The Puget Sound region has always had an edge related to other parts of Washington state when it comes to the real estate market. But that divide is now greater than ever, and it may not be all good news for Puget Sound.
While much of the difference can be attributed to the region’s booming economy, real estate experts warn that land use restrictions are causing an artificially low housing supply. A politically-charged climate could also be contributing to high prices.
According to a new study by Property Shark, the most expensive zip code in Washington is Medina’s 98039, with a median house price of $2.4 million. The second-highest area is located in nearby Bellevue at $1.28 million.
Nationally, Washington is one of the most expensive states for housing. All of the 50 zip codes rank above the national median average of $300,200. King County alone outperformed entire states such as Pennsylvania.
However, the study also found that the Puget Sound region holds an overwhelming share of the state’s real estate market value. Forty six of the top 50 most expensive Washington zip codes are located in King County, and of that 50, 21 are located in Seattle alone.
Absent from that list entirely were zip codes in counties such as Spokane; its most expensive zip code was 99019 at $276,000.
It’s an unusual concentration of real estate wealth compared to other states, according to the study’s author Eliza Theiss. In an email, she wrote: “while it is quite common to have a larger concentration of a state’s top zips in one city or metro area, usually there is more balance.”
Some of the inequity can be chalked up to Puget Sound’s economic prosperity, thanks to major employment centers such as Boeing, Starbucks, Microsoft and Amazon. It also has a lower jobless rate than the rest of the state. According to the Bureau of Labor Statistics, the Seattle/Bellevue/Everett area had an unemployment rate of 3.8 percent in September, compared to the statewide average of 4.6 percent.
That discrepancy has been around for the last 20-30 years, says James Young, the research director for the University of Washington’s Runstad Center for Real Estate Studies. He told Lens that “generally the…economic hub of the state has been the Puget Sound area.” He added that housing prices were more balanced in the early part of the 20th Century, when the timber industry, railroads and aluminum smelting were more predominant.
However, with the rise of the tech industry, parts of the state that still rely on agriculture or manufacturing for employment aren’t growing as fast, he said. As a result, the housing prices have either stagnated or increased at a much lower rate.
“The issue is jobs,” he added. “You have a higher concentration of jobs and more jobs being created in cities transitioning from manufacturing to services economy. More jobs are being created in suburban areas. Suburban areas are where you’re primarily seeing a lot of growth.”
Theiss shares a similar view. “Although there are limitations on how far back our data goes, home price growth has been accelerated in King County thanks to Seattle’s booming economy and rapidly expanding population over the past years. At the end of the day, this concentration of expensive home values is in large part determined by Seattle’s unrivaled economic, cultural and lifestyle advantages compared to the rest of the state.”
The high prices can prove a blessing or a curse, she added. “High median home prices are a boon for homeowners looking to sell, especially for those looking to cash in on high home values and downgrade in living space or relocate to more affordable states or part of Washington state — such as retiring Baby Boomers and empty-nesters.
“On the other hand, Washington’s high home medians, especially in King County, raise justified concerns about affordability. First-time buyers, especially Millennials, are finding it increasingly difficult to attain homeownership status in current market conditions. In King County’s case this is further exacerbated by ultra-high concentration of expensive zip codes, especially as 50 of the county’s top zips posted medians above the national level.”
Another factor contributing to Puget Sound’s incredible home prices is the lowest housing inventory in a decade. It’s almost impossible to generate the supply to fully meet existing demand, Young said. Yet, regulatory uncertainty brought about by either changes or proposed amendments to existing land use policy are also to blame. His observation complements statements made by developers who argue that regulations have made it difficult to add the greater density that is needed.
“It’s not necessarily what they (regulations) are,” Young said. “It’s the changing of them. You don’t know what’s going to happen. If there’s uncertainty, they’re (builders) going to factor that into the price. They’re going to wait until prices go up before they build.”
Though local lawmakers are looking at ideas such as rent control to improve housing affordability, Young says giving developers greater regulatory certainty requires political inaction.
“Doing nothing may be the best thing that can happen,” he said.