As the fastest-growing large city in America, Seattle’s booming and diversified economy has spurred unprecedented development and population growth with a clear urbanization trend. As 2020 looms on the horizon, will the City of Seattle witness the same trajectory over the next ten years? Only time will tell. Here’s a look at a few of the leading indicators affecting the current investment cycle in the region, draws parallels to Seattle’s harbinger markets on the West Coast, like Vancouver B.C. and San Francisco, California, and offers some perspective of how the housing trends may unfold ahead.
Market Fundamentals
As the Information Technology (IT) center of the Pacific Northwest, sometimes referred to as the “Silicon Forest”, Seattle and the Eastside dominate job growth in the region. This is helping to draw 800 or more new residents to the metro area per week.
Seattle means business with more than 1.2 million employed in King County, and the economic region boasts a 3.4 percent unemployment rate with job growth trending at 2.8 percent year-over-year. The Gross Domestic Product (GDP) of the Seattle metro area is $356 billion—three-and-a-half times greater than the City of Vancouver. Seattle posts a local GDP per capita at $86,889—the fourth-highest among the 40 largest metro areas in the U.S.
A Tech Capitol
The five strongest economies in the U.S. are all tech-fueled (in order from first to fifth: San Jose, California; San Francisco, California; Austin, Texas; Seattle; and Denver, Colorado).
According to a report by WalletHub, Seattle is the #1 “Best City for STEM Jobs” and with ample employment, no state income tax, and relative affordability compared with other West Coast gateway cities. It’s simply easier for employers to recruit and retain talent within this specific urban context. Citywide, the tech talent pool spiked from 98,000 in 2011 to 157,000 in 2018 (a 60 percent increase) with most new residents choosing to locate near job centers to avoid commuting.
Relocation
A third of relocations are inbound from the Bay Area, which is conversely known for substantially higher costs of living and a state income tax, which can top 13 percent of annual gross income. The logic is also clear for Californians—move to Seattle and enjoy more discretionary income because the cost of living is approximately 23 percent less.
Growing Population
The Seattle metro area enjoys robust employment growth that averages 50,000 new jobs per year, attracting both relocating residents and investors that want to rent homes to them. The tri-city area (Seattle/Tacoma/Bellevue) population grew from 3.45 million in 2010 to 3.93 million residents in 2018.
Housing Overview
King County added 90,000 housing units between 2010—2018, but only 11,000 were deemed affordable to middle-income residents, which is why the share of residents commuting for 90 minutes or more each way increased by 70 percent in the past decade. King County witnessed a 56 percent increase in home prices since 2009— three times the national rate and at a clip seven times higher compared to median income growth.
Apartment Living
After a record year of deliveries, more than 10,000 new apartments in the metro area filled up during the past 12 months. Seattle's median rent at $2,167 is now the fourth-highest in the U.S. behind San Jose, San Francisco, and San Diego, with premium apartments averaging between $3.75 to $4.50 per square foot per month, and in some cases, penthouse rentals upwards of $20,000 per month.
New Construction Condominium Living
more than half of the 2,079 new construction condominium units across 15 new buildings that are currently offered for presale (with delivery scheduled between 2018 and 2023) have already found buyers, including an increasing volume of international investors. New, for-sale housing is being added to an urban core population of 88,000 residents, which has increased remarkably by 43 percent since 2010. While more condominium supply is in the pipeline, the cost of delivery is much higher. Resale demand for condominiums in downtown has been very consistent, averaging just over one sale per day since 2015.
Demographic Trends Overview
Current residents of downtown Seattle skew younger, with a median age of 37, although there is a growing population of move-down empty-nesters shedding larger single-family homes and choosing the lock-and-leave lifestyle of city living, often cashing out of home equity to buy a second home in a resort destination. More young families are remaining in the city with nearly 5,000 children in residence, doubling in the past decade, with school-aged children having increased by 133 percent, according to the Downtown Seattle Association.
Ethnicity & Education
The resident population is 55 percent male and 45 percent female and predominately Caucasian, although Asian demographics are the second-largest group and the fastest-growing. Two-thirds of the residents are well-educated, earning a bachelor’s degree or higher.
Income
Seattle median household incomes rose by $33,300 to $93,481 since 2010, the third-highest acceleration rate in the U.S., according to 2018 U.S. Census data.
Future Growth
With the urbanization of jobs, housing and lifestyle attractions, it is reasonable to assume Seattle and particularly downtown Seattle will receive an exponential share of the economic expansion and housing demand. Much like the zoning scenario, the market pressures in the Seattle metro area are unable to push out into the growth management boundaries and simply must push up like the residential and commercial towers that have come to personify the fastest-growing city in the U.S.