What’s In Store for Seattle in 2016?

Each year I take a look back on the Seattle real estate market and consider what is coming up in the months to come. Here is a snapshot of my 2016 predictions for Seattle’s real estate market:

PRICES: December’s data is not yet available, but median residential home prices in Seattle have risen 13.1% over 2015. That is a significant increase! I don’t expect 2016 to have an increase quite so strong, but I do expect there to continue to be a more moderate increase since we are starting from a higher spot. Housing inventory will continue to be a challenge and a driver in our market, especially as jobs at Amazon, Google, and other tech industries continue to grow and fill the office space available. Although there are new projects and housing available, it will continue to get consumed quickly. Therefore, I predict Seattle home and condo prices to rise between 8- 10% over the next year.  They rose from 2012 to 2013: 11.2% and 2013 to 2014: 7.4%.

AFFORDABILITY: I do expect this will be a very hot topic in 2016 especially in Seattle. The areas around South Lake Union, Capitol Hill, Queen Anne, and Belltown will see the highest demand. These are already areas where rent – and prices – are soaring, and the people who are moving in for work may be priced out. First time homebuyers will be priced out of many of these areas (as well as renters if rent increases faster than wages). Therefore, they may be looking in neighborhoods just outside of there (such as Ballard, Greenlake, Leschi, etc) and look to mass transit.

INVENTORY: There were 1,133 homes and condos available for sale last November. This year there were only 739 – a 34.8% decline. The average days on market for a home or condo sold October-December of 2014 was 34. That has declined to 22 in October-December of 2015. There are a number of condo developments on the horizon for 2016, but we need more to house the number of people coming into the area.

According to Seattle.gov, 2010’s population estimate was 608,660 and the population estimate for 2015 is 662,400. This means that within the last five years, we needed to house 53,740 additional people. That is 10,748 per year or 207 people per week. No wonder we have an inventory challenge! The job market is going to continue to be strong in 2016 and more workers will be on the hunt for housing!

ADUs and DADUs: Accessory Dwelling Units (ADUs) and Tiny Accessory Dwelling Units (DADUs) are separate living spaces within a house or on the same property as an existing house which are legally permitted. Mayor Murray put forth his aggressive Housing Affordability and Livability (HALA) plan this past year to create 50,000 housing units over the next ten years. Increasing the number of ADUs and DADUs are on the HALA report for 2016 and I predict that we will see many ADU and DADU units built on lots to increase urban density. These are also referred to as cottage housing, small duplexes, and backyard cottages. There may be an opportunity for you to build an ADU or DADU in your own backyard! You can find out more information on ADUs and DADUs and the HALA report here:

INTEREST RATES: The Federal Reserve decided to raise the short term interest rates at their December meeting, which will undoubtedly cause mortgage interest rates to rise over the coming year, perhaps as much as to 5.5%. Although this will affect how much home a buyer can afford, I don’t expect it will diminish demand significantly.

If you would like to learn more about what is in store for 2016 and how what is happening with the real estate market affects your real estate investment, please give me a call or text: (206) 226-5300 or email: sold@windermere.com.

Could Rent Control be coming to Seattle?

According to the National Association of REALTORS®, over the last five years in the Seattle Metro area, rents have increased a whopping 22.26% between whereas wages for 25-44 year olds (which comprise a good number of renters) only increased 15.3%. This time period reviewed was quarter 3 2009 to quarter 3 2014 for the rents whereas wages were reviewed 2009-2014. According to Dupre+Scott Apartment Advisors, that number is even more staggering when looking only at Seattle and since spring of 2013 – 18% higher.

This disparity along with comparisons to tech-driven job markets such as San Francisco have many wondering if Seattle could be the next city to jump on the rent control bandwagon.

According to the Puget Sound Business Journal, there was a town meeting at City Hall on April 23rd to discuss this hot topic and Mayor Ed Murray has even created a housing affordability task force to tackle the problem. The hurdle is a big one – rent control is currently illegal in Washington State.

Seattle Magazine reports that renters make up 52% of Seattle’s population, so the effects of such a law – or not passing a law – will be felt by the majority of Seattle’s residents. With the average market rent for a one bedroom, one bathroom apartment in the city of Seattle going for $1,445 per month, there are a number of renters and would-be renters who are going to have to start finding housing further away from the city center.

People for rent control point to issues like transportation that become a bigger challenge when workers cannot afford to live near where they work and have to commute in. However, those who oppose it indicate that rent control will hamper development and reinvestment in the buildings that may be in need of updating.

Whether you are a proponent of rent control or not, this debate and rent increases are driving some to turn to home ownership, even with the inventory shortages that challenging the real estate market.

