The Seattle Tech Migration

By Ken Urman, Realtor

I have commented frequently during recent months about the number of new jobs bringing people into the Seattle-Bellevue-Lake Washington area. These people are looking for, and buying, homes

and condominiums. They are contributing to the fierce competition for available properties in and near the job centers. Many of the people moving to the Seattle metro area are part of the Seattle tech migration.

There has been a “tech boom” in the Seattle area during the last few years. In fact, Seattle ranks second to the San Francisco Bay area among the nation’s four tech hubs.

Although people have been migrating from California to the Seattle metro for many years, the rate of the migration has increased. The source of the migrants has also narrowed in many cases to the San Francisco Bay area, specifically Silicon Valley.

Why Is the Tech Migration Happening?

As Silicon Valley became the nation’s primary tech hub, the Tech Giants like Google, Facebook, Apple, and others paid higher compensation and offered more perks to get top talent. The talent brought into an already expensive area found housing costs continuing to rise. The result was a cycle of rising compensation driving higher housing costs driving higher compensation.

As some employees grew tired of the ever-increasing housing costs, they moved to more affordable surrounding areas, with longer commute times. Eventually, these prices began to rise, more people were commuting, and commute times grew longer. According to one report, between August 2014 and August 2015, home prices increased 13 percent, rent increased 12 percent, and the average

Silicon Valley commuter spent 67 hours in traffic. Recently, the situation in Silicon Valley became so desperate that some of the large tech companies began supporting the construction of high-density housing, with some even lending their names to the structures.

The average software engineer was paid $132,000 in 2015 in Silicon Valley (according to recruiting company Hired). In 2015 in Silicon Valley, the median home price was $870,000. According to Zillow, the median home price in San Francisco is now $1.2 million.

People soon began to realize that their money would go farther and their quality of life would be better in other cities. Please recall that Google recently opened a facility in Seattle, for example. Based on differences in the cost of living in the various locations, Silicon Valley’s $132,000 when adjusted for local cost of living is $164,000 in Seattle and $195,000 in Austin, TX (another tech hub). The median home value in Seattle ($533,000) is half that of San Francisco. Austin’s median home value ($290,700) is one-fourth of San Francisco’s.

What Does It Mean For Seattle?

The Seattle tech migration has been going strong since 2012. Although Californians have been migrating to Seattle metro in large numbers since 1999, according to the Washington State Department of Licensing, the number of license migrations from California rose from 25,619 in 2012 to 37,624 in 2015.

Already, these migrants have impacted the local housing market, competing for available properties and contributing to the increase in local home values. Although Seattle has not been the top destination for tech workers leaving Silicon Valley, Seattle has already become a major tech hub. Software developer is the second most common job today in the area, with 45,312 workers. The average salary these workers earn is $119,000.

While many homeowners are delighted to see their homes bring high prices in the market and many community leaders are happy about the growth of the local economy, others are concerned that the situation in Silicon Valley will be repeated here. They point out that there is limited opportunity to develop additional housing now.

I believe that with strong leadership and thoughtful planning the Seattle metro area can continue to accommodate growth in the tech sector and provide commuting options that will permit growth in some of the surrounding areas. 

How Coffee Affects Home Values

By Ken Urman, Realtor

Believe it or not, coffee and coffee shops affect home values in nearby neighborhoods. Zillow CEO Spencer Rascoff revealed in his recent book, Zillow Talk: The New Rules of Real Estate," that houses located within a 1/4 to 1/2 mile radius of a Starbucks coffee shop are most likely to appreciate in

value the most and the fastest.

Before you laugh and shrug this off, please keep reading. There is scientific analysis behind the claim.

As you might know, I really enjoy a great cup of coffee. And in keeping with my general desire to support local businesses and companies headquartered in the area, I am a loyal Starbucks customer. You also might have noticed that I bring coffee when I meet with clients. A hot cup of great coffee is a terrific ice breaker.

