The New Gold Rush
The Seattle Metro Area ranks high in the Top Ten Markets nationally to invest in rental properties. A strong job market lead by the continued growth of Amazon has resulted in more people looking for housing than there is housing available in our area. The law of Supply and Demand is the simple explanation for the rise in our rental market and the cost of purchasing property in the Seattle area.
The median price of Single Family homes sold in Seattle rose to an all-time high of $644,950. That is a 24 percent increase over the past year (in King County the median price is $514,975). The increase in multi family property has been just as dramatic. For the condo market we have a median price of $323,975 in King County with Downtown Seattle condos median prices at $597,500. Historically Real Estate appreciates three percent(3%) per year so how do we account for the double digit gains in the Seattle Market.
- Strong job market Unemployment rate in Seattle hovers at 3.7%
- Puget Sound Region is a Trendy Tech Center attracting workers to our area. ONE HUNDRED TWENTY THOUSAND PEOPLE moved here last year
- Historically low interests rates
- Historically low rates of return on other investments less than 1% return on money markets & CD investments
- The median price of a home in Silicon valley is 1.1 million dollars and in Vancouver B.C. it is One Million Dollars. Seattle has become the new destination for many of these high tech workers as our housing costs look like a bargain in comparison. The fact that Washington State has no state income tax is also a bonus
- Seattle has the Growth Management Act that limits high density. Most of Seattle is zoned for Single Family Homes with only a few neighborhoods zoned for high density (condos & apartment buildings with heights of 3 to 6 stories) Ballard and the University District fall into the high density zones that is why much of the new construction is centered there
As rents to continue to rise there has been pressure from Seattle tenants to have rent control legislation in place. They have found a sympathetic partner with the Seattle City Council. In reality the Seattle City Council does not have the power to pass a rent control law. This would have to change at the state level in Olympia, WA. At this time the state legislature is not interested in rent control measures. The Seattle City Council has passed measures to create more burden for a landlord to sell or remove a tenant from the rental property. The Seattle City Council is also looking at creating more restrictions on security deposits. The federal government is also looking at creating more protected classes in regard to rejecting a rental applicant based on criminal history.
As many of you may recall, 2007 was the previous height of our housing market and then the crash came in 2008. On average housing prices fell 30% and rents fell between 10% to a high of 18% in the Downtown core. The market is showing some signs of slowing and there are areas of concern. Boeing has announced layoffs of 4,000 workers and we see some investors making the same mistakes that were made in 2007. If interest rates rise the housing market will appear less attractive for investors.
Investors have played a major role in the high demand for housing with 30% of all property sold to the investor market. New construction can outpace demand. Seattle is also home to the biggest building boom we have seen in the past 40 years. This year alone 20,000 new units will come online. At some point the housing supply may outpace demand. This will lead to a higher vacancy rate and stabilize or lower rental rates, and the cost to purchase housing.
Koss Property Management continues to monitor the Seattle area housing and rental market to help our clients achieve the best possible cash flow and reach their investment goals. Please update our office with your current contact information and see the attached information for our current staff rooster. We welcome questions regarding your property and can provide a current market analysis on your investment property as well as locate property for those seeking additional investment property.
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