Home Investment Shifts

Several noteworthy articles in Sunday's Seattle Times. Front page news that Millennials are not buying houses. I reported on this trend in my recent blog on homeownership, and the reasons for the decline. The fact that young Millennials ages 25-34 are not buying houses is a big part of this decline.

Since 2007, homeownership for young adults in King County has dropped nearly 13 percent. The rate of decline here has been more than twice as fast as the national average. A big reason may be that real estate here is so expensive.

The delay in marriage age and the record high level of student debt exacerbate the difficulties for Millennials to look at purchasing rather than renting. Whether Millenials are renting because they have to or because they want to is causing a major demographic shift in the rental market here, where competition for apartments and rent prices keep going up.

The long term forecast is very good for landlords and investors who hold rental property here.

The second article I found fascinating had to do with EB5 Visa program. EB5 allows immigrant investors and their families to get permanent residency visas, in exchange for investing at least $500,000 in US projects that create at least ten full-time jobs. The program was originally intended to target low income and rural communities.But at least 2 Billion dollars in current projects in the prosperous Seattle metro area are being bankrolled by EB5 monies.

The US Senate just passed a bill to reform the program weaknesses and "restore the program to its original intent, by ensuring that  much of the capital generated and jobs created occur in rural areas and areas with high unemployment."

Why would I care about that, you ask?

Because a revised EB5 would allow small developers like me to take on riskier projects - like my Van Gogh Studio Lofts project at the Rainier Beach Light Rail station - in communities that really need development. As it stands now, it is impossible to lure foreign investors to a market that cannot demonstrate nor promise the kinds of investment returns that can be achieved in more prosperous parts of Seattle.

Lots of implications in both articles for Seattle real estate investors....

Happy Investing!

Seattle Rent Increases

According to Tom Cain of Apartment Insights Washington, rents are up In the King County metro area by 7.9% over the past year, and now average $1284 per unit or $1.53 per square foot. The highest rental rates are in downtown Seattle at $2.43/sf. Class C properties have the lowest vacancy rate (at 3.7%) and rent for an average of $908.

Vacancy rates are also down on average to 4.17%. Ballard has a relatively high vacancy rate of 8.6%, due to the overbuilding in this submarket. By the time the units under construction there are completed, it will have quadrupled the inventory of 50+ unit complexes in the past six years.

There are currently 16,135 units of new construction in the metro area, up 16.6% from a year ago. 59% of these units are in the City of Seattle.

Rents are still forecast to increase 4.5%-5.5% over the next several years, according to Reis. Cain finds it remarkable that the market continues to strengthen in the face of massive amounts of new units. The underlying strength of the economy is what contributes to this growth. According to the US Census, Seattle grew faster than any other major American city in the past year. Seattle also has the second best rate of small business creation in the country, according to recent data.

Had all of these new units not been built, then Seattle rents would be even higher. The rental market’s performance in the past year has been stellar, thanks to developers and lenders who have provided apartments to help meet the demand.

Please message me at HomeLandInvestment@gmail.com if you are interested in investing in income properties in Seattle.

Happy Investing!