Tag Archives: seattle

Seattle’s shortage of homes for sale foments disruptive bidding wars

This article was originally published on WSJ Marketwatch:

The headlines read “Seattle’s real estate market is hot!” Under that glossy surface, Seattle real estate’s inventory dearth is a growing, unruly mess.

Home prices in King County rose 12% in February, but that’s no longer an attention-grabber. They rose 18% in the same period one year before.

Inventory is at just 1.1 months. The number of available homes for sale dropped 21% in one year. These crisis-level numbers should be astonishing, but they’ve begun to seem unremarkable. After all, inventory dropped 26% in 2015, 17% in 2014 and 10% in 2013.

The shock has worn off. We’ve been inundated with double-digit noise for so long in the Seattle real estate market that we’ve almost become numb to it. While that’s understandable, it’s also problematic.

King County is issuing 200 new driver’s licenses every day to people moving in from out-of-state. That doesn’t include in-state migration and in-county natural population growth. Meanwhile, the county is only issuing building permits for 27 new housing units per day.

The diverging trend lines of people and homes get further apart by the day, month and year. Prices rise swiftly.

Residents get squeezed. They “drive to qualify”. They live further out, commute longer distances, create more traffic gridlock, spend more on transportation, have less time to spend with their families and experience a diminished quality of life.

There’s no risky financing housing bubble to blame like there was a decade ago. Employment and in-migration in King County is forecast to rise exponentially in the coming years. These are people with real jobs, verified income and real down payments. There just aren’t enough homes, so prices continue to soar.

Consumers are often surprised to hear that Realtors aren’t always excited about skyrocketing prices. We’ve gone so far as to create a media blitz and conversation starters about how we can add balance to our market at HousingTranslator.com. You’ll see a push for smart housing policy measures on the web, radio, even on the side of buses. Important discussions about creating more housing options in the greater Seattle area aren’t being had often enough and we intend to change that.

We work and live in the same neighborhoods as our clients. Our neighbors and customers feel the same strain on their housing options, commute times and lifestyles. Higher prices due to artificially constrained supply aren’t good for any of us.

As organized real estate groups push for flexibility for greater housing development, we’re often told by those who influence public policy that “We can’t just build our way out of this,” or “Supply and demand don’t apply to this issue.”

The laws of economics are not optional. The population is growing, and demand for housing must be met. Let’s look at the region’s dire housing situation as if it were a different necessary amenity for our residents.

What if the region’s garbage collection services were already maxed out by its current residents? What if, despite population growth, we gave up on building out our waste management services to support our new residents? If some of our residents don’t like the look of more garbage trucks, can we simply deny economics and ignore our population’s growth?

If we try, there’s a day when the garbage service just can’t finish picking up the growing amount of waste that the population is creating. The trucks leave the last 1% of garbage on the sidewalks. They won’t catch up the next week, either. We’ll fall another 1% behind. After just one year, garbage trucks would be leaving more trash on the sidewalks than they’d be picking up. The unmet need for services would continue to become more extreme as the population expands and services, in relative measurement, shrink.

That’s been the story of Seattle’s compounding housing woes, and we’re many years into the process. We can’t clean up today’s problems because we’re still not providing enough housing options to service the population growth from years past.

If the analogy sounds a bit hyperbolic, that’s the intent. Something has to cut through the blasé coverage of Seattle’s real estate outlook.

Bidding wars are the rule. Attorneys and software engineers can’t find homes to buy. That’s not tugging at anyone’s heartstrings.

Higher income residents eventually resign themselves to outbid someone on lower-priced homes, though. These folks force the middle class to find other options — teachers, small business owners, etc. There’s nothing left for middle-class buyers to do but drop down a price category and outbid working-class home buyers. There’s no denying the linkage. We see it every day in the business. Buyers keep bumping each other down, but there’s nothing left at the bottom.

Every new housing unit, high-priced or low, creates more breathing room in the housing ladder. It’s an undeniable domino effect. Thoughtful concern for low-income residents necessarily requires a desire to create more housing units across the entire spectrum of pricing.

The repetitive stories about rising prices in Seattle may lull some to sleep, but the strain on the region due to lack of housing development is snowballing. Affordability of homes at all income levels needs to be addressed if we want to keep our businesses happy, our residents employed and housed, and our transportation systems working efficiently. More people plus more jobs equals more housing units needed. There’s no back-door formula to change this equation.

