We’re all aware of the low inventory of single family homes and the price wars that ensue because of this. However, an article from the Puget Sound Business Journal this past week highlighted that it isn’t just homes that are in short supply. Demand for condos is also through the roof. Last weekend the Nexus in downtown Seattle opened its doors to pre-sales with non-refundable deposits. Despite the rain, a line grew AROUND THE BLOCK for people looking to secure a unit! The units range from $350,000 to $3.5M, and the nonrefundable deposit was 5% of the purchase price (AKA $17,500 to $175,000 – these nonrefundable deposits weren’t exactly chump-change!). The building isn’t even expected to open until mid-2019, yet by the end of the weekend 75% of the building’s 382 units had been purchased. GET OUT OF TOWN! This is officially crazy. Link to this story is HERE.
So it looks like single family homes, townhomes, AND condos are all in short supply, but where is all this demand coming from? As discussed in this CNBC story, last year alone Seattle’s tech industry needed to import around 3,500 people with computer science degrees. Really quick, let’s go back to simple economics: high demand + short supply = increasing prices. With Seattle and all its tech titans hiring faster than the UW/WSU and other area colleges can produce computer science graduates, the high demand and low supply of these candidates has resulted in the highest annual salary [adjusted for cost of living] in the country! After accounting for cost of living, a computer science graduate has about $46,000 more annual spending power in Seattle than in San Francisco ($21,000 more than Chicago, and $47,000 more than New York). No wonder the attraction to Seattle! This article pretty much summarizes why I don’t think Seattle is in a housing bubble, and why prices aren’t going to fall anytime soon – Despite Seattle’s housing market appreciation, Seattle’s overall cost of living after accounting for average income is still much lower than many other large and desirable metropolitan cities nationwide. I would contend that the appreciation rate will eventually slow, but I don’t see the housing market DEpreciating anytime soon.
Today's blog post courtesy of Kyle Bergquist, Guild Mortgage.
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