Seattle has one of the most expensive housing markets in the country, with prices climbing out of the reach of many. But the high price isn’t simply a Seattle problem anymore. It affects the whole of Washington state. So, why are houses in Washington so expensive?
Washington is an expensive state to buy a house, with the typical value of a home here being almost $600,000. The cost has risen by 24% in the past year, and factors responsible for this include local zoning laws, shortage of homes, low-interest rate, higher demand, and cost of Seattle real estate.
In one way or another, all of these factors have led to the barely affordable cost of homes in the state. While many can’t be controlled, adjusting some like the zoning laws is possible. Here, we discuss why houses in Washington are expensive.
Cost of Homes in Washington
The median value of homes in Washington state is $593,897. That’s far more than the national average and makes it one of the top 5 most expensive states for houses. The cost of homes in Washington isn’t just high in the major cities like Seattle. It’s also expensive in small cities and towns such as Spokane, Tacoma, etc. Of course, the Seattle metropolitan area still has the most expensive in the state, with the typical value of the home in the city being $932,382. This means the tech hub city residents continue to find it difficult to afford a home. Even those who can have to spend a chunk of their paycheck to get the home of their choice.
Factors Behind the Expensive Homes in Washington
There are lots of factors responsible for the high cost of houses in Washington, and they include:
1. Local Zoning Laws
Most local zoning laws in Washington prevent the building of anything except detached houses with yards and driveways. This kind of home makes up three-quarters of the houses on the residential land in the state. Of course, these homes are very expensive due to construction costs. But they also take up space, limiting the number of homes built in residential areas. This has led to a massive rise in the price of homes and rents in the city as many people here can’t afford to live in such big homes.
Flexible zoning laws that allow the construction of duplexes, fourplexes, and condominiums on a larger scale will ensure that people have access to more homes. Such smaller homes will not only save space and allow lots of houses to be built on available land. But they’ll also cost less to construct, which means they’ll sell for less. Other states such as California and Oregon have taken this step to solve the housing crisis in their city, and Washington will also benefit from such a move.
2. Shortage of Homes
The level of housing production in Washington is far below the need of those in the city. Between 2010 to 2015 alone, Up for Growth estimates that the housing production in the city fell by 225,600 units. Given that the state has continued to grow significantly since then, it’s easy to see why homes are also becoming more expensive. The pandemic, supply shortages, inflation, and more have reduced the rate of house construction even as new households continue to form in the country. The result is an increase in the value of homes available as more people demand available homes. This has led to an increase across the board in Washington, with rents also increasing significantly.
3. Low Mortgages Interest Rates
Inflation is another factor responsible for the high cost of homes in the state. This inflation is partly due to the low interest rate for a mortgage, especially in 2020 and 2021, to counter the pandemic’s effects on spending power. Many people had access to more money than before and could borrow more conveniently to fund their home purchases. With more money in the real estate market, the cost of homes also rose significantly. However, the Fed has increased the base interest rate, with inflation biting hard on everyone. Prices of homes have enjoyed the period of low-interest rates to climb far out of reach of many, and even the hike in an interest rate is yet to have any effect.
4. Higher Demand for Homes
Another significant factor responsible for the cost of homes in Washington is the higher demand for homes. Since there’s a shortage, more people are willing to pay more for houses, leading to a higher valuation of homes in general. The rising demand in the state is due to several factors, including pandemic-induced migration. Many people quit their jobs and moved to other areas during the pandemic, and most of those who did this have more than enough savings to afford the cost of homes in the new area they moved to. Some of those who migrated even outbid local buyers for the price of the homes, leading to higher prices. The resurgence of remote work also made it possible for many high-earning workers who choose to work remotely can move to lower-cost areas and unwittingly push up the price of homes in those areas.
Many of those who can’t afford homes end up renting, and this in itself increases the cost of rent as many people have no choice but to rent. The vacancy rates for rental homes have fallen significantly in the past few years, and that’s unlikely to stop anytime soon unless the supply matches the supply.
5. Influence of Seattle
It’s impossible to discuss Washington’s expensive real estate market without mentioning Seattle. It has the most expensive homes in the state, and it’s starting to affect all the other areas in the state. Even cities far from Seattle, such as Spokane Valley, have risen significantly. All through the state, the vacancy rates have been significantly low.
The shortage of homes in Washington is one of the primary reasons for the high cost of homes in the state. But it’s not the only one. Migration-induced demand, the exorbitant price of the Seattle real estate market, and more have influenced the overall cost of homes in the state. In addition, the rapid expansion of the state population is unlikely to stop, so the production level has to match it.