For many prospective buyers, Seattle’s rapidly-rising home prices look a little too much like the frenzied market escalation before the 2007 crash. Should people be nervous? Is our market built on a solid foundation of rising incomes and increased demand, or is it built on thin air? Is it a bubble, and when’s it going to pop?
One thing is indisputable—Seattle’s real estate growth rates have been incendiary. Take a look at a recent Seattle Times’ headline, which reads, “Million-dollar-home count triples across Seattle area in 4 years.” It’s astonishing but true—in 2012, 1 of every 40 houses in the Seattle area was valued at $1 million or more; today, it’s 1 in every 14. Some neighborhoods have seen especially dramatic leaps—Capitol Hill’s share of million-dollar homes rose from 11 to 24 percent; Queen Anne from 12 to 30 percent; and Fremont from .7 percent to 6.1 percent.
Seattle’s median home price has also risen 24 percent in only the last year, from $425,000 to $637,250. The condo market is booming as well—the median price of condos in King County rose 26 percent over the last year. If you look at condos in downtown Seattle, prices went up 11 percent, bringing the median to a hefty $597,500.
Even if you’re not in the market for a million-dollar home, good luck finding something else. We have a serious supply problem, and the number of homes available for purchase has fallen 30 percent in only the last year. Houses are hitting the market to be bought in less than a week, often pulling in well over the asking price after a bidding war ends.
The Cause of the Climb
The rise of tech jobs in Seattle has led to rising incomes, which is inflating home prices as new residents search for property near the urban core. It seems almost too simple an explanation, but it’s true. Between 2014 and 2015—only one year—Seattle’s tech worker population grew by 21 percent. Redfin calculates that for every 1 percent increase in the population of technology workers in Seattle, home prices rise by half a percent.
As Crosscut writer Paul Roberts says of Seattle’s new “Creative Class” of technology workers, “Their arrival in Seattle has had a disproportionate impact, both because Seattle is a relatively small market (about a quarter the size of Brooklyn) and because the newcomers’ spending power is so high.”
What’s in Store?
Because Seattle rent and real estate prices have risen so quickly, many buyers and owners are afraid that their homes can’t possibly retain their value.
We’re one of very few mortgage companies to survive the market crash and subsequent recession, and we did it by lending conservatively, being honest with our clients, and betting on the right horses. Here are our predictions for Seattle’s housing market and whether or not what we’re seeing is a bubble:
Our real estate boom is built solidly on the foundation of rising salaries, new wealth moving to Seattle, and limited supply
Though housing prices will continue to increase, we aren’t going to be seeing San Francisco-esque heights. We’re a city able to learn from example, and no one wants to see their outrageous wealth disparity and housing prices here. We’ve already put into place many building codes and initiatives to make affordable housing construction easy and encouraged, and more importantly we’re already building more places to live per annum than San Francisco.
However, new construction will never outpace the increased demand, and the housing boom isn’t over. We will experience another spike in 2019 after Google opens their new South Lake Union headquarters and employs as many as three or four thousand new “Creative Class” workers in the very same year that Expedia opens their new Seattle headquarters to accommodate their 3,000 current Bellevue employees as well as as many as 4,500 more. If you’re worried about buying a home that won’t retain its value, don’t worry, the tide of high-income buyers is only rising.
If you’re considering the purchase of a new home, but afraid of being burned by purchasing in the midst of the most competitive seller’s market this city has ever seen, we can tell you with conviction that our high real estate prices are here to stay and indeed continue growing.
For more information or market insight, contact us at Seattle Mortgage Planners!