grow, but they won’t be steep double-digit jumps like most investors are used to by now.