The folks at Zillow (headquartered locally) have developed a very scientific system to determine where to open each coffee shop. If we are willing to trust their claims, they also have a way to predict the next hot spot neighborhoods. As for Realtors, they would have us believe we need only to follow their lead.

Nichole Goodkind, writing at Yahoo Finance, reports that Zillow analyzed the prices of homes located within a ¼ to ½ mile radius of Starbucks locations for five years after each shop opened. “They found that homes closest to Starbucks appreciated by 21 percent, while homes a bit farther

away grew in price by under 17 percent.” Specifically, according to the article, “they found that in 1997 a home within ¼ mile of a Starbucks sold on average for $137,000, while a home not near a Starbucks sold on average for $102,000. Today, the average home has gone up 65% in value to $168,000 but homes near Starbucks have tone up 96 percent to $269,000.

Zillow also addressed the obvious question, “is this a generic coffee shop effect?” They discovered that homes near a Dunkin Donuts appreciated 80 percent over the five year period, while those near a Starbucks appreciated by 96 percent.

If you are in the market for a house near an existing coffee shop, I would be delighted to share my vast knowledge of all coffee shops in the area and I would enjoy helping you drink (coffee) your way through neighborhoods within a ¼ to ½ mile radius of various coffee shops, including Starbucks, Dunkin Donuts, and other brands. Call me – I’ll bring the coffee!

It's A Great Time to Sell or Buy a Home

If you have been waiting for the local real estate market to rebound, your wait is over. Mercer Island, the communities surrounding Lake Washington, and even Seattle and Bellevue are very hot real estate markets now. In a nutshell: home prices are up, demand is high, and inventory (homes currently on the market) is low. In fact, the conditions are right for bidding wars for available properties. 

Recently, Seattle was listed as one of the top markets in the country for home sellers, in a feature article in Money Magazine. The housing market is changing, creating a “new playing field for homeowners, who are finally able to sell, as well as would-be buyers who’ve been delaying a purchase in anticipation that prices would keep falling,” Money reported. In addition, Seattle, Los Angeles, San Jose and Phoenix were listed as top markets for sellers, while Philadelphia, Chicago, Albany and New Haven/Stamford were top markets for buyers. According to the feature article, sellers should keep their expectations in line: Price increases are to be modest and gradual. According to Money, home sellers may have the most bargaining power in the West, while homebuyers may be more in control in the Midwest and Northeast.

 

Real Estate inventory on Mercer Island normally averages about 100 homes at this time of year. Today there are less than 60 homes available, and most of those available are in the very high end of the price range. On Mercer Island Median prices in 2011 rose 2.5 percent from $835,000 to $857,000.

Lawrence Yun, Chief Economist for the National Association of Realtors®, reported recently that sales are being driven by strengthening fundamentals – the improving jobs picture, rising rental rates, continuing low interest rates, and housing affordability – and prices are gaining on reduced supply.

Here is an example from a recent personal experience representing buyers who made an offer on an Issaquah home. After only a few days on the market, the listing agent had 12 valid offers on the property. My clients were among the 12. The offer accepted by the seller was possibly more than 10 percent over the listing price. I fought hard for my clients, but I could not advise the client to pay that much for that particular home. The sale of this home was frenzied, with too many buyers and too many emotions driving offers. 

This example is not a bad situation for the local residential property market. However, there are several clear implications to be drawn:

1.       Buyers should not be surprised by frenzied competitive bidding for available properties

2.       More homes are being listed every day, and patience will win out in the end

3.       People buying homes in this market would do well to trust and follow the advice of their Realtors® or Brokers, especially if they are new to the area.

4.       Homeowners, who have been waiting for the right time to sell, should call their consulting Realtor® today to discuss their options.

The Seattle-Bellevue-Mercer Island-Lake Washington communities real estate market is unique. Today it is a zooming market. Whether you are buying or selling, I advise patience and good counsel. If you have been waiting for the right time to list your home, please let me assure you that the time has come. I would be honored to list your home and assist you as your Realtor® and listing agent. If you are in the market to buy, it would be my pleasure to help you find and purchase the right home for your needs. Call me today at 206-499-4948.