On the surface, Seattle’s housing market looks like any other in the country.
The inventory of single-family homes for sale is up substantially year over year. New listings are up slightly, sales remain subdued and home prices aren’t moving much. That’s the story in the majority of housing markets.
But Seattle is wrestling with a problem that is more acute than all but a handful of metropolitan areas — crippling affordability issues.
“It’s hard to find a market as expensive as Seattle,” said Jeff Tucker, an economist for Seattle-based Windermere Real Estate. “We’re really right behind the expensive coastal California markets when it comes to typical single-family home prices.
“With higher interest rates that we’ve started, yeah, the affordability constraints have seemed to put a bit of a ceiling on price appreciation.”
Tucker’s comments are reflected in the data. According to Altos, the median home price is a staggering $910,000 compared to $649,999 at the beginning of the COVID-19 pandemic in March 2020. Seattle has one of the higher median incomes in the country at $110,744, but that doesn’t translate into price relief.
The Emerald City’s price-to-income ratio is 7.4, trailing only Los Angeles (12.49), San Diego (10.41), San Francisco (10.1) and Miami (8.5). It’s also higher than many markets known for astronomical home prices, such as New York (7.3), Boston (7.18) and Washington, D.C. (6).
Seattle doesn’t have much open land for builders to address the housing shortage. But the state took action in 2023 by passing legislation that allows for accessory dwelling units (ADUs), duplexes and fourplexes in almost every city in Washington. The law goes into effect next month.
That only has a limited impact, though, because for more density to be created, a property owner needs to have both the interest in doing so and the funds to make it happen. Many won’t do it if there isn’t a clear and direct increase on the value of the home.
“I’m talking with more customers who are looking for multigenerational situations, whether that be to build an ADU on their own lot, or sell and buy a multigenerational home that they could have either the younger or older generation,” Redfin agent David Palmer said. “I’m seeing a mix of both.”
To the extent that upzoning helps with affordability, it may be canceled out by the state budget approved by Gov. Bob Ferguson in May. It adds $9 billion in additional taxes. On top of tax hikes related to property ownership, there are others that will impact buyers and sellers indirectly — including higher sales taxes, estate taxes and capital gains taxes.
“It’s a historic tax increase,” said Nick Glant, founder of Seattle’s Real Residential. “There are some folks feeling like they’re getting increased costs to live here. It gives some of our job creators and maybe the higher-end segment a reason to consider spending the next 10 years in some place that’s maybe a little more tax friendly.
“I wouldn’t call it an exodus, per se, but I would say there’s a little bit of a movement to look at other states where it might be a little more affordable to live long term, especially in retirement years.”
On top of local issues, home buyers and sellers are wrestling with the macroeconomic headwinds that are slowing down markets everywhere.
The April tariff announcement from President Donald Trump tanked global markets and pushed mortgage rates back up to 7%. The Federal Reserve has given no indication that an interest rate cut is coming in the near term.
The tariff news also gave consumers a reason to proceed cautiously. A recent Redfin survey showed that more than half of respondents were either canceling or pausing their search for large purchases like a house.
Consumer sentiment tanked in the aftermath, although it has rebounded since the tariffs were paused. Still, there were material consequences for the housing market.
Palmer said he had a client in back out of a purchase in April because their stock portfolio dropped precipitously, and they were partially paying for the transaction by selling stock. Markets have also since rebounded, but many people are on alert for any subsequent economic drama.
“I’m still optimistic about Seattle in general,” Palmer said. “I’ve been through the real recessions, and I just don’t see a lot of those indicators. Now, granted, last time I said some stuff like this, Mother Nature said ‘hold my beer’ and we had a pandemic, but it’s not doom and gloom here.”