Technology job growth in Seattle is leading to a booming housing market, but the backlash against the rising cost of home ownership may finally be taking its toll.
The percentage of Seattle residents who think now is a good time to buy a house dropped to 51 percent midway through the year, down from 57 percent at the start, according to the Zillow Housing Confidence Index.
If you’re a renter, the prospect of homeownership is likely less appealing than it was only a few months ago.
Two percent of renters in Seattle said they plan to buy in the next year, compared to 7 percent at the beginning of the year, the index said.
However, confidence didn’t slip in Seattle quite as badly as other tech hubs – such as San Francisco, Denver and San Jose – and Seattle now has the highest homeownership confidence among these cities.
Confidence plunged from 54 percent to 46 percent in Denver and 43 percent to 36 percent in San Jose. San Francisco’s drop was less extreme but with confidence already low, it hit 40 percent.
Buyers are so discouraged in tech hubs that Zillow Chief Economist Svenja Gudell is watching the market closely for signs that homes are overvalued, which could mean another housing bubble.
“I don’t think we’re in a (housing) bubble – certainly not nationally – but for San Francisco and cities like it, I think we’ll have to get some more data points before we know that. It’s something we’ll have to keep a close watch on,” Gudell said.
Seattle and other tech hubs are following similar trends, although to a less extreme degree.
The lack of home-buying confidence in these areas comes from one major root cause: tech jobs.
While growth of the tech market makes Seattle an attractive place to move for tech professionals, their influx into the city has increased demand, and driven prices up.
“Rents have been rising quite rapidly and incomes have not kept up, so you’re spending a larger and larger share of your income on rental payment, so this makes it harder for first time homebuyers to save for a down payment,” Gudell said.
Meanwhile, 67 percent of adults surveyed in Seattle said now would be a good time to sell a home, up from 57 percent in January.
The drop in confidence over the first half of the year was significant among 18 to 34 year olds in tech hubs. In San Francisco, the percentage of them planning to buy a home within a year has plunged from 18 percent last to just 5 percent, and a similar pattern was seen in Seattle, Zillow PR specialist Jordyn Lee said in a blog post.
This is a stark contrast to Philadelphia, where home values were flat over the six month period. There, the percentage of 18-34 year olds looking to buy a home within a year had increased from one percent in January to 23 percent as of July.
Jeanine Stewart, Puget Sound Business Journal