If you’re looking for a different kind of good news in the market, you can find it from this Housing Views analysis of the flow-of-funds data from the Federal Reserve. It finds that, nationally, home equity wealth is at a high. What that means is that the money owners could turn on selling their homes, after paying off their mortgage, is at a high. Given that less than a decade ago a startling percentage of homeowners had negative equity, meaning the amount they owed on their mortgages was more than they could get if they sold their house, that’s actually pretty great news. The analysis is looking at the whole country, so of course there will be local differences, and some areas do still have an unhealthy level of low and negative equity wealth, but it’s nice to see a national trend that indicates home owners are in a fairly comfortable situation, relatively independent of what the market will pay for their homes.
In more local news, the Seattle City Council passed a tax on short term rentals. It’s not yet active and the implementation details are still forthcoming, but it’s a measure explicitly meant to target the Air BnB market. The fund will go toward affordable housing, which is handy. It’ll be something investors in the local market will want to watch, though I suspect it isn’t going to have a significant impact on revenue for the AirBnB crowd.
Perhaps related to the previous news item, Curbed Seattle pulled out the locally relevant bits of an Apartment List report. According to it, nearly half the renters in the Seattle area were cost burdened, meaning they spent more than 30% of their income on housing. That 30% figure is the magic number that a healthy budget spends on housing, and is what banks use as a target when deciding how much of a mortgage you qualify for. The article does a good job of putting the numbers in context, both nationally and historically, so I’d suggest checking it out.
Curbd Seattle has the roundup of rental listing prices for November. Overall, it looks like rent is up a bit year-over-year and flat or slightly down as compared to September, which is in line with a lot of what we’ve seen over the course of the last year. Despite the slower, flatter rate of rents this year, the effects of rent increases are still being felt across the city, including a uptick in homelessness. If rents remain relatively flat this may wind up easing some of the pressure on the purchase market’s inventory by allowing potential buyers to continue renting rather than enter the market. It’s not the best way to correct the market, and it isn’t enough by itself, but it’s something that could have enough of an impact to be worth watching.
And the market is in need of some correcting. The sellers have all the advantages in this current market, with a continuing trend of quick sales and rising prices. I’m going to take the 11% year over year increase in inventory and cling to that as some good news. Realistically, most sellers are buyers, too, so a balanced market will make everybody happy.
If you know Seattle, you know it’s a fairly literary city, but now it’s internationally recognized as such. UNESCO has designated Seattle as a City of Literature, after a years-long campaign by locals for the recognition. This confirms me in my strategy of establishing knowledge of a neighborhood by knowing where, from any given house, I’d go for grocery shopping, tea drinking, and book buying.
The Case-Shiller numbers for August are out, and price increases are still going strong. “Strong” in this case means 11.3% compared to August of 2016. If you’re distressed by that, this article from the Seattle Times might help put things in perspective. It compares the Seattle market for housing (buying and renting) to San Francisco’s market, and the comparison generally comes off favorably for Seattle. That said, having perspective doesn’t mean you won’t still be distressed; “San Francisco is worse” doesn’t mean things aren’t rough here.
This one caught me by surprise: Florida is one of the top places people arriving in Seattle hail from. Our weather is objectively better than theirs, so I can understand the impulse. Welcome, Floridians!
I just have two links for you this. The first is this article which has been passed around pretty extensively amongst the local real estate folks. Everybody likes rose-colored glasses, and this article is tinted pink like a Tiffany window. Most of the quotes from Matthew Gardner demonstrate a finely crafted ability to look at selected pieces of the big picture and take comfort. If you like that comfort, stop there.
If you’d prefer a broader take, you might want to click through to The Seattle Bubble’s response to the article. Tim isn’t willing to say that we’re in a bubble, and he’s more qualified on economics and stats than me, but I’m pretty comfortable coming down on the side of saying yes Seattle is definitely in a bubble. We’re still at the beginning of it, but looking at our market numbers compared to the national trends, we’re outstripping national averages by more than can be justified by local economic forces. Unemployment is down and inventory is low everywhere, but Seattle is having a unique response, and I don’t think it’s a sustainable one.
What that means for people looking at buying or selling in the local market will depend on the individual, but broadly speaking, if you want to buy in the next 1-3 years, now is probably better than waiting, and if you want to sell, now’s good. Next year will be too. The year after that is probably good, but I’m not comfy with predicting continued growth beyond there at this point in time. Recognizing a bubble and behaving accordingly is savvy. Forgetting that bubbles burst isn’t.
Comments are open for proposed zoning changes that would allow ADU (Accessory Dwelling Units) and backyard cottages in Seattle. It’s a tiny step toward fixing a large housing problem, but enough tiny steps add up. I suspect permitting ADUs is a much more palatable route to the city’s single-family home dire hards than some of the other density proposals out there, including abolishing single-family-zoning entirely.
We finally have approved building designs for the Capitol Hill station, the development to go above the light rail station that opened last year. The station opened early, but breaking ground on the accompanying development has taken its own sweet time, and we aren’t there yet. This will add inventory to the apartment market in Capitol Hill, which is a good thing, and create community space with extremely easy access from outside the neighborhood, which is also good; having people in Capitol Hill for something other than the night life is always a good thing.
And in case you were wondering why people are concerned about wanting more inventory on the market, or whether it’s had any effect, it looks like the cost of living in Seattle is up to $75,000 per year, and a lot of that is due to the cost of housing.
