Seattle, the Housing Market That Can't Make Up Its Mind
(Bloomberg) -- The housing market in Seattle can't seem to make up its mind, just like Amazon and its search for a second headquarters.
For years, the story behind the real-estate market here was this: Californians looking for cheaper property would migrate north and push up prices indefinitely. But about a year ago, Seattle started seeing signs of outward migration, meaning more people were looking for homes elsewhere than there were people looking to move in. It signaled a tipping point for one of the nation's hottest housing markets, where homes would fetch competing bids within hours of being listed and sell for well above the asking price. Many Seattle-ites were giving up and looking elsewhere. Amazon's announcement last year that it was looking for a second headquarters only encouraged them.
I caught up with Redfin CEO Glenn Kelman yesterday to chat about the volatile housing market in Microsoft and Amazon's home town. "People said if Amazon can't afford it here, how can I?" he said. The median home in the city fetches about $700,000.
Even Silicon Valley, which has seen home prices climb relentlessly, is seeing some similar cooling trends. Some people there are listing homes they recently purchased because they fear they bought at the height of the market and want to unload before a big drop, according to Redfin.
But in Seattle, the outward migration pattern reversed in the spring. Rising mortgage interest rates are slowing the pace of appreciation to about 6 percent per year from 15 percent. Homes are lingering on the market, so buyers don't have to rush. Sellers are dropping prices. A city struggling to come to terms with becoming the next Silicon Valley, an exclusive enclave for the tech industry's affluent, might be seeing signs of relief. Emphasis on the word might.
"Seattle right now is an extremely volatile market," Kelman said. "There are markets where everyone knows what to expect, and in Seattle that's not the case. Every month is something new."
A rapid influx of tech wealth can foster an identity crisis, something the winner of Amazon's second headquarters should think about. It can be a bit of culture shock when teachers and firefighters suddenly can't afford to pay the rent or get approved for the mortgage. "Seattle has always had an identity of being a middle-class city," Kelman said. "We're not entirely in love with what we've become."
Amazon, which announced its headquarters search more than a year ago, is expected to pick a location by the end of the year. It's promising to invest $5 billion and create 50,000 good paying jobs over the next 18 years. So the tech wealth and woes of Silicon Valley and Seattle, and the home-price volatility that comes with it, may soon manifest itself in a city near you.
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