We can build our way out of this problem. We can also do it intelligently, by preserving legacy neighborhoods and increasing density in urban centers near transit hubs. Change is inevitable. Political myopia and willful ignorance will not improve the path that the Seattle region’s housing stock is headed down.

We’ll be at least 10,000 units further behind next year. There’s no time for nonchalance in light of our repetitively gaudy housing numbers. From a long-term perspective, they’re downright scary.

Residential building can’t keep pace with Seattle’s surging job market

This article was originally published on WSJ Marketwatch:

Surveying the dozens of towering cranes growing into Seattle’s skyline, one might wonder if there’s a housing boom that will eventually crash as it did in the last Seattle real estate downturn. It’s a reasonable reaction for an untrained observer, but it’s also a dangerous one for the region’s ability to plan for accommodating smart growth.

Seattle was recently cited as the top U.S. city for construction cranes, with twice as many in action as New York or San Francisco. Viscerally, it feels like a building boom that could outstrip demand.

The problem is that, by and large, the city isn’t building housing. Of the 16 new high-rise towers being built in Seattle, just two of them are condominiums. Between Seattle’s three new condo buildings, the city is adding about 1,000 housing units. New apartment buildings are only bringing online around 2,000 new units in the short term. Meanwhile, King County issued 71,000 new driver’s licenses to people from out of state in 2015. Most of these people will work in the metropolitan core. The numbers aren’t adding up.

Seattle’s rate of housing construction continues to fall behind the region’s population growth. The demand for housing comes from a changing local environment. An ever-increasing population of technology, health-care, science and other workers are relocating to the area for its booming employment market.

In the current environment, with robust job growth and a nationwide spotlight, Seattle is experiencing rapid price appreciation. Double-digit gains have become the norm, squeezing the ability of the average resident to live in the core. This creates great stress on the transportation system as residents move further out and commute back in to the city.

Seattle’s growth isn’t a new story, but defining its size and impact is often difficult. Companies are often tight-lipped about hiring numbers. Based on multiple reports, though, just four local companies are planning on hiring an additional 10,000 employees in the coming year. There’s phenomenal job growth throughout the region across dozens of large organizations, but by simply focusing on Amazon AMZN, +0.49%  , Google, GOOG, +0.60% Facebook FB, +0.78%  , and Microsoft MSFT, +0.51%   the region needs to build an additional 10,000 housing units within a reasonable commute distance to keep our housing situation from becoming more constricted.

What about that forest of cranes? It seems that most of Seattle’s construction is focused on offices for the workday employees as opposed to homes to house them within close proximity. Amazon is nothing less than a phenomenon. It occupies 10 million square feet of commercial space in Seattle, and it seems to announce plans to build a new tower every other month. The company is hiring as quickly as it is building offices.

Many of these new residents will want to buy homes. While the growing city requires greater density of housing, condo construction lags far behind population growth. There are a scarce few condo construction projects coming to market, and few in the planning phase. Between Insignia, Gridiron, and Luma projects opening between 2015 and 2017, less than 1,000 new condos will be available to purchase.

Developers blame the lack of condo construction on onerous regulations that put tremendous liability on the builders of condos. The costs of construction, and the virtual guarantee of being sued in the current environment, render most Seattle real estate projects unworthy of condo development.

Smart growth requires the region to encourage density in the locations where employment exists. Local officials need to embrace the links between housing supply, development costs and the ability to provide affordable housing and reliable transportation for citizens at all income levels. The price of housing has always affected the ability of the entire spectrum of residents to live in a healthy environment and have a reasonable work commute.

Seattle needs more housing. It needs higher-end housing that’s in demand by our new residents to slow the rapid price increases due to constricted supply. It needs moderately priced housing to keep its long-time citizens within reasonable distances from their employment and ease transportation issues. It needs affordable housing to keep our residents who are being stretched to their limits in safe environments where they can continue to work and grow without the fear of losing everything.

It’s time for Seattle to talk seriously about what will ultimately decide our fate — supply and demand. There is no band-aid or legislative work-around that negates the laws of economics.

The conversation starts with supply. Everything else is a game of musical chairs.

Seattle home-sale market provides small hint of slowdown

This article was originally published on WSJ Marketwatch:

Home buyers in Seattle might be able to breathe a bit easier. The Seattle real estate market is still red hot, but the rate at which its inventory is shrinking has been slowing.

The number of homes available for sale in the greater Seattle area has shrunk about 13% year over year. That news on its own sounds like bad news for buyers. Compared with the 20% drops that we’ve seen over the past 18 months, though, it looks like a positive trend. Sellers may finally be getting on board and listing more homes for sale.

