A Zillow report released on July 22 shows Seattle rents rising faster than in any other U.S. city, increasing 9.7% from June 2015 to June 2016. Average monthly costs have risen nearly $500 over the last four years and have now exceeded the $2,000 mark for the first time in Seattle’s history. Although there has been nearly constant construction adding thousands of new units, the rental market continues to grow undeterred. In 2011, Seattle’s rent was about $300 more than the U.S. average; now, in 2016, it has more than doubled to $620 above the U.S. average.
In a Seattle Times article, Svenja Gudell, Zillow’s chief economist says there are 3 main factors that continue to drive rental prices up. The first is the near-constant stream of new hires relocating to the region as Seattle companies continue to hire. Coming from out-of-area, these people are more likely to rent first before buying. Second, there is intense competition and low inventory in the home sales market, driving more people to rent when they would otherwise buy. Thirdly, many of the newest apartment developments are luxury or high-end and start at a higher average sales price.
In a market with such volatile rent prices, however, we believe that the intense competition in the home-buying market is actually an argument to make an even greater effort to buy. In fact, we will start to see a shift towards homeownership, particularly as new, for-sale condominiums are being developed in Seattle after a long run of developments intended for rent. NEXUS hopes to capitalize on the expectation that rental prices will continue to spiral out-of-control, forcing renters to take a good, hard look at buying. Doing so will dampen the risk of being priced out of the rental market by locking themselves into a fixed monthly cost through the long-term mortgage that homeownership provides.
In addition to greater financial stability and established budgetary expectations, home ownership provides tax benefits as well as a tangible asset that has historically appreciated in value over time. While average rental prices continue to increase in Seattle, average home prices are increasing substantially as well, as those are up 11.8% year over year, fourth in the nation. While the rate of increases will likely not remain this high forever, we only see signs that overall growth will continue as companies keep hiring and attracting people to this region. Rather than paying a substantial amount of money in rent every month, garnering no equity or capital, many people will start to realize that home ownership is the more attractive option in this market. Driven by projects like NEXUS that satisfy the needs of consumers who prefer to live in an urban environment but are discouraged by an exorbitant rental landscape, home ownership should be everyone’s goal in the coming years.
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