However, the economics of it make sense. If you are paying $3,000 per month for a three bedroom apartment in Capitol Hill and you can buy a 3 bedroom home in Wallingford for $600,000 (even taking into account multiple offers driving up the price from $500,000 to $600,000), depending on your down payment, that mortgage and principle may only come to $2,300 per month. Add taxes and insurance on there and you might be at $2,800 per month.  Remember, this is just an estimation, and prices vary, but if you are pounding your fist, hoping rent control is passed before your landlord decides to raise the rent again, you owe it to yourself to take a look at home ownership.

And remember! If you have a 30 year fixed rate mortgage, your monthly mortgage payment is your monthly mortgage payment – next year and 25 years down the road. Furthermore, you are building equity which could mean money in your pocket when you are ready to sell. Try doing that while renting!

I would be happy to give you additional information on how to make your housing dollars go further. Give me a call: (206) 226-5300 or send an email to: sold@windermere.com!

Amazon Set to Lease More Office Space in Downtown Seattle

According to the Seattle Times, Amazon has leased a full city block in South Lake Union which was originally occupied by Troy Block. This is a two building development with 817,000 total square footage leased. The first of these two buildings will be open in 2016 and the other in 2017. The total square footage occupied by Amazon could accommodate 50,000 employees which would make Amazon the largest employer in Seattle.

While there are some concerns about Amazon occupying 25% of Seattle’s available inventory of premium office space, I would like to focus on what this could mean for our local real estate market.

As you probably are aware, we have a shortage of available homes in our Seattle real estate market. There is a shortage of condos, residences, and rentals causing rental rates to increase excessively. There are some apartment buildings in the area that are renting apartments in excess of $4,000 per month for a two bedroom apartment just over 1,000 square feet. The City of Seattle and King County have turned density and growth into hot, highly debatable, topics. Unless we allow for areas of higher density, house prices are going to continue to rise, causing would-be workers to be priced out of the urban core due to high rents or housing prices.

The second hot topic is transportation. Sound Transit and Light Rail are going to be a part of our long-term solution for dealing with the increase in traffic that more jobs in the Downtown core creates. Although I mentioned Amazon earlier, Facebook is also expanding Downtown according to Geekwire, along with Zillow, Twitter, Tableau, and Google which means more employees at these companies as well.

What do homeowners and would-be homeowners need to know? If you are renting, please talk to a real estate agent about what the next five years could look like for you in terms of rent versus your purchasing a home or a condo. There may be loan programs available that will allow you to purchase property with a lower down payment than you expected.

I will be keeping an eye on what Seattle and King County are doing to handle the density problem which could affect homeowners in our area. In other cities where additional dwellings are allowed on a city lot, the value of those lots have gone up significantly. I will be sure to keep you in the loop if something like that comes to the Seattle real estate market! In the meantime, please contact me with any questions you have about our local housing market: (206) 226-5300 or email sold@windermere.com.

Multitudes of Millennials in Position to Purchase in Seattle Metro Area

According to the National Association of REALTORS® the Seattle Metro Area is one of the top ten markets in the country with the Millennial generation poised to lead the charge of first time homebuyers. Seattle, along with metros such as Austin, Dallas, Denver, Des Moines (Iowa), Grand Rapids (Michigan), New Orleans, Ogden, and Salt Lake City have strong job markets with jobs that appeal to this generation and the demand for housing hasn’t priced first time homebuyers out of the market like in New York, Los Angeles, and San Francisco.

According to NAR Chief Economist, Lawrence Yun, “NAR research finds that there are…metro areas millennials are moving to where job growth is strong and home ownership is more attainable. These markets are well-positioned to soon experience a rise in first-time buyers as the economy improves.”

The homeownership rate for young adults (under the age of 35) was 43% in 2005 (the peak) and the rate has fallen from that peak to 36% in the first quarter of 2014.

NAR measured current housing conditions, housing affordability (measured by incomes, interest rates and median home prices), job creation, and population trends across the country in metro areas that have a large millennial presence. NAR expects that as life events present themselves (marriage, kids) millennials will want to settle down and purchase a home rather than rent and live in close quarter. As long as market conditions hold and affordability is maintained, millennials are poised to be our next wave of first time homebuyers.

What does this mean for current homeowners? I expect demand will continue to be strong in our region as job growth is strong in our region. Over the next few years, if you own a home with market value under about $400,000, I expect that price point to increase in demand unless our builders complete new homes to meet that growing need. If you have questions for me or would like to learn more, please give me a call or send me an email: (206) 226-5300 or sold@windermere.com.