Available inventory in the Seattle real estate market has been under two months for over two years. That’s not a healthy market, and it has pushed double-digit price increases across the region. A balanced market would have 4-6 months of available homes. Sellers are concerned that after they sell, they’ll have trouble finding their next home in this competitive market. It becomes a self-reinforcing cycle. The summer slowdown we’re seeing right now may finally be reversing that trend a bit.

That’s the feeling on the streets from many real estate brokers. From the MLS board to the Realtor association and brokers’ offices, the general murmur is that while the market is still very hot, we can feel a bit of a slowdown in the air. Some buyers are giving up. Some aren’t willing to waive all of their contingencies any longer. Cash buyers still win, and big offers still prevail, but buyers are negotiating a bit harder and sellers are playing along.

King County, at the heart of the Puget Sound real estate market, could use that relief. The median Seattle home price rose 15% over the past 12 months. At $505,000, that pricing is out of reach of many middle-income residents. Still, the influx of technology jobs and the lack of new construction create a demand for homes in the upper pricing tiers of the market.

ondos are scarce. King County has 0.9 months of available condo inventory for sale. Seattle condos are like a black hole. The inventory just keeps imploding upon itself.

With this kind of price appreciation comes bubble talk. The price increases are dramatic. There will be a slowdown at some point, but our situation is vastly different than it was before the 2007 peak. There are 10,000 new technology workers coming to the Seattle metro this year from just four companies. They’re making good money. The mortgage system now verifies income, employment, assets and ability to pay.

In short, the last bubble was built on false credit. Home buyers today have cash, large down payments and good jobs. Seattle’s population shift is a major factor in a long-term reshaping of the city’s real estate market.

A bit of a slowdown would be welcome in the Seattle real estate market. Just don’t expect prices to go down any time soon. The fundamentals for today’s buying frenzy are solid. Seattle has become a more valuable place to live.

Seattle home prices surge more than 10% as supply struggles to meet demand

This article was originally published on WSJ Marketwatch:

The inventory of homes for sale has finally begun increasing a bit in the Seattle real estate market. In King County, the supply of available homes has been at less than two months for nearly two years. For most of 2016, inventory has hovered around one month’s supply.

In April we saw residential real estate inventory bump up from 1.1 months to 1.3. That 18% gain is nothing to dismiss, but it’s one drop in a very large bucket that needs to be filled to give home buyers some breathing room. It’s not enough to satiate the local population hoping to purchase a home, let alone the influx of tech workers moving to the Seattle region. Amazon, Facebook, Google, Nintendo, Microsoft and many others are in a talent-spending competition that rivals any tech hub nationally.

At issue for the region are the burdensome condominium construction regulations, lack of mass transit options and a deficiency of high density housing near the transit centers that exist today. Until the region begins to plan and grow like the big city Seattle is becoming, prices will continue to rise quickly.

Luckily, interest rates continue to keep homes relatively affordable. Home buyers today are spending a significantly smaller share of their income for mortgage payments than they were during the last Seattle real estate boom.

Prices will, at some point, start to squeeze the affordability of payments if the current rate of price appreciation continues. The median single-family home sale price in King County was $537,000 in April. That’s up 10.9% from the same time last year when the median was $484,000.

Condos sit in an even more extreme position. Inventory is at 0.9 months of availability. Buyers are gobbling up listings faster than they’re coming on the market.

Seattle condos months of inventory, median sale prices

The median King County condo sale came in at $315,000 last month. That’s a 13.8% year-over-year increase. Condos seem particularly attractive to the newer residents in the Seattle market who have often relocated from urban areas in larger cities. The Seattle real estate market just isn’t keeping up with that demand and is, in fact, falling further behind by the year.

Antidevelopment advocates will say that we can’t build ourselves out of this problem. There is always a contingent in a city that wants everything to remain as it was. There’s no stopping the economic growth in Seattle, though, unless we allow our housing shortage to become so severe that businesses decide we’re no longer a financially viable location.

That would be a real shame. The real estate ecosystem in greater Seattle has to be built on a long-term strategic plan to accommodate smart growth in infrastructure for housing and transportation.

Long-term double digit growth isn’t sustainable without significant stratification of a community. As we head into another year of 11% and 14% gains in Seattle real estate prices, it’s time to focus on acting now.

(Statistics via Northwest MLS. The NWMLS did not compile or publish this information.)