The Seattle housing market, where demand far outruns supply, has a hard time accommodating new buyers. Because the perceived value of any individual house is higher in Seattle than in other cities, sellers have been able to raise their prices to astronomical numbers. In that same realm, many home owners are not interested in selling their homes or leaving the Seattle area at all, leaving fewer options available for incoming residents.
But at the same time, Seattle hasn’t even planned enough housing expansion to meet current needs, much less future ones. While builders in and around Seattle have a financial interest in meeting demand, they haven’t been able to create as many units as buyers needs. Many new Seattle residents are fine with renting apartments or homes rather than purchasing simply to get into the area for work, but alas, there is little availability in the rental market either, thus inflating lease prices.
What could possibly be setting back the expansion of Seattle’s housing industry? For one, Seattle and Washington state lawmakers. Because of their accountability for the long-term, however, Seattle’s leaders have had to balance the priority of short-term housing space with long-term quality of life.
No more micro-housing
One of the previous housing solutions Seattle builders recently discovered was micro-housing. The concept allowed willing residents to rent high-quality living space at extremely small sizes, about the size of a hotel suite but with shared common space, for the length of normal leases. Because the spaces were smaller, prices and demand were both slightly lower and more units could be created.
However, this practice is already disappearing in Seattle due to new regulations and enforcements. Of course, lawmakers must be aware of the consequences of their legal actions. Are these housing units a threat to Seattle’s excellent average quality of life? Do they have the potential to become future slums if housing demand significantly decreases in the future? Even if the answer isn’t unequivocally yes, this apparently isn’t a risk that Seattle’s leadership is willing to take.
Caps on rental fees
Not everyone is working in a way that increases rent prices, though. Although it won’t alleviate the shortage, Seattle city council participants are proposing new caps to the fees renters can be charged for moving into a Seattle property. Because current demand is so high, many landlords are gouging renters for a greater amount of money than the lease itself through arbitrary added costs and enormous security deposits. If the proposed new regulation passes, some changes may include a fee and deposit cap at one month’s rent, and an opportunity for renters to pay the fees over the course of a few months instead of all at once.
In one of many moves to bolster future growth, Seattle mayor Ed Murray recently approved taller buildings in Seattle’s University District. This is not the only newly approved legal change to create housing opportunity, but it is also not the standard. In fact, despite the need for new housing and the mayor’s approval, many residents still oppose actions such as this.
What is clearly at stake in the argument is that the pull for growth restrictions from lawmakers and residents is slightly stronger than the push for development and progress. On the other hand, Seattle legislators are primarily a voice for current residents as opposed to possible future residents. The result? A Seattle market that has yet to find a better incentive for Seattle to open up faster, for more people, and at a lower price.
High demand for home purchases driven by external factors
Part of the reason for a high demand for homes is that mortgage interest rates are low. Those who want to buy a home want to buy it now while rates are still ideal, and if Seattle is home, there isn’t much of an alternative. However, mortgage rates aren’t very affected by local or regional decisions; the economic factors are basically set at a national level, leaving Seattle’s specific needs out of the equation.
These lower rates are actually better for current Seattle residents seeking to refinance. Because home prices have appreciated so much, Seattle homeowners are finding themselves more capable of getting a refinance due to excellent equity. Low rates and high equity are really a perfect storm for a refinance situation, despite the challenge presented for outsiders looking to move in and buy or rent.
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