Potential home buyers in the Seattle region are facing record low inventory and all-time high prices, thanks in part to a booming tech industry that’s fueling extraordinary job growth at companies such as Amazon.com, Tableau, Zillow and Expedia. Meanwhile, bidding wars are only expected to heat up as the busy spring home shopping season approaches.
“We’re in for another crazy spring real estate market,” said J. Lennox Scott, chairman and CEO of John L. Scott, Inc., in a press release announcing the latest findings from the Northwest Multiple Listing Service. He described the current situation as a “Pac-Man” market in which “houses are being gobbled up as soon as they come on the market.”
According to the latest market update, sale prices of single-family homes in King County jumped 19.8 percent last month, surging from $429,900 in February 2015 to $514,975 last month. Even worse for home buyers, the number of homes available is down nearly 30 percent from a year ago.
It’s no secret that the region’s flourishing tech economy is attracting renters and buyers who are having a significant impact on the market. And it is not just home-grown success stories such as Amazon, Microsoft, Zillow and F5 Networks that are fueling the boom. In recent years, giant Silicon Valley tech companies — including Facebook, Google, Twitter, Dropbox, eBay, Salesforce and others — have established fast-growing engineering centers in the region.
“There are a combination of factors driving inventory in Seattle to unhealthy lows,” said Sam DeBord, managing broker with Coldwell Banker Danforth. “New tech workers moving to our area are great for the economy, but we haven’t built adequate housing stock to support them. The newest transplants drive up rent prices in the most convenient locations, while those who’ve been here for a couple of years are now putting down roots and buying homes. There just aren’t enough available to meet the demand.”
Those hoping to get into condos as an alternative aren’t finding any relief. MLS reports condo sale prices in King County jumped 26 percent from a year ago, rising from $257,000 to $323,975. The number of active listings dropped 36.6 percent from a year ago.
“Condo construction is a particular problem,” DeBord said. “The regulations and liability involved are so costly that developers would rather just build apartments. That further restricts available condo inventory for those relocating to our area. Tech workers, in general, seem to be attracted to the low-maintenance lifestyle of in-city condo living, and we haven’t been able to keep up with that demand.”
Any talk of housing or the mass influx of new tech workers inevitably is tied to the boom at Amazon, which now employs 26,500 in the Seattle area and is growing rapidly with hundreds of open positions. Worldwide, Amazon added 76,500 new employees last year alone, bringing its total employment to 230,000.
In remarks last month, Seattle Mayor Ed Murray acknowledged the housing challenge in Seattle, but also noted that Amazon’s hypergrowth “is a great problem to have.”
“The Seattle housing market led the broader national housing recovery in large part due to the South Lake Union employment effect,” said John Madrid, a managing broker with John L. Scott Real Estate. “All of the construction that isn’t office space in South Lake Union is apartments because investors are seeing that’s where the biggest return is.”
Madrid said the condo market is as hot as the single-family home market right now and there are only a handful of large-scale condo projects, that he knows of, happening in Seattle.
“Man, if I had the answer for Seattle’s housing crunch, I’d run for mayor!” Madrid said, adding that he thinks there has to be room for increased density in some of the neighborhoods closer to the city.
“I know there’s a lot of pushback from those respective neighborhoods,” Madrid said. “I’ve seen what’s happened to Ballard and it’s not the same place I remember it being 10 years ago even. I wouldn’t want that to occur in every Seattle neighborhood but I do believe there is some middle ground there.”
According to statistics, besides King, 10 other counties in the 23-county area served by Northwest MLS also reported double-digit price gains for single family homes that sold last month.
Madrid said Amazon will continue to hire at an accelerated pace, along with other medium and small tech companies in the area. Expedia is moving to Interbay and Weyerhaeuser is putting its headquarters in Pioneer Square, adding even more pressure to the depleted inventory. Madrid said he wishes he could tell home buyers to wait for a slow down, but it’s not coming over the next year or so.
“Serious buyer’s will eventually find a home but it may take time and it will most likely require tradeoffs in location and/or home type or size, unless they have flexible budgets,” Madrid said. “Home sellers are most definitely in the driver’s seat.”