Seattle may currently hold the record for most cranes and construction projects underway in the downtown core. Most of the units are rentals/retail with permitting that began several years ago.
Due to many of the projects reaching completion now, or relatively soon, Seattle is seeing a saturation in rental units. In fact, Spire Tower near the Space Needle will now be built as condos versus apartments and some units will sell for nearly $5 million!
Most data points to over-saturation of rental units, particularly apartments. Even with climbing home prices and increasing interest rates more and more people are moving from rentals to purchases. The number of buyers still outweighs the number of sellers which continues to keep the sales market out of balance.
What makes a market sustainable in terms of home prices and how can a buyer determine if the prices are just right or overvalued?
Population growth and low inventory account for one pricing indication. This is a basic principle of supply and demand. In Seattle, the population continues to grow at a record pace and there are simply more buyers than sellers.
Salaries and job growth are the second big factor which will continue to increase local home prices. Buyers can afford the prices and continue to pay them. Salaries are high, tech companies and other startups love the area, and some of the countries largest companies are anchored here.
Affordability for service industry and other lesser paid professionals such as teachers, first responders, etc. will remain a struggle. For this we see a massive push outwards increasing home prices well outside the core of Seattle and Bellevue.
For the Puget Sound Region prices are already up over 10% for single family homes and 15% for condos in relation to 2017 prices.
In much of the country the growth is not sustainable when compared to salaries and population growth. In areas like Seattle, Denver, and San Francisco prices will continue to increase until more supply comes available. This needs to be a mix of new construction and resale to help serve the populations of these areas. Unfortunately new construction is drastically lagging in Seattle because of land prices, labor and material costs, and a lack of suitable options due to topography.
If you own a home in the Puget Sound area you can expect your value to continue to increase even if the pace slightly slows. If you are considering upsizing or even downsizing consider what a new home in this market will cost you.