Number of Million Dollar Homes Tripled

According to a recent study by Trulia, the number of million dollar homes in the Seattle metro area has nearly tripled in the last four years. According to the study (of all homes in the metro area – not

just those for sale at a particular time), In May 2012, 2.6 percent of homes in the Seattle area were valued at $1 million or more. In May 2016, 7.0 percent of Seattle metro homes are valued at one million dollars or more. This means that in just four years, the number of million dollar homes nearly tripled.

This increase in the number of million dollar homes also moved Seattle from 20^th to 14^th in the nation for the largest number of homes valued at $1 million or more. The majority of these million dollar homes are waterfront properties or other homes with views of water. These tend to be focused largely around Lake Washington, Lake Union, and Puget Sound.

Why is this Happening?

Several factors have converged that have driven prices higher.

·       One factoris the number of wealthy Asians who are looking for luxury homes. Their specific needs in these houses have led them to focus on large homes or to add specific rooms and amenities to the homes they purchase. These buyers also clearly want luxury homes.

·       A second factor is that Seattle has become a major tech hub in the U.S. This expansion of the tech industry locally is drawing people to high-paying jobs. Further, many tech workers who find themselves priced out of the San Francisco and Silicon Valley market, are drawn to Seattle by the relative affordability of housing.

·       A third factor is that Seattle has limited opportunities for expansion of housing. There is a limited amount of land available. To accommodate the influx of tech and other workers, the best use of available land is the construction of apartments and condos (in every price range). Although apartments are being built, few of the buildings have made the conversion to condos.

·       A fourth factor confronting Seattle area buyers and home values is the very limited number of available properties on the market. As I have pointed out in my blog posts for the last year, extremely low inventory of available homes drives intense competition for the homes available, often ending in bidding wars. The competition drives home prices higher. Ever increasing prices then becomes a

factor for those who might want to sell, creating fear that they will not be able to find another home before they have depleted their resources.

What does it Mean?

Based on my recent experience with two luxury homes listed within the last month is that demand is just as strong as it is for homes priced at other levels. We should keep in mind that there is no single definition of luxury real estate. Whether we define luxury property on the basis of price, custom build, or amenities above the average home, there is still demand for these million dollar homes. On Mercer Island, a luxury home tends to be defined as a home priced at $1million or more.

One of the homes listed in the last month was on Lakeview Lane on Mercer Island. This home has a contract pending today. The other million-dollar-plus-home, on Avalon Place on Mercer Island is currently generating strong interest. The migration of higher-paid tech professionals coincides with the growth of tech centers and demand for luxury Real Estate.

Other neighborhoods experiencing dramatic growth in million dollar homes include:

•        Broadmoor, a gated community on a Seattle golf course, has the highest concentration of homes valued at $1 million or more (97 percent).
•       The Capitol Hill neighborhood saw the proportion of million dollar homes increase from 11 percent to 24 percent.
•        East Queen Ann and West Queen Anne saw an increase from 12 percent to 30 percent.
•       Belletown saw an increase from 3.6 percent to 8.4 percent.
•       Fremont’s increase was from 0.7 percent to 6.1 percent.

The Bottom Line

The number of million dollar homes in the Seattle metro area has increased significantly during the last four years. We should keep in mind, however, that the median price for a single-family home in the area increased from $425,000 in 2012 to $637,250 today.

Is this reason for alarm? Absolutely not!

Homeowners should be aware that the value of their homes has increased in the last four years. This appreciation in value can be expected to pay off whenever they decide to sell.

Those who want a single-family home will be able to find an affordable option, even if that option is farther from the job hubs.  As construction and use of the regional rapid rail system moves forward, I believe commuting to the economic hubs will be far less onerous than it now seems to some buyers.

I believe that there will be buyers for the million dollar homes in our area. I also believe people will be able to find a home they can afford. 

Remember, for every million dollar home in the area, there are 13 homes that cost less than $1 million.

If you are interested in selling or buying, please call me. I am helping people sell and buy homes in this market every day.