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.
Zillow released a report on the number of million dollar zip codes across the country and Seattle gets some attention. While the Bay area dominates the million dollar zip code range, Seattle gets special attention for doubling its number since the housing peak in 2007. Keep in mind that these numbers are being judged based on the Zestimate, which is a fraught metric.
Continuing with the spate of stories about the state of the local renter market, a new study using census data indicates that every generational group in Seattle has a significant portion of people who are overburdened by the rent. The report looked at the proportion of income spent in rent for three different age groups by people who rent instead of owning. While the different groups had very different rates of homeownership, they were all fairly similarly burdened by their rent.
Related to the theme of Seattle’s growth from the last several weeks, Seatac is growing, too. The south terminal has been undersized for quite some time, and the new terminal is expected to double its capacity. The hope is that this will reduce delays and crowding in a way that significantly improves the Seatac experience. Hurray!
The sun has been making regular appearances and the mercury is rising, so check out this map of Washington State’s depressing place names and the stories behind them. My favorite is #4, Desolation Peak, but I do have a literary bias so it was cheating by getting Jack Kerouac involved.
Rent prices are continuing to do interesting things, by which I mean, they’re still going up, but not uniformly and not at the rates we’ve been seeing. (Rents showing a slight drop in Capitol Hill? I’m wondering if that’s a data blip, or a settling out now that the light rail has been open for a while.) We’re still ranking in the top 10 nationally across a variety of sources. Rent prices in the region are a very important metric to watch for assessing the state of the housing market as a whole. We have a lot of outside investors, but not enough to power the entire market, and rents are a good indicator for where the locals are going to stand when they assess their relationship to the market.
That’s important because this year may or may not be the year that kicks off a genuine housing bubble. The housing stats since November have been an ambivalent will-we-won’t-we mix, and that’s continuing. So far we’ve been leaning more toward the won’t-we side, but March showed signs of a shift. April doesn’t appear to have supported that. Inventory is still low, but the number of sales finally dropped, and there are some indications that prices are starting to plateau. Those are both really good signs that the market isn’t getting frothy and the growth we’ve seen in the last few years have been a natural correction in response to the recession. It’s not definitive, though, and we’ll have to keep watching the numbers as the year continues. If sales continue to fall and prices hit a definitive plateau, we’ll be in good shape. Give us a couple years for inventory to correct toward something reasonable, and we might even see a sane market again.
The news this week is all about renting. Seattle is one of the few places in the country where the current median rent wouldn’t cover the mortgage on the median priced home according to a study from Zillow. Most of the time in most places, median rents and mortgage payments are commensurate, or the rents are higher. The Seattle market just keeps finding new ways to stay special. That doesn’t mean that buying can’t be the right choice for somebody renting in the current market, but it does mean the current market is challenging, and there may need to be reasons other than strictly budgetary ones at play to make renting a good choice for a buyer.
Which makes the timing of this article from Curbed Seattle on the best neighborhoods in the area to rent in fortuitously timed. They have several different categories based on your main priority in your neighborhood, and include a category for the best burb to rent in. Even if you’re stalwart in your property ownership, it’s a handy article just to see how your neighborhood stacks up from a renter’s-eye-view.
The burbs category in the Curbed article is especially handy in light of this article from rentcafe.com blog breaking down the growth rates for renters in 20 metropolitan cities and comparing it to the rates of growth in the suburbs. In most cases, including Seattle, the burbs are adding renters faster than their urban centers. That’s particularly surprising given the stereotype of people renting in the city, but moving to the burbs when they buy. Market norms and trends a generation from now probably aren’t going to look much like they traditionally did before the housing crisis, and this is a striking example of where those differences are going to come from.
Last week we talked about the news that rent hikes might be getting smaller. Smaller hikes isn’t the same as smaller rents, though. Zillow just published a handy calculator that will help you figure out what level of raise you need in order to cover your anticipated rent increase.
Some of the news in this article about properties going above listing price won’t be terribly surprising, but if you thought the hot market was limited to the Seattle city limits, you’ll want to read past the fold. The percent of properties in Redmond going over list is big enough to make Seattle’s numbers look reasonable. The eastside in general is cooking up a storm, pressing buyers in the area who need “affordable” even more tightly into the North/South corridor around the city.
Bertha broke through, but we’re not quite done talking about her. SDOT made a video so you could watch the accomplishment. If you’ve ever wondered what the world’s largest boring machine looks like when it finishes a job, now you can find out.
If you’re a data nerd at all, you should probably be reading the Seattle Bubble on your own regularly, because their analysis is great. For example, they dug into the January data from the Case-Shiller index and look at more than just price growth in Seattle, but give good context for how it compares to other rapidly growing metropolitan areas including, important to the Seattle market, San Francisco. With as much interest as we get from Bay Area investors, a softening in the market there is likely to have an impact on the Seattle market (though probably not a huge one unless it was part of something bigger) so it’s something worth keeping an eye on.
There’s more evidence that trends in rent prices from the last several years might be shifting. A slow down in increases isn’t remotely the same as rents going down, but it’s still good news as far as I’m concerned. With upzoning approvals around the city already rolling in, and plenty more in the pipeline, hopefully the next few years will bring a slow down in rent hikes across the city. We’re at a place where rents are high enough to keep the market happy to build new inventory for quite a while; stabilizing things will let buyers be more thoughtful about their choices in jumping ship to buy, hopefully easing some of the inventory trouble we’re having and shoring up against the kind of frenzy that would tilt us toward a burst-ready bubble. (I started in the industry right after the last bubble burst. It was fun to be a buyer’s agent then, but I’m not eager to go back to it.) In summary: Yay, less exorbitant rent hikes!
Speaking of pipelines: Bertha made it! Yo go, you tardy, over budget girl. I must confess, I was one of those, “That’s never actually getting done,” doubters. It got done. Finally. Being a doubter doesn’t make me less proud of that giant drill that eventually could.