It's almost been almost a month into the new year and The Sound Mortgage is excited to be working on some great projects for this year and we are excited to see what the markets have in store for us this year. But first, let us recap what occured in 2017 for the real estate industry, and what is expected this 2018!
The technology boom has increased housing demand and home value by nearly 3 times more than their historical average which is around 4.8% annual growth in the Pacific Northwest. It was expected that new developments would help ease the demand, which it did, but affordability has become a huge issue. In 2017 demand for luxury housing decreased. Despite that, the demand for multi-family housing including condominiums and townhouses rose significantly; especially in areas where there is a mix of residential homes and apartments, known as ‘Surban’. This helped slow down the rising rental rates for 2017. Although, affordability is a major issue, it has not stopped Seattle from growing. Seattle is a tech hub, and 12% of Seattle’s workforce are employed in tech jobs. Seattle is also a very attractive place to live with an excellent quality of life, appealing to many well-educated workers.
The rest of the West Coast also has high hopes for 2018. In Sacramento and San Diego, their workforce focuses on the health sciences. In Los Angeles, they may not have highly-educated workers, but their diversity and technical skills allows them to supply labor to many different industries that will help stimulate their economy and population growth. However, lack of affordable housing and lack of proper infrastructure are some concerns that might deteriorate growth.
The housing market in the South is also seeing housing prices and value increase. With Amazon announcing that it is looking for new HQ2, cities in the South are in the process of planning to build, in anticipation of the possibility that they may be the next HQ2. Dallas, Atlanta, and Nashville are great contenders for the next HQ2. If amazon were to choose any of these 3 cities, rental prices would increase at a minimum of 1% to 1.5%. With strong population and economic growth due to presence of research universities and a highly educated workforce, these cities are also a great talent magnet.
Although there may be more housing, the question of affordability is still on the table. According to MarketWatch, if mortgage rates rise to 4.7% by the end of 2018, than the median price of existing homes will rise by 4.1%, increasing monthly mortgage payments.
It seems like 2018 will be a year with a lot of change and Sound Mortgage is excited to see what will happen with the housing markets. If you are interested about learning more about Seattle markets or want to learn more about investing with us, click here.