By Erica C. Barnett
On the latest episode of Seattle Nice, we talked to Redfin’s chief economist, Daryl Fairweather, about the recent slowdown of Seattle’s housing market and what it means for the future of our economy.
When we talk about a “decline” in the housing market, that refers to a slowdown or reversal of housing price increases because more people are selling than buying—in other words, it’s bad news for people who already own houses that they are trying to sell, but potential good news for those trying to buy or rent here.
That’s an important distinction I tried to keep in focus as we talked about what a “slowdown” means for the city. Renters, who make up more than half of Seattle residents, bear the brunt of an increasingly expensive housing market; although buying a home in Seattle has become much more expensive than renting, anyone who does manage to buy a house has their monthly housing costs more or less locked in place, apart from annual tax increases, while rent generally increases unpredictably every year.
For those who already own houses, it’s true that the equity they gain through monthly mortgage payments only comes to fruition when they sell, which may not make sense if they plan to stay in Seattle, since they would have to buy a new place in the same expensive market. However, longer-term Seattle house owners whose mortgage is, say, $3,000 a month are exponentially better off than renters who would have to pay thousands more for the same house, since rent goes up so much faster than property taxes.
All of which is to say: If the pace of job growth continues to stall, as Fairweather predicts it will, affordability will improve somewhat. But, Fairweather noted, “we’ve already gotten to this place where affordability has gotten so bad that I don’t know if people will really feel like things are getting better for them” even if housing prices decline a bit. For renters, “if you’re going from $2,000 a month rent to $3,000 a month rent, and then I’m telling you, ‘Oh, but next month or next year it’s going to be $2,995, it doesn’t really feel like things are getting meaningfully better,” Fairweather said.
Fairweather also threw some cold water on David’s belief that AI could be a tool to meaningfully lower the cost of housing. Both she and David are more techno-optimistic than I am, but Fairweather noted that most of the factors that have increased the cost of housing development have nothing to do with brainstorming or permit times (two things David and Fairweather said AI might help with) but construction materials and human physical labor, which can’t be digitized.
Sandeep also brought up his “heretical view” that the region should expand its growth boundaries to allow much more housing outside current growth limits, which already allow significant amounts of suburban sprawl. The argument against sprawl isn’t so much an anti-housing argument, in my view; it’s that sprawl is energy-intensive and destroys natural resources (in our region, forests) and farmland while requiring huge investments in infrastructure that contributes to climate change, like the freeways and feeder roads to move people from the suburbs to their jobs in Seattle by car.
In addition, Fairweather said, moving the urban growth boundary outward “results in longer commute times … and if they’re paying for gas on top of their mortgage, then maybe they’re not actually doing any better, or maybe their quality of life isn’t any better” than it would be if they paid for a more expensive house closer to the city.