The Seattle Times has had some good real estate coverage if you’re looking to get a feel for the flavor of the market. One is a behind-the-scenes look at the negotiation for a house in West Seattle. Another is a compilation of Mike Rosenberg’s reddit AMA on the local market and housing in general.
The Puget Sound Business journal dug into demolition and construction permits to find the areas of the city that are the hottest for teardowns and the answer isn’t surprising: Ballard is the winner. Of the hot neighborhoods in Seattle, it’s the one with the largest inventory of property that hasn’t been through an upgrade cycle or wasn’t built to the top of the market in the first place, so teardown activity now makes sense.
The Seattle Bubble appears to be running out of headlines for the perpetual sameness we’re seeing with the latest market numbers. I’m sympathetic to the sentiment, though I think Tim and the NWMLS both missed the important takeaway from the data indicating that more houses are sitting on the market past their review date and other listings having price reductions: it means that marketing a property does still matter and buyers aren’t literally buying anything. That’s good news of a sort, if you’re willing to strain for it. It means things can still get worse.
Lots of news about the rental market this week, and not terribly consistent news, either. On the one hand, according to the Puget Sound Business Journal, vacancies are up, though they attribute the increase to new units entering the market. Meanwhile, median rents are up once again, across all the various places that calculate it.
Everybody who was worried that the news about Amazon’s hunt for a location to set up a second HQ spelled the end of the cushy Amazon-Seattle relationship can comfort themselves with the news that Amazon isn’t finished growing in Seattle. They already represented a significant portion of the office space tenancy downtown, and now they’ve signed a lease agreement for huge chunk of the Rainier Square project. I’m skeptical about the wisdom in facing the fragility inherent in being dependent on a single company by throwing in with that single company harder, but it is hard to say no to the opportunities Amazon offers.
At least if somebody other than Amazon wants to move in, they’re likely to have the space to do it. The Uptown/Lower Queen Anne rezoning passed, so the area will be eligible for taller buildings. Every neighborhood up for review so far has passed which is a promising trend both for increasing density in Seattle and putting the prospect of affordable housing on the horizon.
I was slightly off in the timing, but I was right about the weather punishing me for declaring Autumn’s arrival last week. And it’s expected to get warmer tomorrow? Seattle, you and I need to have a serious conversation about appropriate temperature choices for late September.
I suppose it makes sense, though, given the Case-Shiller numbers. As always, the Seattle Bubble has a great analysis, and looks at the local market trends in comparison with national trends for an illuminating picture. Growing that much faster than the national rate is interesting, but I’m not convinced it’s the kind of interesting that’s good. All real estate is local, but national trends have a tendency to correct local anomalies.
At least we’re doing our part to put that market heat to work combating the weather heat. Seattle is ranking pretty well nationally for LEED-certified residential building. Those are buildings that are certified for their “greenness” focusing mostly on energy efficiency. I’ve been a big fan of the current building trends prompted by LEED-certification because in addition to being more environmentally friendly, the construction is frequently higher quality, with better noise control, than the typical construction trends of the ’90’s and aughts.
Autumn is here and we have the drizzle to prove it! I understand that this isn’t a universal opinion, but I am quite pleased to have the return of the chilly damp that is Seattle at its best. (Watch it get sunny and shoot up to the 80’s this weekend just to spite me.)
MyNorthwest has a slightly fluffy article about how apartment building trends in Seattle are preventing condo building. Or maybe it’s about how difficulties around condo development in Settle are causing that problem. It’s a little light on actual content, but does capture the very warranted feeling that there’s a gaping hole where the entry-level housing market ought to be. Useful if you’re looking to capture the flavor of the current market and aren’t fussed about details.
Less fluffy and more interesting, this article from HousingViews takes a look at the effect of the tax Vancouver instituted on non-resident foreign buyers in 2016. News of the tax was received in some quarters with the assumption that those buyers would leave Vancouver and come to Seattle. From the data presented in that article, it looks to me like they stayed in Vancouver, they just stopped paying as much on the houses to be there. (Price growth slowed, but transaction rates didn’t.)
If you’re more interested in the infrastructure we already have, Curbed did a ranking of Seattle neighborhoods to find the ones that make car-free life the easiest. They look at transit access, walkability, and bikability. It’s a handy guide, especially if you’re interested in details about upcoming transit shifts for some of the neighborhoods discussed.
The Seattle Bubble has their analysis for the August numbers from the NWMLS. Things are still trucking along. What struck me in this was actually the quoted bit from the MLS saying that 1/3 appraisals are coming in low. That…surprises me. I’ve been hearing about low appraisals here and there, but haven’t run into one or heard nearly enough to suspect they were that common. Granted, cash offers usually don’t have an appraisal, but while cash is a significant portion of the market right now, not enough that I’d expect it to hide the fact that a third of the appraisals are coming in significantly low. On the one had, woah. On the other, I’m glad to see there’s a check in place on pricing in the market and that it’s getting triggered that often.
Curbed Seattle did a great writeup on the “missing middle” of Seattle’s market. It’s been true that there’s no such thing as a starter home in Seattle for a while. Starter-condo, maybe, but single-family home? Nope. The fact that the rental market isn’t really stepping in to fill that gap is a significant part of what’s driving people out of Seattle and into the surrounding areas. I see a lot of people going further north, up to Mountlake Terrace, Lynnwood, Everette, and Lake Stevens, but there’s a significant southern movement, too.