Windermere economist believes upzoning is ‘unlikely’ to lower Seattle property values

Oct 8, 2021, 5:08 AM
(MyNorthwest photo)
(MyNorthwest photo)

Housing prices seem to keep climbing no matter what. But as of the latest report, the market seems to be really healthy in Kitsap County.

“For the last several months, [it’s] kind of felt like Groundhog Day every time we speak,” Matthew Gardner, Windermere’s chief economist, told Seattle’s Morning News. “Prices always going up; there’s no supply — same old, same old.”

“But you know me, I like to dig deeper through the numbers,” he added.

Economist: ‘Don’t give up hope’ on Seattle housing market

As KIRO Radio’s Dave Ross noted, Kitsap County is looking better, and Gardner says it’s partly because work from home is real and not going away.

“However, at the same time, it’s not going to be black and white,” he said. “We’re not going to be disappearing off into the wild blue yonder forever. And that means that there has been far greater interest in the counties adjoining Seattle. So whether it be Snohomish, Pierce, or as you said, Kitsap, and people are going out there for a lot more value for money than they can get here in Seattle.”

As far as what’s driving the high prices in the market, Gardner says it’s a couple of things.

“One of which is naturally we think about home prices, it’s all about supply and demand. We’re not building enough housing, there is demand. So go back to Econ 101,” he said. “Limit supply, have net new demand, that pushes prices up. But also it’s a function of the fact that mortgage rates, even though they have certainly notched up, which was expected, are still remarkably low.”

“So given that — and one more thing as well, and that is those pesky millennials, they are getting older and they want to buy housing,” he added. “So we’ve really got almost a perfect storm in that respect.”

In King County at least, though, Gardner thinks it could be reaching an apex.

“We’ve seen month over month home prices are down,” he said. “In fact, they’re down across the board. We’re seeing two different things, one of which is affordability has become a significant issue. And, quite frankly, people are saying there’s nothing to buy, but I’m not going to get carried away. So we are seeing home price growth, the pace of growth is slowing, but more so here in Seattle than in those adjoining counties.”

Housing as an issue for Seattle’s next mayor

Housing is going to be a big issue in the mayoral race, Dave noted. But does Gardner see any viable solution to creating the kind of super cheap, affordable housing in enough quantity to actually get 37,000 people into low-cost housing?

“[It’s] remarkably, remarkably difficult,” he said. “So I think you’ve got to be careful not to conflate the things. We talk about low-cost housing or affordable housing. We really think about the housing market in three buckets. So you have the normal market rate housing, which is fine. But then we’ve got the demand for workforce housing, and that’s for families making 80 to about 120% of median income. That’s going to be the firefighters, the teachers, the nurses. And then you’ve got the low-income housing, people making below 40 or 50% of median income.”

“But I think it’s that middle tier of housing, which is the biggest concern that I have. … In order to address that, obviously, as you said, we need to build more. We’ve run out of land. So how can you get around this? Well, you’ve got to ultimately think about, is zoning in our market appropriate today, as it was back in, what, 1938 when it was created?”

Gardner says while single-family zoning in Seattle made sense in the 1930s and probably into the 1960s, it doesn’t make sense now. That said, people are very against change, he added.

“People that live in those neighborhoods, quite frankly, a majority of them are just not fans of that, they don’t want change and they can be very vocal about it,” he said. “So I think it’s a significant issue. But ultimately, I think what we need to do is the same route we saw in Minneapolis, we’ve seen already in Oregon, and it’s going to happen in California where you can build — we’re not talking about high rises, but duplexes or triplexes inside single family zoned areas.”

White Center leads shift in Seattle area suburbs decade in the making

Yes, people who own their homes in those areas and see more people coming in and more development — maybe at lower price points — will naturally be concerned about the value of their homes. But Gardner says he thinks building low-income housing in the community is unlikely to lower property values.

“It’s not a case where we’re talking about development of a lot of Section 8 houses,” he said. “We’re not talking about a new Cabrini–Green coming into play. So when we talk about this, in terms of those duplexes or even triplexes, quite frankly, I could drive you down the street and ask you to choose what was single family versus a multi-family home or an attached home, I think you have a hard time in some areas figuring out which one that is. So it doesn’t change the aesthetic necessarily.”

“And really, people continue to move here whether we like it or not,” he added. “We’re not going to make up any more land. I know it’s what we need, but whether we can do it, whether there’s a political will to do it, well, that’s the big question.”

Listen to Seattle’s Morning News weekday mornings from 5 – 9 a.m. on KIRO Radio, 97.3 FM. Subscribe to the podcast here.

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Windermere economist believes upzoning is ‘unlikely’ to lower Seattle property values