Rental property investment can be a lucrative business when approached correctly. Of course, you do need to do your due diligence to ensure that you are investing in places that are conducive to your successful business interests.
One of the cities that may have caught your eye is Seattle. If you look at what the Northwest Multiple Listing Service has to say, King County saw the median price of single-family homes in King County fall by 10% in March 2022 from a year earlier.
Price declines such as these, for example, may make the idea of buying a property in Seattle more attractive, but of course, it's not the only thing you have to think about.
The idea below is to give you all the insights you could need to make an informed buying decision.
Seattle Housing Market Trends
Thanks to data provided by Redfin, which is a national real estate brokerage, it becomes possible to break down the markets of interest into fourth subsections to see what the trends look like.
Starting with the North market in Seattle, competitive would be the understatement of the year. The average situation sees no less than three offers being received, with a sale being secured in just 8 days.
November 2022 saw the average sale price of a home increase by 3% when compared to the previous year. You'll typically find that homes sell for the asking price, transitioning to the pending state within 9 days. If the home is seen as a hot commodity, the sale could be about 2% above the asking price, with the pending state transition coming in 5 days.
In West Seattle, the situation wasn't much different, with these periods being mostly the same. However, the average sale price for the period November 2022 to November 2023 saw a 4.3% increase.
The median sale price here was $805,000. West Seattle homes tend to sell 7 days after they are listed. Additionally, while there were 683 houses sold by August 2021, the figure was 463 in August 2022.
You also have the Northwest Seattle housing market that showed a lot of the same competitive trends, with houses being sold within 7 days on average after having received four offers. November 2022 saw an increase in the average sale price of a home of 6.1% over the previous year.
It's not abnormal for hot homes in the area to sell for 3% above the list price, going pending in a maximum of 5 days on average.
Finally, there's the Northeast component of Seattle's housing market, which is no less competitive than its counterparts. Here, homes sell in an average of 9.5 days, having received four offers. Average sale prices were a staggering $1.12 million in November 20222, which would've been an increase of 8.7% over the previous year.
The difference here is that compared to the list price, the average sale price is 1% below it, and the transition to the pending state will take about 10%. However, hot homes are likely to sell for 1% above the list price, with pending sales coming in no more than 5 days.
What Factors Impact the Seattle Real Estate Market?
As is the case with other markets, several external factors play into the results you see on the market. Here are four of the most fundamental ones to bear in mind.
First, there's the matter of mortgage rates, which will tell you how expensive your purchase will be. Considering that the Fed has been raising rates to combat inflation, it creates a situation where monthly payment requirements are very steep, even pricing above-average earners out of the market in some cases.
The economy also has to be thought of, since its state is an indication of both the willingness and ability of buyers to be able to acquire homes. There are factors such as inflation, GDP, income, cost of goods, and more, that must be thought of here.
Demographics is next on the list, and this speaks to subgroups of the population based on certain similar factors. Examples of these include age, income, race, etc. Groups often act similarly in the housing market, which is why large demographic shifts can usually give you an idea of what kind of moves you can expect in the housing market.
Finally, government policies are a part of it too. Whether it's taxation requirements, deductions, or something else, when the government puts these requirements in place, it can immediately get easier or more difficult to acquire a Seattle home.
Will the Seattle Housing Market Crash?
There's a lot that would indicate that the Seattle housing market is going to slow down, which is what economists expect to happen. With that said, a crash is not expected, and there are several reasons for this.
First, there are a lot of new buyers entering the market, which contributes to sustained high demand. Bear in mind that certain groups such as millennials would now be ready and willing to buy properties.
Next, there's the matter of inventory, which is low just about everywhere, and the Seattle area is no exception. A balanced market would require about 6 months of inventory, which is not the current situation.
Additionally, lending standards are not what they used to be. Things are much stricter now, meaning the kind of people who are approved borrowers tend to be in the excellent category.
Seattle Real Estate Market Statistics
Compared to 2021, 2022 saw a notable fall in the number of permits approved for the construction of new single-family homes. In fact, comparing November 2022 to the previous year saw a fall of 36%. The decline has been almost consistent with each new month.
As of November 2022, the housing supply number stood at 1.9 months of inventory. Considering the national average is 2.7, this is extremely low. This means that the current situation is that of a seller's market.
Median home prices for single-family homes in November 2022 stood at $730,000, which was a 2.1% appreciation over the previous year. As you can probably tell by the kinds of prices alluded to so far, the pricing scheme in the city is much higher than that of the national median, which sits at $394,000.
The Seattle Housing Market Forecast
Starting on the note of interest rates, these aren't expected to get much better anytime soon. The Fed, considering the current state of inflation, will likely continue to use interest as a means of fighting the problem. This will contribute to mortgages continuing to be difficult to afford.
Some experts think that with the high interest rates, sellers in Seattle will be bringing down their home prices. Others do not agree with this assessment, instead believing that there will be no drop in the costs.
For the most part, the belief is that the inventory situation won't be getting any better. At 1.9 months, it's not even 1/3 of what would be required for a balanced market. With the lack of new developments, and demand continuing to be high, things are expected to remain as is. However, there are a few experts who believe that unaffordable housing will stabilize things.
With the ever-climbing mortgage rates, there's also the belief that the number of homes sold will be falling and the speed at which they go out of inventory will be slowed.
Tips for Rental Property Investors
You don't need real estate agents to tell you that the Seattle market consists of some pretty expensive properties. If you're going to buy one, select the location based on your objectives.
Short-term, Airbnb-type rentals will need to be near attractions and walking areas, for example, while long-term rentals will need to be near conveniences.
Regardless of what the market looks like, remember to think about your financial situation before you commit to anything.
The Seattle housing market suffers from some of the challenges being seen nationally, such as low inventory and high interest rates. While the market is expected to slow down, it shouldn't crash.
Since the prices are so high, you need to think long and hard about if you're willing to stand such a cost to get a rental property.
Frequently Asked Questions
Are Seattle Housing Prices Going to Drop?
Some experts believe this will be the case because of rising mortgage rates, but others do not agree.
Is Seattle a Good Place to Invest?
It can be if you find the right area. The high prices make it a risky proposition.
Will Supply Return to Normal in 2023?
With demand continuing to be high and not enough new developments, most experts don't believe so.