COVID-19 pulled the tablecloth out from under the feast of new housing inventory that had been set. In King and Snohomish Counties, 20,000 apartments were scheduled to open in 2021 and 2022. Brian O’Connor, principal of O’Connor Consulting Group and Commercial Analytics, reported that apartment vacancies in these counties rose from 3.8 percent to 6.1 percent in 2020; and that unless demand rebounds, vacancies could rise to 6.9 percent by early 2023. “All this product in the pipeline is there because of what the demand used to be,” he said. “The market did what it should have done — stepped up supply. COVID hits. Demand drops. All those units are still in the pipeline.”
Between Seattle and Shoreline, net demand for apartments dropped by 7,900 units last year, comprising nearly four out of five units delivered in the preceding year. By September, rents had declined by 9.5 percent in these cities, and by 15 percent in the downtown core. Meanwhile, rents were only 1.6 percent lower on the Eastside, and actually rose in South King County and Snohomish County.
Seattle median household incomes rose by $42,300 to $102,500 since 2010, sustaining its rank as the third highest in the U.S. for income growth, according to 2019 U.S. Census data. With an estimated six households moving to the city center each day since 2010, most development has focused on apartments. Today, 82 percent of the residents are renting in downtown Seattle, while just 18 percent of the housing comprises condominium ownership.
This balance is likely to shift toward ownership over the next decade, as newly relocated renters seek to put down roots. Some of the more affluent will enjoy restricted stock units (RSUs) offered by their tech employers, which can vest, be cashed in, and provide for a down payment. RSUs are also being used by some lenders for income qualification. As their incomes rise, their accountants will advise them to explore purchasing homes for mortgage interest deductions and to participate in the rapid equity gains of the city.
The business community knows Seattle’s growth can’t survive on a “sugar high” from the most recent economic expansion. Employers and business generators like Amazon remind voters that companies have choices as well, so the region had better stay competitive. Meanwhile, post-COVID messaging from the Federal Reserve has assured that interest rates will remain low. COVID-19 does not appear to have kept stock markets down for long, and above all, the regional housing market has shown its resilience.
Longer term, the Puget Sound Regional Council published VISION 2040, which was adopted in April 2008, and plotted strategies for distribution of an additional 1,712,000 people from 2000–2040 to the regional geographies in the Central Puget Sound region. The five metropolitan cities of Bellevue, Bremerton, Everett, Seattle, and Tacoma are slated for 32 percent of the growth, adding 550,000 people to those city centers. Despite the challenges of the past year, it is reasonable to assume Seattle and particularly downtown Seattle will receive an outsized share of the economic expansion and housing demand. The market pressures in the Seattle metro area are unable to push out to the growth management boundaries; they simply must push upward in the form of the residential and commercial towers that are now reshaping this city.